Delivery of sheets and rings to customers amounted to a sale.

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 turn-over 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 assessee thereupon applied to this Court, under section 12-B of the Sales Tax Act to set aside the assessment on this item of his turnover which, it should be remembered, was ultimately sustained by the Tribunal.

At one stage, learned counsel for the petitioner-assessee contended that, if the Department and the Tribunal took the view, that it was in essence a case of barter and applied rule 17 of the Turnover and Assessment Rules, then, the definition of ‘sale ‘in section 2 (h), which in effect made a transaction of barter a sale, would be beyond the legislative competence traceable to Ertry 54, List 2 of Seventh Schedule to the Constitution. On that, notice war issued to the Advocate-General. It is however, unnecessary to go into the constitutional validity of the definition o, ‘sale’ in the Sales Tax Act, as the petitioner can get the relief he wants in this case on other grounds.

On examining the facts of this case, particularly with reference to a bill which the assessee issued and which is taken as typical of the transactions the assessee entered into with his customers, it is found that there was no question of purchase when the scrap metal was entrusted by the customer to the assessee ; nor was there any sale as such of the brass and copper sheets or rings. No doubt, the Tribunal pointed out that “ the appellant admitted that it is not possible to correlate any given set of circles supplied to a customer to any particular quantity of scrap received from the customer” . That may not be strictly accurate, because, earlier the Tribunal found that the customer got back an exact equivalent in weight of the scrap that had been originally entrusted to the assessee. The nature of the business conducted by the assessee was such that it was not possible to correlate the supply of the new sheets and rings to the very scrap entrusted to the assessee by the customer who got the new sheets and rings in exchange. Apparently, the assessee collected scrap from a number of customers, had all that scrap melted, manufactured sheets and rings, and gave back the customers the exact weight, but in new sheets and rings. That the identity of the new sheets and rings could not be correlated to and established with the scrap supplied by the customer is not really germane in deciding the real question at issue, was there a sale or purchase at any time, either when the assessee took over the scrap for the specific purpose of melting it and converting it into sheets and rings, or when there was a delivery of the finished product, that is, sheets and rings, by the assessee to the customer. The Tribunal found that the total weight of the scrap tallied with the total weight of the sheets and circles given to the customer: As we said, the quantitative tally was there. Only, the identity of the scrap with the new sheets and rings could not be established, and it was not necessary to establish it.

The Tribunal was of the view that the principle laid down by a Division Bench of this Court in Raju Chettiar v. State of Madras1, did not apply to the facts of this case, but that the present case