2013 (10) TMI 1279 - HC - VAT and Sales Tax

Determination of turnover assessable to tax - Held that - after introduction of section 3B and after amendment made to the definition of sale under section 2(n)(ii), the contention raised by the learned counsel for the assessee cannot be accepted, since by the operation of law, the transfer of goods involved in works contract would amount to sale taxable under section 3B. The assessee therein had purchased the dyes and chemicals from outsaid the State. Consequently, this court held that the entire turnover was assessable to tax. - Decided in favour of Revenue.

Summary

Issues:
1. Interpretation of the applicability of sales tax in dyeing works contract.
2. Differentiation between dyes/chemicals and consumables in terms of tax eligibility.

Issue 1: Interpretation of the applicability of sales tax in dyeing works contract
The High Court was presented with a revision by the Revenue against the Sales Tax Appellate Tribunal's order regarding the assessment year 1996-97. The main legal questions raised were whether the Tribunal failed to consider the treatment of goods in dyeing works contracts, and whether goods incorporated in such contracts should be considered as goods or in another form due to the application of dyes and chemicals. The Revenue relied on a prior unreported decision of the court from 2011, which highlighted that post the introduction of section 3B and amendments to the definition of "sale" under section 2(n)(ii), the transfer of goods in works contracts would amount to a taxable sale under section 3B. Citing precedents like Rainbow Colour Lab v. State of Madhya Pradesh and Associated Cement Companies Ltd. v. Commissioner of Customs, the court concluded that the contention against taxing the turnover involving dyes and chemicals from outside the State could not be accepted, and the entire turnover was deemed assessable to tax.

Issue 2: Differentiation between dyes/chemicals and consumables in terms of tax eligibility
The court emphasized the distinction between dyes and chemicals used in works contracts and consumables like fuel or welding electrodes that are exhausted or disappear after the work is completed. By following the earlier decision and relevant legal precedents, the court clarified that the operation of law, post the statutory amendments, necessitated the treatment of the transfer of goods in works contracts, including dyes and chemicals, as taxable sales under section 3B. Consequently, the court allowed the tax case revision, setting aside the Sales Tax Appellate Tribunal's order and ruling in favor of the Revenue, without imposing any costs.