Scrap sale classification determined tax at the lower rate where obsolete machinery was sold as condemned scrap.

Goods sold through e-auction were treated as condemned iron and steel scrap, not functional plant and machinery, where the sale documents described the subject matter as rejected, obsolete and secondary arisings and the surrounding facts showed dismantling and transport as scrap. The acceptance letter's reference to plant and machinery did not alter the character of the transaction because it was linked to the e-auction terms and the total value of scrap. On that basis, the applicable tax rate was 4% and the higher levy with surcharge was not sustainable.

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Issues: Whether the goods sold through the e-auction were condemned scrap taxable at 4% under the relevant entry or plant and machinery taxable at 12% with surcharge.

Analysis: The agreement between the public sector entities described the subject matter of sale as iron and steel scrap, rejected, condemned and obsolete secondary arisings, and the e-auction terms reflected disposal of scrap and secondary arisings. The acceptance letter, though mentioning plant and machinery, also linked the sale to the e-auction terms and referred to the total value of the scrap. The Department itself had earlier clarified that if the plant and machinery had been sold as scrap and dismantled for transport as scrap, the sale would attract tax at 4% without surcharge. The surrounding facts, including dismantling by explosives and transport of the material as steel scrap, showed that the machinery had become obsolete and condemned and had outlived its utility.

Conclusion: The sale was of scrap and not of functional plant and machinery, so tax was payable only at 4% and the higher levy was unsustainable.

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