2018 (5) TMI 1865 - HC - VAT and Sales Tax

Levy of tax - job-work - dyes and chemicals used in the execution of job work of bleaching and dyeing are transferred as in physical form or as their inherent properties - Held that - The issue has been decided by this Court in M/s A.P. Processors, Faridabad Vs. The State of Haryana and others, 2018 (5) TMI 1797 - PUNJAB AND HARYANA HIGH COURT of even date, wherein after examining the factual matrix and the relevant case law on the point, it has been held that while determining the actual loss of chemicals, dyes and colours where the fabric or the textile undergoes various processes depends upon factual aspect which can be considered only by the Assessing Officer where parties can produce evidence in respect of their respective claims/contentions - the matter has been remanded to the Assessing Officer to work out the details of quantity of chemicals, dyes and colours that would get washed out in the process of dyeing and printing of fabric undertaken by the assessee. The Assessing Officer has been directed to conduct the factual inquiry in this regard after giving liberty to the parties to produce evidence in respect of their respective contentions and, thereafter, he would be at liberty to proceed in the matter for adding percentage of the chemicals, dyes and colours in the value of the turnover, which are retained or embedded on the textile or fabrics as the case may be in accordance with law - petition disposed off.

Summary

Issues:
1. Assessment of tax on chemicals and dyes used in job work.
2. Interpretation of property transfer in the execution of works contract.
3. Application of VAT on consumables used in job work processes.
4. Determination of taxable quantity of chemicals, dyes, and colors.

Analysis:

Issue 1: Assessment of tax on chemicals and dyes used in job work
The petitioner, engaged in job work in Haryana, faced a tax demand on dyes and chemicals used in fabric processing. The Assessing Authority held that all materials used in job work are transferred, justifying taxation. The petitioner challenged this assessment, leading to a detailed examination by the court.

Issue 2: Interpretation of property transfer in the execution of works contract
The court referred to a previous judgment to determine that the property transfer of chemicals, dyes, and colors used in job work is crucial for taxation. It emphasized that the actual loss of these materials during processes should be assessed by the Assessing Officer based on evidence provided by the parties.

Issue 3: Application of VAT on consumables used in job work processes
The court clarified that VAT should not be levied on the entire value of consumables used in job work if they are not transferred to the principal. It highlighted the need to exclude a percentage of consumables from the turnover value for taxation purposes.

Issue 4: Determination of taxable quantity of chemicals, dyes, and colors
The court directed the Assessing Officer to conduct a factual inquiry to ascertain the quantity of chemicals, dyes, and colors washed out during fabric processing. Parties were granted the opportunity to present evidence, and the Assessing Officer was instructed to add the percentage of retained materials in the turnover value in compliance with the law.

Conclusion:
The court set aside the previous orders, remanding the matter to the Assessing Officer for a fresh assessment based on the principles outlined in the judgment. This comprehensive analysis ensures a fair and evidence-based approach to determining the taxable quantity of materials used in job work processes.