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2014 (3) TMI 1043 - HC - VAT and Sales TaxSeeking direction for amending certificate of registration of the petitioner-company under the CST Act, 1956 - Whether a civil works contractor is entitled to include machinery, tools and equipment used for execution of works contracts and accessories, in the certificate of registration under the CST Act, to claim the concessional rate of tax on inter-State purchase of such equipment, under section 8(3)(b) of the CST Act, read with rule 13 of the CST Rules, 1957 - Engaged in the construction of bridges, flyovers, roads and multi-storied buildings - Held that - it was not necessary that the property in the plant, machinery or equipment should be transferred to the contractees, which would be a case of resale simpliciter. Section 8(3)(b) of the CST Act was not confined only to purchase for the purpose of resale, but expressly covered plant, machinery, equipment, etc., if required for use in the manufacture or processing of goods for sale. Such goods for sale could be in the form of goods or in any other form. In other words the goods of sale might undergo a transformation, alteration or change. In the case of a works contract too, articles integral to the process of manufacture such as tools, plant, machinery, equipment, for example concrete mixers, pumps, hydraulic mobile cranes, vehicles, computers is used for preparing plans designs, etc., vehicles used for carrying construction materials, etc., and other similar articles would be eligible for concessional tax even though such goods may not actually be incorporated in execution of the contract. Therefore, the Joint Commissioner of Sales Tax, erred in law in refusing to amend the certificate of registration of the petitioner under the Central Sales Tax Act, 1956, by adding construction equipment, machinery and tools such as hydraulic mobile crane, vehicle, pump material, computer, accessories, office equipment, etc., used in the process of execution of a works contract in the certificate of registration under the Central Sales Tax Act and it should be included in the registration certificate. - Decided in favour of petitioner
Issues Involved:
1. Whether a civil works contractor is entitled to include machinery, tools, and equipment used for executing works contracts in the certificate of registration under the Central Sales Tax Act, 1956 (CST Act) to claim a concessional rate of tax on inter-State purchase of such equipment. 2. Interpretation of Section 8(3)(b) of the CST Act and Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957 (CST Rules). 3. The distinction between goods used in the manufacturing process and those used in the execution of works contracts. 4. The impact of the 46th Amendment of the Constitution on the definition of "sale" and "works contract". 5. The relevance of judgments from the Supreme Court on similar issues. Detailed Analysis: 1. Inclusion of Machinery, Tools, and Equipment in the Certificate of Registration: The petitioner, a civil works contractor, challenged the refusal of the Joint Commissioner of Sales Taxes to amend its certificate of registration to include machinery, tools, and equipment used in executing works contracts. The petitioner argued that under Section 8(3)(b) of the CST Act, read with Rule 13 of the CST Rules, such items should be eligible for a concessional rate of tax. 2. Interpretation of Section 8(3)(b) of the CST Act and Rule 13 of the CST Rules: Section 8(1) of the CST Act provides for a concessional rate of tax for goods specified in the certificate of registration of a registered dealer, intended for resale or for use in manufacturing or processing goods for sale. Section 8(3)(b) further elaborates that goods specified in the certificate of registration can be intended for resale or used in manufacturing or processing goods for sale, telecommunications, mining, or power generation/distribution. Rule 13 of the CST Rules specifies that goods intended for use as raw materials, machinery, plant, equipment, tools, etc., in manufacturing or processing goods for sale are eligible for concessional tax. 3. Distinction Between Goods Used in Manufacturing and Execution of Works Contracts: The respondent-Joint Commissioner argued that machinery and tools used in works contracts are not incorporated into the final product and thus do not qualify as goods used in manufacturing or processing. However, the petitioner contended that the definition of "sale" in Section 2(g) of the CST Act includes the transfer of property in goods involved in the execution of a works contract, thus bringing such goods within the ambit of Section 8(3)(b). 4. Impact of the 46th Amendment of the Constitution: The 46th Amendment enabled the levy of sales tax on the value of goods involved in the execution of works contracts. The amendment clarified that the definition of "sale" includes the transfer of property in goods involved in works contracts. This amendment was upheld by the Supreme Court, which recognized that activities involved in works contracts could constitute manufacturing or processing of goods for sale. 5. Relevance of Supreme Court Judgments: Several Supreme Court judgments were cited to support the petitioner's case: - Indian Copper Corporation Limited v. Commissioner of Commercial Taxes: The Supreme Court held that goods used in the manufacturing process, including vehicles for transporting processed goods, could be included in the certificate of registration. - J. K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer: The Court held that goods used in processes integral to manufacturing, even if not directly incorporated into the final product, qualify for concessional tax. - Chowgule & Co. Pvt. Ltd. v. Union of India: The Court ruled that blending ore for sale constituted processing, and machinery used in such processing was eligible for concessional tax. Conclusion: The court concluded that the petitioner was entitled to include machinery, tools, and equipment used in the execution of works contracts in its certificate of registration under the CST Act. The Joint Commissioner erred in refusing the amendment. The writ petition was allowed, directing the respondents to amend the certificate of registration to include the specified items used in the execution of works contracts.
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