12 August 2011
My assessee who is dealer, a trader of Metal Scrape purchases scrape from hawkers and sells it to the customers. He does not undertake any manufacturing activity or mechanical process as defined in the definition of "scrape" given in the clause (b) of explanation to Section 206C. Now my query - is he required to collect TCS from his customers in the light of this explanation? is there any case law pertaining to this? i have to defend him in scrutiny matter. Waiting for early reply. Thanks.
12 August 2011
1. Provisions of TCS u/s 206C are applicable to sellers of the specified goods including scrap and it is immaterial whether the seller is manufacturer or trader. See heading of section of 206C- it specifically says trader, also explanation (a) buyer and (b) seller. No where it is stated seller is manufacturer.
2. Only in explanation(b) scrap it states scrap arising out of manufacturer. I opine that all scrap sales does not attract TCS only sales of industry scrap or those scrap that arises in course of manufacture are scrap for TCS . These scrap is sold by industry to dealers and further by dealers to other customer, tCS apply on sales by industry to dealer and also on dealer to other persons.
3. You need to check whether the sales of scrap is industry scrap as specified in explanation.
23 January 2012
Dear Preetyji, Thanks for the reply. I understand that you want to say that if scrape is generated by an industry and sold to dealer who in turn sells further, TCS is appicable to the dealer also.
As regards scrape arising out of industry, it would be practically impossible for a scrape trader to identify scrape from industry as they store everything together in scrape yard.
Also in one lot sold to anyone, it is difficult to arrive on which portion TCS is applicable and on which portion it is not.
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