Purchase tax on scrap depends on manufacture: waste battery shells attract levy, but pure lead scrap merely melted into ingots does not.

Purchase tax under section 5A was sustained on old and waste battery shells because recovery of lead through elimination of waste and melting into ingots involved substantial processing and produced a commercially different article, amounting to consumption of raw material in manufacture. Purchase tax was not attracted on pure lead scrap such as sheets, sinkers, wires and similar items where the material was merely melted into ingots, as that did not constitute manufacture. The levy was therefore upheld only for battery and similar waste scrap, while pure lead scrap melted without manufacturing transformation was excluded after verification of accounts and inspection.

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Issues: (i) Whether the Tribunal was justified in sustaining purchase tax under section 5A on old and waste battery shells used for recovery of lead; and (ii) whether purchase tax could be levied under section 5A on pure lead scrap purchased and merely melted into ingots.

Issue (i): Whether the Tribunal was justified in sustaining purchase tax under section 5A on old and waste battery shells used for recovery of lead.

Analysis: The raw material was battery scrap from which lead was recovered through several processing stages, including elimination of waste and melting into ingots. The process involved substantial value addition and resulted in a commercially different product. Recovery of lead from battery waste in this manner amounted to consumption of raw material in manufacture.

Conclusion: The levy of tax under section 5A of the Kerala General Sales Tax Act, 1963 on purchase of old and waste battery shells was upheld, against the assessee.

Issue (ii): Whether purchase tax could be levied under section 5A on pure lead scrap purchased and merely melted into ingots.

Analysis: Where the purchased materials were pure lead scraps such as lead sheets, sinkers, press metal, wires, seals, bushes, wheel balance weights, lining and similar items, and they were only melted into ingots, the process did not amount to manufacture. On that footing, liability to purchase tax was not attracted on such items.

Conclusion: Purchase tax under section 5A was not attracted on the actual quantity of pure lead scrap purchased and melted into ingots, in favour of the assessee.

Final Conclusion: The levy was sustained only for battery and similar waste scrap involving recovery by elimination of other materials, while exemption was directed for pure lead scrap merely melted into ingots after verification of accounts and inspection.

Ratio Decidendi: Scrap processing attracts purchase tax where the activity results in manufacture of a commercially different article through recovery from waste materials, but mere melting of pure scrap into ingots without such manufacturing transformation does not.

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