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TMI Blog2002 (10) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the total value of the dyes and chemicals used in the bleaching and dyeing of the yarns and fabrics was shown at Rs. 39.11 lakhs as against the correct figure of Rs. 22.75 lakhs. This was also not accepted by the assessing authority. The petitioner took up the matter in appeal before the first appellate authority who dismissed that appeal. The Tribunal in second appeal has confirmed the orders of the two authorities. 2.. The petitioner had raised the following questions of law as arising out of the order of the Sales Tax Appellate Tribunal: "(a) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that the chemicals and dyes used up in the execution of job-works is taxable at the hands of the petitioner. Is not the decision of the Appellate Tribunal contrary to the statutory provisions and decided cases? (b) Whether, in the light of the specific ground No. 5 raised and pressed, the Appellate Tribunal is justified in law in omitting to deal with the same. Has not the Appellate Tribunal committed an error in this respect? (c) Whether, on the facts of the case, is not the observation of the Appellate Tribunal that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Tax (Law) v. Pio Food Packers [1980] 46 STC 63 and the decisions in Assistant Commissioner (Intelligence) v. Nandanam Construction Company [1999] 115 STC 427; (1999) 7 KTR 651 and Deputy Commissioner of Sales Tax (Law) v. N. Kannan Nair [1988] 70 STC 48 rendered in the context of section 5A of the Act. 4.. The facts are not in dispute. The petitioner undertakes bleaching and dyeing of yarn and textiles entrusted by customers as per agreements entered into between them. The petitioner uses dyes and chemicals apart from other items, such as furnace oil, electricity, etc., in executing the works contract. The question is as to whether the dyes and chemicals purchased by the assessee by issuing "C" form and used in the execution of the works contract attracts section 5(1) read with section 5C of the Act. The counsel mainly relied on the provisions of section 5C of the Act, the relevant portion of which reads as follows: "5C. Deduction of certain amounts in arriving at the taxable turnover of a dealer in respect of transfer of property in the execution of works contract.-The taxable turnover of a dealer in respect of the transfer of property involved in the execution of works co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsection and is liable to be excluded from the turnover under section 5C of the Act. We are in agreement with the view taken by the two appellate authorities to the effect that if the items which are used in the process are existing in any form in the resultant product, then there is a transfer of the item used as goods exigible to tax under the Act. We are also of the view that if the item which is used in the process is not in existence in any form in the end-product, then it can be treated as a consumable. Here, it must be noted that section 5C itself makes the position clear by specifying "not involving any transfer of property in goods and actually incurred in connection with the execution of the works contract". In the instant case, admittedly, the assessing authority has granted a deduction in respect of chemicals to the extent of Rs. 7,82,200 as being consumed or used, on an estimate. However, the assessing authority did not grant deduction for the entire value of the chemicals alleged to have been used in the process. This was for the reason that the assessee was not maintaining proper accounts and any documents to establish the entire quantity of chemicals purchased, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the goods involved in the execution of a works contract on which tax is leviable, must exclude the charges which appertain to the contract for supply of labour and services. This would mean that labour charges for execution of works contract, the seven items mentioned therein, including the item (v) cost of consumables, such as water, electricity, fuel, etc., which are consumed in the process of execution of a works contract and other similar expenses for labour and service will have to be excluded as charges for supply of labour and service, it was observed. The Supreme Court held that the value of the goods involved in the execution of a works contract will, therefore, have to be determined by taking into account the value of the entire works contract and deducting therefrom the charges towards labour and services which would cover, inter alia, cost of consumables, such as, water, electricity, fuel, etc., used in the execution of the works contract the property in which is not transferred in the course of execution of a works contract. Here, it must be noted that all the aforesaid items will not form an identifiable part of the works contract executed. In other words, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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