Scrap metal converted into ingots is treated as manufacture, triggering purchase tax liability under section 7-A.

Purchase tax liability under section 7-A of the Tamil Nadu General Sales Tax Act arises where goods bought without tax are consumed in manufacturing other goods for sale or otherwise. Scrap metal that is melted and converted into ingots loses its identity and becomes a commercially distinct product, so the process is manufacturing rather than mere cleaning or removal of impurities. On that basis, the scrap was treated as consumed in the manufacture of other goods, and the turnover was correctly brought to tax. The Kerala decision relied on by the assessee was distinguished on its facts.

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Issues: Whether scrap metal purchased by the assessee and converted into ingots was consumed in the manufacture of other goods so as to attract tax under section 7-A of the Tamil Nadu General Sales Tax Act.

Analysis: Liability under section 7-A arises when goods purchased in circumstances in which no tax is payable are consumed in the manufacture of other goods for sale or otherwise. Scrap metal and ingots are commercially distinct commodities. The process of melting scrap and turning it into ingots destroys the identity of the scrap and results in a manufactured product different from the raw material. The conversion is therefore a manufacturing process and not a mere cleaning or removal of impurities while retaining the same commodity. The relied-upon Kerala decision was distinguished on its facts.

Conclusion: The scrap was consumed in the manufacture of other goods, and the turnover was rightly brought to tax under section 7-A. The finding is against the assessee and in favour of the Revenue.

Ratio Decidendi: When purchased scrap loses its identity and is converted into commercially distinct ingots, the process constitutes consumption in the manufacture of other goods for the purpose of purchase tax liability.

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