THE HON’BLE SRI JUSTICE T. VINOD KUMAR

AND

THE HON’BLE SRI JUSTICE PULLA KARTHIK

TRC.No. 60 of 2004

O R D E R: (per Hon’ble Sri Justice T.Vinod Kumar)

1. This Tax Revision Case is filed by the State-Revenue being aggrieved by the order of the Sales Tax Appellate Tribunal (for short ‘the Tribunal’), dt.15.11.2003 in TA.No.115 of 1999. The assessment year involved is 1993-94 under the APGST Act, 1957

(for short ‘the Act’).

2. Heard learned Special Standing Counsel appearing on behalf of the petitioner-State, Sri A.K.Jaiswal, learned counsel appearing

on behalf of the respondent-assessee, and perused the record.

3. On behalf of the petitioner-State it is mainly contended that the Tribunal is not justified in allowing the appeal in treating the MS-Rolls, Mill Scales and M.S.Broken rolls as scrap of iron and steel falling under Entry 2A of the III-Schedule to the Act and not

under defectives, rejects, cuttings or end pieces of items of iron and steel mentioned in Entry 2 of III-Schedule to the Act.

4. On behalf of the petitioner-State it is also contended that the Tribunal was not justified in granting setoff of tax on the total turnover without including the iron scrap arising from the finished products to arrive at the total turnover for granting setoff.

5. In order to appreciate the submissions made on behalf of the petitioner-State it is to be noted that the respondent-assessee is a manufacturer of M.S.Bars, Rounds and Angles. In the process of manufacture of M.S.Bars, Rounds and Angles, the scrap arising therefrom was treated as scrap of iron and steel, and at the relevant point of time being liable to tax at the point of first purchase by registered dealer buying in the State or when purchased by an electric or furnace unit or an induction furnace units in the State at the point of purchase in the said unit, the petitioner-Revenue on the other hand treated the scrap generated as defectives, rejects, cuttings or end pieces of goods of iron and steel mentioned under Entry 2 of III Schedule to the Act.

6. The Tribunal however taking note that Entry 2A of the III Schedule to the Act specifically deals with Iron and Steel Scrap as detailed therein and having regard to the nature of the goods arising in the process of manufacture of finished goods by the respondent-assessee, had held that the said products cannot be considered as defectives, rejects, cuttings or end pieces of any of the goods as specified in Sub-Clauses (i) to (xv) of Entry 2 of III Schedule to the Act.

7. Though on behalf of the petitioner-State it was sought to be argued before us that since, the scrap arising in the manufacture is out of M.S.Rolls, Mill Scales, M.S.Broken rolls and thus, are to be considered as cuttings and end pieces of iron & steel and therefore, are rightly classified by the Assessing Authority as well as the Appellate Authority as falling in Entry 2(xvi) of III Schedule to the Act, it is to be noted that the respondent-assess being a manufacture of M.S.Bars, Rounds and Angles, being finished products, the process of manufacture of such finished goods would result in generation of scrap, which cannot be equated to defectives or rejects or cuttings or end pieces of finished goods of the category of goods mentioned under Entry 2 of III Schedule of the Act.

8. In order to fall under Entry 2(xvi) of III Schedule to the Act, the product should be a final product arising out of the manufacturing process, but not a defective or a reject on account of not meeting the specifications or the cuttings or the end products of the finished product. On the other hand, M.S.Rolls, Mill Scales, M.S.Broken rolls cannot be treated as a finished product by itself, not meeting the standard specifications for it to be called as a defectives or rejects of cuttings of such finished products.

9. The Tribunal by considering the above aspect had rightly held that the M.S.Rolls, Mill Scales, M.S.Broken rolls, which are generated in the process of manufacture of final products namely