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TMI Blog2003 (9) TMI 720X X X X Extracts X X X X X X X X Extracts X X X X ..... The said tin ingots are used for the manufacture of tins. In the assessment for the years in question the assessee contended that the tin ingots consumed in the process of manufacture of empty tins are not exigible to tax under the Act since there is no transfer of property in the sheets. The assessing authority rejected the claim and brought the purchase value of tin ingots by making an addition of 25 per cent towards gross profit to tax at the rate of 10 per cent under the Act. Aggrieved by the assessment order the assessee filed appeal before the Appellate Assistant Commissioner (Commercial Taxes), Kollam. The appeals for the assessment years 1990-91 to 1994-95 were disposed of by a common order dated September 2, 1998 (annexure B). The first appellate authority directed the assessing authority to examine the aspects regarding the return of the tin cuttings and regarding the estimation of turnover under section 5A with certain directions. The assessee filed appeals against the said orders before the Tribunal. The Tribunal by a common order dated December 20, 2000 (annexure C) disposed of the appeals filed for the assessment years 1990-91 to 1994-95. It was contended before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax the rate of tax applicable is only the tax applicable to works contract and not the tax on finished goods, viz., tins. The counsel also submitted that the estimation of sales turnover of ingots by adding 25 per cent gross profit to the purchase value of tin ingots is arbitrary and excessive. 5.. The learned Government Pleader appearing for respondents, on the other hand, submitted that the assessee had used the tin ingots purchased from outside the State in the manufacture of tins for its customers and therefore there is a deemed sale of the said tin ingots as contemplated under explanation (3A) to section 2(xxi) of the Act. The Government Pleader further submitted that this is not an item exempted under section 5C of the Act. The Government Pleader also relied on a decision of the division Bench of this Court in the judgment dated October 31, 2002 in T.R.C. No. 283 of 2002*. The Government Pleader further submitted that the rate of tax on tin ingots used in the manufacture of tins is levied at 10 per cent which is the rate applicable to metals including tins under the First Schedule to the Act. The Government Pleader also submits that the gross profit addition at 25 per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacture of tins and therefore the turnover of tin ingots is not exigible to tax under the Act. In this context it is relevant to refer to the provisions of explanation (3A) to section 2(xxi) of the Act as per which a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract shall be deemed to be a sale. 9.. In the present case the tin ingots used for the manufacture of tins do not disappear as in the case of electricity, oil, fuel, etc., from the end-product. The tin ingots are absolutely necessary for fabricating the tin sheets into tins. The tin ingots unlike in the case of fuel, chemical or oil continue to be part of the tins manufactured. The Supreme Court in Gannon Dunkerley Co. v. State of Rajasthan [1993] 88 STC 204; (1993) 1 KTR 178 observed that keeping in view the legal fiction introduced by the Forty-sixth Amendment whereby the works contract which was entire and indivisible has been altered into a contract which is divisible into one for sale of goods and other for supply of labour and services, the value of the goods involved in the execution of a works contract on which tax is leviable must exclude the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal has clearly held that tin ingots are essential ingredients for the conversion of tin sheets into tins and that the transfer of tin ingots was necessary to complete the work entrusted. In the light of the principles laid down by the Supreme Court and by this Court in the abovementioned cases we are of the view that the authorities and the Tribunal were justified in levying tax on the turnover of tin ingots used by the assessee in the execution of the works contract. We are also of the view that the sale value of the ingots has been rightly estimated by making a gross profit addition of 25 per cent to the purchase value of tin ingots. 12.. The only other question that remains to be considered is regarding the rate of tax on the tin ingots transferred. The assessing Reported as Teaktex Processing Complex Limited v. State of Kerala [2004] 136 STC 435 (Ker). authority had levied tax at the rate of 10 per cent which is the rate applicable to tins and metals. We have already noted that the Supreme Court in Gannon Dunkerley Co.'s case [1993] 88 STC 204 has held that it would be permissible for the State Legislature to tax all the goods involved in the execution of a works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract, viz., the manufacture of tins is tin ingots only, the tin sheets being supplied by the awarder. According to us, the expression "goods involved in the execution of works contract" and the expression "in the form of goods" occurring in clauses (a) and (b) of section 5(1)(iv) relate to the same goods, viz., the goods transferred, in the instant case are "tin ingots". The expression "in the form of goods" occurring in sub-clause (a) cannot be considered as referring to the product of works contract. Subclause (a) of clause (iv) of sub-section (1) of section 5 refers to a situation where there is a composite contract for supply, erection, fabrication, etc. In such a case the supply part will attract subclause (a), for, the supply of material is in the form of goods. But in a case the use of some material belonging to the contractor in the execution of a works contract as in the case of a job-work where the main raw material, viz., tin sheets are supplied by the awarder itself it cannot be considered that the rate of tax applicable to the product of the works contract, viz., tins can be applied to the tin ingots transferred by the assessee. According to us, such a situation fall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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