Scrap recovered from condemned railway coaches was treated as a second sale, not a taxable first sale.

Scrap iron recovered by dismantling condemned railway coaches and condemned huts purchased at auction was treated as scrap from the outset, because the articles had no further utility as such and were bought only for dismantling and recovery of materials. On the intention of the parties, the auction sales were in substance sales of old materials or scrap embedded in the condemned articles, not sales of usable machinery or goods of a different description. The assessee's later sale was therefore a second sale of scrap and not taxable as a first sale under the Madras General Sales Tax Act.

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Issues: Whether scrap iron obtained by dismantling condemned railway coaches and condemned huts purchased in auction was the first sale of scrap liable to tax, or only a second sale not exigible to tax under the Madras General Sales Tax Act.

Analysis: The condemned coaches and huts had no further utility as such and were bought only for dismantling and recovery of the materials contained in them. On the intention of both the sellers and the purchaser, the auction sales were in substance sales of the old materials or scrap embedded in the condemned articles. Scrap iron in whatever form it comes to market and whether derived from condemned machinery or other condemned articles was treated as falling within the category of scrap rather than as usable machinery or goods of a different description.

Conclusion: The assessee's purchase was of scrap and his later sale was only a second sale. The turnover was not taxable as a first sale.

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