Scrap classification for condemned machinery confirmed where sale was only for dismantling, disposal, and removal as unusable goods.

Goods permanently closed, surrendered factory licence and sold only for dismantling and removal were treated as scrap under the Tamil Nadu General Sales Tax Act, not as plant and machinery. The court applied the real nature of the transaction and common parlance test, finding that condemned and unserviceable machinery sold on an as-is-where-is, no complaint basis for disposal was not taxable at the higher plant-and-machinery rate. The lower scrap rate applied, the impugned clarification was set aside, and the differential tax was directed to be refunded.

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Issues: Whether the sale of the closed B & C plant and machineries, sold on an "as-is-where-is" and "no complaint" basis for dismantling and removal, was taxable as plant and machinery at the higher rate under the First Schedule or as scrap at the lower rate under the Second Schedule of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The plant had been permanently closed, the factory licence had been surrendered, and the unit had become unusable. The materials were sold through an auction arrangement only for disposal as scrap, and the purchaser dismantled and removed them accordingly. The description in delivery documents and the conduct of the parties showed that the substance of the transaction was a sale of scrap and not a sale of working plant and machinery. In tax classification, the real nature of the goods and the common parlance understanding of condemned and unserviceable machinery were decisive. The earlier departmental clarification fixing tax at four per cent also supported the scrap classification. The higher rate applicable to plant and machinery therefore could not be sustained.

Conclusion: The sale was liable to be taxed as scrap at four per cent and not at twelve per cent as plant and machinery.

Final Conclusion: The writ petitions succeeded, the impugned clarification was set aside, and the differential tax was directed to be refunded to the appropriate parties.

Ratio Decidendi: Where goods have become wholly unserviceable and are sold in substance for dismantling and disposal as scrap, their tax liability is determined by the real nature of the transaction and the common parlance understanding of the goods, not by the nominal description used in the sale documents.

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