2017 (4) TMI 7 - HC - VAT and Sales Tax

Concessional rate of tax - Iron and Steel - respondent-assessee s case is that the Iron and Steel purchased by the respondent assessee and used in the execution of the civil works contracts of the construction of the buildings, remains Iron and Steel as declared goods under the provisions of Section 14 of the Central Sales Tax Act, 1956 and therefore are taxable only at the concessional rate of 4% and not at 13% rate of tax - Held that - the issue is no longer res-integra as decided in the case of Smt. B. Narasamma Versus Deputy Commissioner Commercial Taxes Karnataka & Another 2016 (8) TMI 636 - SUPREME COURT , where it was held that commercial goods without change of their identity as such, are merely subject to some processing or finishing, or are merely joined together, and therefore remain commercially the same goods which cannot be taxed again, given the rigor of Section 15 of the Central Sales Tax Act - petition dismissed - decided against Revenue.

Summary

Issues:
Interpretation of tax rates on iron and steel used in construction works contracts under the Karnataka Value Added Tax Act, 2003.

Analysis:
The High Court considered a revision petition filed by the Revenue under Section 65 of the Karnataka Value Added Tax Act, 2003, regarding the taxation of "Iron and Steel" used in construction works contracts. The controversy was whether such materials should be taxed at the concessional rate of 4% or the higher rate of 13%. The court noted that the issue was covered by a decision of the Hon'ble Supreme Court in a similar case, which determined that "Iron and Steel" used in construction remains declared goods under the Central Sales Tax Act, 1956, and thus taxable at the concessional rate of 4%. The Karnataka Appellate Tribunal had also ruled in favor of the respondent-assessee, specifying that iron and steel used in certain forms were taxable at 4%, while those used in fabrication of items like grills and gates were taxable at a higher rate due to being transferred in a different form.

The High Court further discussed the Supreme Court's previous decisions in similar cases, emphasizing that iron and steel products used in construction, even if they change form, are still considered declared goods and should be taxed at 4%. The court highlighted the importance of adhering to legal provisions and rules, such as Rule 3 of the KVAT Rules, to compute total and taxable turnover accurately. The court dismissed the Revenue's revision petition, stating that since the issue was settled by previous Supreme Court decisions, there was no further question of law to be considered. Consequently, the revision petition was rejected, and no costs were awarded.

In conclusion, the High Court's judgment clarified the tax rates applicable to iron and steel used in construction works contracts under the Karnataka Value Added Tax Act, 2003. The decision was based on previous rulings of the Supreme Court, which established that such materials are declared goods and should be taxed at the concessional rate of 4%. The court emphasized the need for proper examination and adherence to legal provisions while computing taxable turnover, ultimately dismissing the Revenue's revision petition as the issue was no longer open for consideration.