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2008 (12) TMI 706 - HC - VAT and Sales TaxWhether the Sales Tax Appellate Tribunal was correct in their conclusion that the chemicals used in the process of tanning raw hides and skins involves transfer of property and liable for tax under section 3B of the Tamil Nadu General Sales Tax Act, 1959? Held that - Even though the learned counsel has produced before us the process chart, the fact remains that those particulars were not produced before the authorities below. The appellate authority simply stated that transfer of property can take place in any form but however did not give any factual finding as to how the transfer of property took place in the present case. Therefore we are of the considered opinion that the matter requires to be considered by the assessing authority afresh. Accordingly we set aside the order dated May 25, 2000 of the Sales Tax Appellate Tribunal and the matter is remitted to the assessing authority for fresh consideration. The petitioner is directed to produce materials before the assessing authority in support of their contention that there was no transfer of property involved in the process and the chemicals were completely washed away in the process and as such acted merely as a catalyst . The particulars so furnished by the assessee has to be considered by the assessing officer and a factual finding should be recorded with due opportunity to the petitioner. Since the matter pertains to the assessment year 1995-96, the assessing authority is directed to decide the issue as expeditiously as possible and in any case, within a period of three months from the date of receipt of a copy of this order.
Issues Involved:
1. Whether the chemicals used in the process of tanning raw hides and skins involve transfer of property and are liable for tax under section 3B of the Tamil Nadu General Sales Tax Act, 1959. Issue-wise Detailed Analysis: 1. Transfer of Property and Tax Liability under Section 3B of the Tamil Nadu General Sales Tax Act, 1959: The assessee, a dealer in hides and skins, for the assessment year 1995-96, purchased chemicals for processing hides and skins quantified at Rs. 7,58,524. The assessee claimed exemption of the cost of consumables under "labour charges and other like charges," which was denied by the assessing authority, resulting in the computation of taxable turnover. The assessee's appeal to the Appellate Assistant Commissioner was rejected on the grounds that the chemicals improved the product and enhanced its value, indicating accretion of property in the finished goods. The Tribunal upheld this view, confirming that the chemicals could not be equated to consumables like fuel. The learned counsel for the petitioner argued that the chemicals acted merely as a "catalyst" and did not involve transfer of property. A process chart was produced to demonstrate that the chemicals lost their form during the tanning process. In contrast, the learned Special Government Pleader for the Revenue maintained that the chemicals improved the product and enhanced its value, thus constituting accretion of property in the finished goods. The petitioner relied on several judgments to support their claim: Pest Control India Ltd. v. Union of India [1989] 75 STC 188 (Patna): The court held that the involvement of chemicals in pest eradication did not involve transfer of goods, as the chemicals were consumed in the process, leaving nothing tangible in which property was transferred. Commissioner of Sales Tax v. R.M.D.C. Press Pvt. Ltd. [1999] 112 STC 307 (Bom): The court found no transfer of property in ink used for printing, as the ink was consumed and lost its identity in the process. Bavens v. Union of India [1995] 97 STC 161 (Ker): The court held that a photographer's contract did not involve a works contract, as there was no accretion to goods or property originally belonging to the customer. Tamil Nadu Mosaic Manufacturers Association v. State of Tamil Nadu [1995] 97 STC 503 (Mad): The court held that consumables used in the execution of a works contract, where property is not transferred, fall under "labour charges and other like charges" and should be excluded from taxable turnover. The learned Government Pleader cited Commissioner of Sales Tax v. Hari and Company [2006] 148 STC 92 (Bom): The court rejected the claim that paper and ink used in com-binding and photocopying were incidental, holding that any transfer of property in goods constitutes a sales transaction. The court concluded that determining whether there was a transfer of property requires examining if the consumable item retains its identity or is completely consumed in the process. In the present case, the petitioner did not provide sufficient factual details to the authorities. Therefore, the court set aside the Tribunal's order and remitted the matter to the assessing authority for fresh consideration. The petitioner was directed to produce materials to support their claim that the chemicals were completely washed away and acted merely as a "catalyst." The assessing authority was instructed to decide the issue within three months. The tax case was disposed of with the direction for fresh consideration by the assessing authority, with no costs awarded.
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