- (1.) Leave granted.
(2.) Appellant manufactures Steel Ingots. It purchased iron scrap from the Railways in public auction. Iron scrap is melted and converted into the finished products. Appellant had been accorded recognition under Section 4-B (2) of the U.P. Trade Tax Act (for short "the Act") in terms whereof it became entitled to purchase raw-materials for manufacturing purpose at a concessional rate of tax. In the year 1985-86, it purchased 2532.989 M.T. of iron scrap. Allegedly, the lots contained various categories of iron scraps as it was purchased on "as is where is basis". Appellant allegedly was not allowed to sort out the scrap at the time of purchase as the conditions specified therein were : "1. The material will be sold of "AS IS WHERE IS" basis. 2. No sorting, picking whatsoever under any circumstances will be allowed. 3. The purchaser will be required to take delivery of the material from the lots. 4. The purchaser should inspect the lots prior to the auction."
(3.) Appellants stated that about 9.47% of the total amount of scrap purchased, i.e., 239.966 M.T., could not be utilized by it. It sold the said goods to other dealers at a concessional rate of tax. Inter alia, on the plea that the appellant for the purpose of obtaining the tax concession in terms of Section 4-B(2) of the Act had furnished an undertaking whereby and whereunder it undertook to utilize the entire material for manufacturing purposes, which was breached by reason of the said transfer, a proceeding for levy of penalty was initiated against it whereupon a show-cause notice was issued. Cause was shown by the appellant on 5.03.1990 contending that the said quantity of scrap being not usable, it had no other option but to dispose of the same.;