2017 (4) TMI 195 - HC - VAT and Sales Tax

Rate of tax - iron and steel - concessional rate of tax - whether taxable at 4% or 13% - Held that - the issue is no more res-integra - The Hon ble Supreme Court in the case of B. Narasamma 2016 (8) TMI 636 - SUPREME COURT , 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 - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of the Karnataka Value Added Tax Act, 2003 regarding the taxation rate applicable to "Iron and Steel" used in construction works.

Analysis:
The High Court of Karnataka addressed the controversy raised in a revision petition filed by the Revenue under Section 65 of the Karnataka Value Added Tax Act, 2003. The court referred to the decision of the Hon'ble Supreme Court in the case of B. Narasamma Vs. The Deputy Commissioner, Commercial Taxes, Karnataka, which established that "Iron and Steel" used in civil works contracts for building construction remains "Iron and Steel" as "declared goods" under Section 14 of the Central Sales Tax Act. Consequently, the applicable tax rate for such goods is 4% and not 13%.

The Karnataka Appellate Tribunal had previously ruled in favor of the respondent-assessee, emphasizing that even after iron and steel are cut, shaped, and used in construction, they retain their original characteristics. The Tribunal highlighted that there is no value addition to these materials, as they are primarily used to reinforce concrete structures. However, due to the lack of specific details on the transfer of iron and steel in the same form, the case was remitted back for a fresh assessment.

In a subsequent decision, the Hon'ble Supreme Court reiterated the principle that the declared goods, such as iron and steel, can only be taxed at a rate of 4%. The Court reviewed the history of the case, including orders from the Appellate Tribunal and High Court, ultimately setting aside previous judgments and affirming the 4% tax rate for the mentioned goods.

Given the consistent legal precedents established by the Hon'ble Supreme Court, the High Court of Karnataka concluded that the issue at hand no longer required further consideration. The court dismissed the Revenue's revision petition, citing the decisions of the Supreme Court as the basis for their ruling.