Commr.Of Commercial Taxes & Ors vs Chitrahar Traders

The N.L.C., namely, Neyveli Lignite Corporation is a Government of India enterprise and a company, and is involved in the activity of generation and supply of electric energy to various State Electricity Boards. The said company set up a plant to produce Leco, which is a form of lignite in the year 1965. The 2 said plant, however, was having frequent breakdowns and was incurring huge losses. Consequently, an effort was made to upgrade the plant which, however, turned out to be a failure due to which the entire plant was closed down on 4.4.2001 as unviable. Thereafter the company proceeded to dispose of the entire plant and machinery as according to the company, the plant was of not marketable value and also because it had lost its use and outlived its utility and had no value except as scrap. The said company thereafter appointed M/s. Metal Scrap and Trading Corporation Ltd. (hereinafter referred to as 'MSTC') on 3.11.2004, a Government of India enterprise, engaged in the business of scrap to arrange for disposal of condemned plant.

Pursuant to the aforesaid agreement arrived at, the aforesaid plant and machinery, which according to the company became scrap as obsolete and unviable, was sold through the process of e-auction and the respondent herein offered its bid which came to be accepted by the MSTC. The acceptance letter is also placed on record. The said letter is dated 16.2.2005 which states that the tender offer of respondent was accepted on "as is where is" basis for purchase of B & C Plant one lot and machinery as a whole lot as per the terms and conditions of the e-auction. In the said document it was also indicated that sales tax would be charged @ 12% with surcharge @ 5%. It was also made clear therein that the sales tax which is being levied would be provisional one and subject to any change. It was also specifically indicated therein that the material value along with taxes and duties including income tax and educational cess on IT would be paid on total value of the scrap.

However, a dispute arose thereafter as to whether sales tax is leviable and payable on the said articles @ 4% as the plant and machinery was sought to be sold as scrap or whether the respondent is liable to pay sales tax @ 12% with 5% surcharge also. In view of the aforesaid dispute which arose, the respondent wrote a letter dated 7.4.2005 to the sales tax authorities mentioning 4 therein about the details and manner of the transaction that had taken place regarding purchase of the scrap by the respondent pursuant to the e-auction conducted by MSTC. In the said letter the entire background facts leading to the e-auction and acceptance of the tender were stated. A Form being Form No. XIV was also filled up by the respondent wherein it was mentioned by it that they had purchased plant and machineries as a whole in one lot but the same also enclosed another declaration made by the respondent herein indicating the full particulars of the goods and stating therein that the total sale value ex-taxes and duties as a whole in one lot is Rs.70,01,00,019.00. While giving the said particulars of the case, it was also specifically mentioned by the respondent that what was purchased was scrap material and thereafter the details of such scrap materials were given in the said declaration.

Being so situated, two writ petitions came to be filed before the Madras High Court, one by the respondent herein and the other by Neyveli Lignite Corporation Ltd. In the writ petition filed by the aforesaid Corporation, a stand was taken that what was sought to be sold to the respondent company was scrap of the condemned plant and machineries, but sales tax and surcharge was realized from the respondent @ 12% and 5% on provisional basis, and subject to change at later stage. It was also pointed out that the aforesaid parts of the machineries were removed by issuance of 100 delivery notes-cum-gate passes. In paragraph 11 of the affidavit enclosed with the writ petition, the following statement was made by the said company: -

The respondent has paid sales tax and surcharge at the higher rate of 12% and 5% while taking out the goods out of the factory premises. In view of the present order passed today, the respondent becomes entitled for refund of overpaid amount which shall be assessed by the Department within a period of three months from today and the amount found due and payable to the respondent shall be refunded back to the respondent along with interest as payable in accordance with law within two months thereafter.

The appeal is dismissed with the aforesaid observations.

.......................J (Dr. MUKUNDAKAM SHARMA) 11 ......................J (ANIL R. DAVE) NEW DELHI, MARCH 16, 2011.