Taxable scrap classification and input-tax proof govern set-off on re-rolled steel products under sales tax law.

Iron and steel scrap described as rails, rail scrap, tyre scrap and condemned pieces was held to fall under entry 2-A of the Third Schedule to the Andhra Pradesh General Sales Tax Act, not entry 2(xvi), because it was used scrap rather than defectives, rejects, cuttings or end pieces. The scrap was therefore taxable at the last purchase point in the State. The dealers were also denied set-off on finished re-rolled products, since the concession depended on proof that the ingots, billets or scrap used as raw material had actually suffered tax. Absent proof of prior tax payment on the input, no set-off was available.

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Issues: (i) Whether the iron and steel scrap purchased by the dealers fell under entry 2(xvi) of the Third Schedule or entry 2-A of the Third Schedule to the Andhra Pradesh General Sales Tax Act, 1957. (ii) Whether the dealers were entitled to set-off on the finished products without proving that the raw material had suffered tax.

Issue (i): Whether the iron and steel scrap purchased by the dealers fell under entry 2(xvi) of the Third Schedule or entry 2-A of the Third Schedule to the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: The description in the purchase bills showed that the goods were scrap such as rails, rail scrap, tyre scrap, condemned pieces and similar used material. These items were not defectives, rejects, cuttings or end pieces falling under entry 2(xvi). The court also relied on the earlier division bench view that M.S. scrap purchased by such dealers falls within entry 2-A and is taxable at the point of last purchase in the State.

Conclusion: The scrap fell under entry 2-A and was liable to tax at the last purchase point in the State.

Issue (ii): Whether the dealers were entitled to set-off on the finished products without proving that the raw material had suffered tax.

Analysis: The Government Order granting set-off allowed reduction of tax on re-rolled finished products only where the ingots, billets or scrap used as raw material had actually met tax. The court applied the principle that exemption or set-off based on duty-paid or tax-paid inputs is available only when payment of tax on the input is shown as a matter of fact. Since the raw material was exigible at the last purchase point, the burden lay on the assessee to establish that it had suffered tax.

Conclusion: The dealers were not entitled to set-off unless they proved that the raw material had suffered tax.

Final Conclusion: The revisions failed because the scrap was taxable at the last purchase point and the claimed set-off depended on proof of prior tax payment on the raw material.

Ratio Decidendi: Where a tax concession or set-off is conditioned on raw material having suffered tax, the assessee must prove actual tax payment on the input, and scrap taxed at the last purchase point does not qualify for set-off absent such proof.

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