9911796707
TMI Blog1993 (6) TMI 239X X X X Extracts X X X X X X X X Extracts X X X X ..... aid fabrics are received in the factory of the applicant the same are fully manufactured in a salable condition and are commercially known as grey cotton hosiery fabrics. These fabrics undergo various operations in the factory of the applicant-firm. These are boiled in water, mixed with various chemicals and are washed and scoured and thereafter these are taken for the dyeing process. The applicant purchases bleaching powder, whiting and other chemicals and uses them for bleaching the grey fabrics; for its dyeing activity dyes and other chemicals are purchased and used. Art and skill are also involved in executing the process of bleaching and dyeing and for this purpose technical persons have been employed by the applicant. The firm is merely a processing house and after doing the work of processing, namely, bleaching and dyeing, as per the requirement of its customers, the processed fabrics are returned to them. What is received for processing by the applicant is known as grey cotton hosiery fabrics and what is returned to the customers after being processed is known as cotton hosiery fabrics. The finally processed fabrics are not the property of the applicant and cannot be sold b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill and there is no question of transfer of property in goods in any form. Chemicals used in the form of treatment to the fabrics are consumed and destroyed in the process of such treatment. The chemicals used are not identifiable in any way as goods. There is, therefore, no transfer of property in goods in the course of rendering services of bleaching and dyeing to the customers. Chemicals are washed away in the process of treatment and do not accrete and form part of the articles. There is thus no accretion or accession as envisaged in section 6D. Hence there is no transfer of property in goods. 6.. Mr. A.K. Chakraborty, learned advocate for the applicant, referred to a book entitled Chemical Technology of Fibrous Materials by F. Sadov and others (translated from the Russian) and placed before us extracts from the said book on bleaching and dyeing. He also referred to extracts from a book entitled A Glimpse on the Technology of Textile Fibres by R.R. Chakravertty. On the authority of these treatises, Mr. Chakraborty tried to show that by the process of bleaching the impurities of grey cotton are removed. He contended that the dye is exhausted after the work is done and no conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd bleaching. The dyes and chemicals, which are used by the applicant to dye a particular cloth, finally changed the colour of the cloth and in this process the entire dyes and chemicals are deposited in and/or soaked by the cloth itself and remained permanently on it and cannot be removed by washing. After undergoing the process of dyeing the cloth gains some weight which shows that the goods in the form of dyes and chemicals which are added to the cloth become a part and parcel of the same. In the case of bleaching, the grey cloth is bleached by adding bleaching powder, etc., and also some whiting agents. Though the bleaching powder which is used to decolour the grey cloth is washed away, but the "whiting" which is used only for the purpose of adding colour to the decoloured cloth remains there permanently as a deposit and cannot be removed by washing. Whiting is nothing but a white colour, which is used to make the decoloured cloth white. Some chemicals are also added in order to ensure that the deposit of whiting or white colour settles on the fabric permanently. There is, therefore, transfer of property in goods in the case of bleaching as well as dyeing. 10.. Mr. Majumdar r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in goods in some form or the other. The definition of works contract envisages an agreement between two persons, one owning the property or the goods and the other carrying out certain specific works on it. There has to be pre-existence of certain goods, which are required to be altered, ornamented, finished, processed, treated, etc., in terms of the contract. In other words, there has to be a property owned by somebody, who engages somebody else to carry out certain works involving application or affixation of certain materials to that property. (See Studio Kamalalaya [1993] 89 STC 307 (WBTT); [1993] 26 STA 85). 13.. It is now well-settled that deemed sale or contractual transfer under sub-clause (b) of clause (29-A) of article 366 and section 6D takes place on the principle of accession and accretion [see Builders Association of India v. Union of India [1989] 73 STC 370 (SC)]. Transfer of property in goods effected by accession is the cornerstone of the works contract envisaged in the said section. For the purposes of taxation in a works contract, the following ingredients or pre-requisites have to be there. There has to be a contract between two parties relating to a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present. A thing can have a form when it exists and the evidence of such existence is the form in which it manifests itself. So, what is important here is that the goods have to exist in some form or the other. It does not necessarily follow that accretion has to be in the form of material; it may be in the form of colour, reaction or strength. If it is consumed, destroyed or used up leaving no trace or remnant or reaction of any kind in any form, then it cannot be conceived that transfer of property in goods has taken place. 16.. Apart from the cases already mentioned Mr. Chakraborty referred to a number of other cases. Some of them are not relevant. The case of B.C. Kame [1977] 39 STC 237 (SC) deals with the contract of sale vis-a-vis the contract of skill and labour. In that case it was held that photography involved essentially a contract of skill and labour and that the supply of photographic prints is not sale. It is not the case of the applicant here that his job work is only a work of skill and labour. Admittedly, materials are used in the execution of the work. The case of Anandam Viswanathan [1989] 73 STC 1 (SC) dealt with the question whether printing of question paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemical Technology of Fibrous Materials). The process of dyeing, therefore, promotes the transfer of coloured ions into the fibre. 19.. It is evident that the chemicals applied to the fabric for dyeing are not exhausted but are retained by the fabric in the form of a shade of colour. This is also confirmed from the technical point of view as indicated in the foregoing paragraph. There is accretion of coloured ions into the fabric. But, in the case of bleaching the position is different. There is no accretion but, on the contrary, the fibre loses weight because of elimination of impurities and natural colouring substances. It is not clear whether any special whiting agent is applied after bleaching or whiting takes place in the course of bleaching itself. In the case of the former, that is, if special whiting agent is applied, the same principle as in the case of dyeing will apply. 20.. It may be mentioned in this connection that Mr. Ashoke Kumar Mukherjee, Chartered Engineer and Textile Processing Technologist, whose opinion has been produced by the applicant, had relied on the same authorities quoted above. He has, however, made an observation which is not quite in conformity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act or arrangement between the owners of the fabric and the contractor, who is doing the processing work on it. In other words, the issue is whether there is sale of goods between them. The question whether the contractor is doing manufacturing work by himself while executing the said contract is altogether a different matter. The latter is actually the subject-matter of Empire Industries case [1987] 64 STC 42 (SC); AIR 1986 SC 662. 26.. We may now consider the next plea of the applicant that the provisions of section 6D of the Act infringe the provisions of article 286 of the Constitution. Mr. Chakraborty, learned advocate for the applicant, argued that the power of State Legislature under entry 54 of the State List is subject to the limitation relating to prohibition contained in article 286. He further argued that the tax of the nature referred to in sub-clause (b) of clause (29-A) of article 366 is also subject to similar restrictions, but this has been ignored while enacting section 6D. He contended that the section is liable to be struck down as it does not take into consideration the consequences of deemed sale involved in the execution of works contract which takes place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of transaction in respect of works contract is such that it is difficult to visualize any sale in the course of interState trade or commerce or an outside sale or a sale in the course of import in respect of goods which are involved in the execution of such a contract, since the deemed sale of such goods takes place only when the goods are incorporated in the works and this can only take place in the State in which the work is executed. 30.. Be that as it may, there cannot be any dispute with regard to the legal position that section 6D of the Act complies with the limitation imposed by article 286. As rightly pointed out by Mr. Majumdar, the saving provision in section 27 is meant to give such a protection. The relevant portion of section 27 is reproduced below: 27.. Savings.-(1) Notwithstanding anything contained in this Act, (a) a tax on sale or purchase of goods shall not be imposed under this Act- (i) where such sale or purchase takes place outside the State of West Bengal (ii) where such sale or purchase takes place in the course of import of the goods into, or export of the goods out of, the territory of India; 31.. The overriding provision in the said secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
