1988 (4) TMI 379 - SC - VAT and Sales Tax

Whether the materials used by the assessee for the contract works on behalf of the Public Works Department can be taxed under purchase tax under section 5A of the Kerala General Sales Tax Act, 1963? Held that - Appeal dismissed. In the instant case, the user must be in the other commodity and the expression consumed otherwise must be so construed.

Summary

Issues:
1. Interpretation of section 5A of the Kerala General Sales Tax Act, 1963 regarding the taxation of materials used by a P.W.D. contractor.
2. Whether the materials used by the assessee for repair of roads can be taxed under purchase tax under section 5A of the Act.

Analysis:
The Supreme Court dealt with petitions for leave to appeal under article 136 of the Constitution from the decision of the High Court of Kerala, where the Revenue was the petitioner and the respondent was the assessee, a P.W.D. contractor. The main issue revolved around the interpretation of section 5A of the Kerala General Sales Tax Act, 1963, specifically regarding the taxation of materials used by the assessee for the repair of roads. The Tribunal found that the materials used by the assessee did not fall under the purview of section 5A as there was no consumption of a commodity for the manufacture of another commodity, as required by the section. This interpretation was supported by a previous judgment of the Court in Deputy Commissioner, Sales Tax (Law) v. Pio Food Packers [1980] 46 STC 63; [1980] 3 SCR 1271, which emphasized the need for consumption of goods in the manufacture of other goods for the section to apply.

The assessing officer had assessed the turnover of materials used by the assessee for the execution of contracts under section 5A of the Act. However, the Tribunal disagreed, stating that in the absence of consumption of a commodity for the manufacture of another commodity, as required by the Act, the materials used by the P.W.D. contractor for constructing a sea wall or repairing a public road did not qualify for taxation under section 5A. The Court upheld the Tribunal's decision, emphasizing the need for consumption of goods in the manufacture of other goods for the section to apply, as established in previous judgments.

The Court also addressed the argument that even if no manufacturing process was involved, the case could still fall within the scope of section 5A(1)(a) of the Act because the statutory provisions spoke of goods consumed in the manufacture of other goods for sale or goods "consumed otherwise." However, the Court rejected this contention, stating that the expression "consumed otherwise" must be construed in the context of the consumption being in the manufacture of another commodity. The Court cited the decision in Deputy Commissioner of Sales Tax (Law) v. Thomas Stephen and Co. Ltd. [1988] 69 STC 320 to support this interpretation. Ultimately, the Court found no grounds to interfere with the High Court's decision, and the petitions for leave to appeal were dismissed.