2011 (2) TMI 1252 - HC - VAT and Sales Tax

Whether the petitioner is entitled to concessional rate of tax on purchase of natural rubber used for rubber backing of polypropalin rubber mats done on job-work basis Kerala General Sales Tax Act, 1963 - Held that - petitioner satisfies both the conditions in the notification inasmuch as it is an industrial unit purchasing the rubber and though as a job-worker, it carries out industrial activity to make the product a rubber product within the meaning of the notification, denial of concessional rate to the petitioner will defeat the very purpose of notification which is promotion of rubber based industries in the State. - Petitioner is entitled to concessional rate for the purchase of rubber under the notification for the relevant year and accordingly the revision case is allowed by vacating the order of the Tribunal confirming the reassessment and by restoring the original assessment at concessional rate of tax on the purchase turnover of rubber used in rubber backing work done by the petitioner for others

Summary

Issues:
Entitlement to concessional rate of tax on purchase of natural rubber used for rubber backing of polypropalin rubber mats under notification S. R. O. No. 1091/99.

Analysis:
The petitioner engaged in the industrial activity of rubber backing of polypropalin rubber mats for another manufacturer during 2004-05. The petitioner claimed a concessional rate of tax on the purchase turnover of rubber used in the job-work under notification S. R. O. No. 1091/99. Initially granted, the concessional rate was later withdrawn due to a tax escaping assessment, stating that a job-worker not engaged in manufacturing is not entitled to the concession. The issue revolved around whether the petitioner, as a job-worker purchasing rubber independently for industrial activity, should be denied the concessional rate intended for rubber-based industrial units. The Tribunal upheld the disallowance, leading to the revision filed before the High Court.

The notification S. R. O. No. 1091/99 aimed to reduce the tax rate for rubber-based industrial units on the purchase turnover of rubber used in manufacturing rubber products within the State. The Court analyzed the conditions of the notification, emphasizing that the petitioner, though a job-worker, contributed to the manufacturing process, resulting in the final product of rubber-backed polypropalin mats. The Court interpreted the definition of rubber products under the notification to include goods utilizing rubber as a raw material, even if predominantly made of polypropalin. The Court concluded that denying the concessional rate to the petitioner would contradict the notification's objective of promoting rubber-based industries in the State.

In light of the above analysis, the High Court held that the petitioner satisfied the conditions of the notification by being an industrial unit purchasing rubber and contributing to the manufacturing process, making the product a rubber product as per the notification's definition. The Court ruled in favor of the petitioner, allowing the concessional rate for the purchase of rubber used in the rubber backing work, thereby overturning the Tribunal's decision and restoring the original assessment at a concessional tax rate.