sales tax in case of rejected garments sold as scrap

Head - Legal & Secretarial


I would like to know if there is any provision in Sales tax act by which benefit can be taken in following case

Stock of garment amounting to Rs. 25 lakhs was rejected due to out of length and same was rejected by exporter certifier and stamped as rejected. The partner sold the same as scrap and realised Rs 20000/- on which he paid the sales tax. Now the sales tax department raised demand on 25 lacs and matter is in appeal before Commissioner and he has asked the relevant provision under which it can be allowed.

Please advise



the definition of sale is very much clear that, to become a sale there should be transfer of property in goods for consideration.  In your case the consideration is Rs.20,000/- and not Rs.25,000/-.  It is self explanatory not required much explanation


Vasanth D Jaganath


Head - Legal & Secretarial

But the stock cost was Rs. 25 lacs which was sold as scrap for 20000/- and sales tax comissioner has raised the question that there is no provision under which he can accept the sale at Rs. 20000/-

He says it should be chargeable on Rs 25 lacs only and not on 20000/-. would be really nice if you could quote relevant provisios and the case law to support my case.






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