Scrap, not ship: condemned vessel bought for breaking was outside purchase tax because no manufacturing use occurred.

A condemned, unserviceable vessel sold only for breaking and scrapping purposes was treated as scrap rather than as a ship. The purchase documents, tender terms and correspondence showed that the buyer acquired the old materials contained in the vessel and resold them in the same form, without any manufacturing process. On that basis, purchase tax under section 13 of the Bombay Sales Tax Act, 1959 was not attracted, because the transaction did not amount to use of the goods in manufacture or otherwise satisfy the statutory condition for levy. The ratio is that a sale of an old vessel for scrapping, followed by mere resale of recovered materials, is a purchase of scrap, not taxable manufacturing use.

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Issues: Whether a condemned and unserviceable ship purchased for breaking and scrapping purposes was to be treated as a ship or as scrap, and whether dismantling it attracted purchase tax under section 13 of the Bombay Sales Tax Act, 1959.

Analysis: The purchase documents, tender terms, and surrounding correspondence showed that the vessel was sold as an old condemned ship only for breaking and scrapping purposes. The buyer acquired the old materials and articles contained in the vessel and sold them in the same form. No manufacturing process was applied to those goods. Purchase tax under section 13 is attracted only where the goods purchased are used in the manufacture of goods or otherwise answer the statutory description for levy. On the facts found, the transaction was in substance a purchase of re-rollable scrap in the form of an old ship, not a purchase of a ship for manufacture.

Conclusion: The condemned vessel was scrap and not a ship, and section 13 did not apply. The questions referred were answered in the affirmative and in favour of the assessee.

Ratio Decidendi: Where a condemned and unserviceable vessel is sold for breaking and scrapping purposes and the buyer merely resells the recovered materials without any manufacturing activity, the transaction is to be treated as a purchase of scrap and not as use of goods in manufacture for the purpose of purchase tax.

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