Law: Income Tax Act, 1922

Section:

Sales Tax---Sale Manufacturers collecting scrap metal from customers and supplying them finished sheets and rings of equal weight Whether transaction a sale Amount realised as labour charges from customers Liability to sales tax [Madras General Sales Tax Act. (IX of 1939).] The assessee collected scrap metal from his customers, melted the scrap, manufactured sheets and rings and gave back to the customers the new sheets and rings. The identity of the new sheets and rings could not be correlated to and established with the scrap supplied by the customer, but the Tribunal found that the total weight of the scrap tallied with the total weight of the sheets and rings given to the customer. The Department assessed the assessee to sales tax estimating the turnover of the transaction at three times the labour charges: Held, that there was no purchase of the scrap by the assessee and there was therefore no element of sale when the sheets and rings were handed over to the customer and that what was collected from the customer was in substance and effect the charges for converting the old metal into new sheets and rings and there was no liability on the assessee to pay any sales tax. Jayarama Chettiar, In re (1948) 1 S T C 168 distinguished. Raju Chettiar v. State of Madras (1955) 6 S T C 131 ref. ORDER RAJAGOPALAN, J. One of the lines of business of the petitioner assessee was to convert the scrap metal entrusted to him into sheets and rings for the customers. In the assessment year 1955 56, the petitioner collected from his customers a sum of Rs. 87,118 14 6 as labour charges for the supply of finished copper and brass sheets and rings. The Department held in effect that there must have been a purchase of the scrap metal from the customers, and that the subsequent transaction was a sale of the brass and copper sheets and rings. The Department estimated the turnover of the second transaction at three times the labour charges, and on an estimated turnover of Rs. 2,61,356 11 6, the petitioner was assessed to sales tax. On appeal, the Commercial Tax Officer confirmed that assessment. The Tribunal confirmed that assessment when the assessee appealed to the Tribunal. The…

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