Second sale exemption fails for processed scrap metal products that become commercially distinct taxable goods.

Second sale exemption under the Kerala sales tax rules applies only where the goods purchased and sold are commercially the same. Scrap metal that is processed into sheets, rounds, circles or utensils becomes a distinct commodity, so the converted products cannot be treated as the same goods for exemption purposes. The scheme of the First Schedule also treats metal scrap as a separate taxable item, while metal entries apply to metal as such rather than to scrap or goods manufactured from it. Accordingly, processed products made from scrap do not qualify for second sale exemption.

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Issues: Whether scrap metal, after being processed into sheets, rounds, circles and utensils, retained its identity so as to qualify for second sale exemption under the sales tax rules, and whether the converted products remained outside the taxable entries in the First Schedule to the Kerala General Sales Tax Act, 1963.

Analysis: Rule 32(13) of the Kerala General Sales Tax Rules, 1963 grants exemption only where the same goods are purchased and sold. The scrap purchased by the assessee was commercially different from the metal recovered after refining and processing, and the end products sold were not scrap but distinct commodities. Entry 121A of the First Schedule specifically treats metal scrap other than that covered by the Second Schedule as a separate taxable item, while the other metal entries contemplate tax on metal as such and not on scrap or products made out of it. The Legislature's scheme showed that scrap and the metal recovered therefrom are not the same goods, and utensils made from the recovered metal are still further removed from the original scrap.

Conclusion: The assessee was not entitled to second sale exemption on sales of copper and brass sheets, aluminium sheets, circles and utensils made from scrap, and the assessment was rightly restored.

Final Conclusion: Converted products manufactured from scrap metal are distinct from the scrap purchased and cannot claim exemption as the same goods under the second sale rule; the taxable assessment was upheld.

Ratio Decidendi: Second sale exemption applies only where the goods sold are commercially the same as the goods purchased, and processed or manufactured products derived from scrap metal are different taxable goods under the relevant schedule entries.

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