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1995 (6) TMI 193 - HC - VAT and Sales Tax
Issues: Interpretation of tax laws regarding the deduction of consumables in works contracts for the purpose of levying tax under section 3-B of the Act.
In this judgment delivered by the Madras High Court, the primary issue revolved around the interpretation of tax laws concerning the deduction of consumables in works contracts for tax assessment under section 3-B of the Act. The Tribunal's view aligned with a Division Bench's opinion in a previous case. The crux of the matter was whether consumables like ink and dyes used in printing and dyeing works contracts should be considered as part of 'labour charges and other like charges' not involving property transfer, thus warranting their exclusion from the total turnover for tax calculation purposes. The Court referred to the Gannon Dunkerley case, where the apex Court clarified that the tax on the transfer of property in goods in works contracts is leviable on the goods involved in the contract. It was emphasized that the value of goods in the works contract should be determined by deducting charges for labor and services, including the cost of consumables like water, electricity, and fuel, which are not part of property transfer during the execution of the contract. Consequently, the cost of consumables used in works contracts, where property transfer does not occur, falls under the category of 'labour charges and other like charges' as per section 3-B(2)(e) of the Act, necessitating their exclusion from the dealer's total turnover for tax calculation under section 3-B(1) of the Act. In light of the above legal principles and the precedent set by the apex Court, the Court dismissed the tax cases in question, thereby upholding the exclusion of the cost of consumables like ink and dyes from the total turnover of dealers for tax assessment purposes under section 3-B(1) of the Act. The judgment reiterated the importance of considering the nature of goods involved in works contracts and the treatment of consumables in such contracts for accurate tax assessment in accordance with the law.
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