9911796707
TMI Blog2008 (1) TMI 851X X X X Extracts X X X X X X X X Extracts X X X X ..... in the contention of the petitioner/assessee that the denial of concessional rate is illegal. Decided against assessee. - - - - - Dated:- 8-1-2008 - DATTU H.L. C.J. AND JOSEPH K.M. , JJ. The judgment of the court was delivered by K.M. JOSEPH J. Since common questions arise in all these cases, they are disposed of by a common judgment. S.T. Rev. Case Nos. 174 of 2004, 79 of 2007 and 81 of 2007 are filed by the assessee, while S.T. Rev. Case No. 184 of 2005 is filed by the State of Kerala. S.T. Rev. No. 79 of 2007 relates to the assessment year 1997-98. S.T. Rev. No. 81 of 2007 relates to the assessment year 1998-99. S.T. Rev. No. 174 of 2004 relates to the assessment year 1995-96. S.T. Rev. No. 184 of 2005 relates to the assessment year 1996-97. The assessee is a works contractor engaged in powder coating of metal cabinets. The case of the petitioner/assessee, in brief, is as follows: Various manufacturers entrust their goods, i.e., different types of unfinished products, like metal cabinets, lift panels, stabilizers, UPS frames, panel board, booster cover, etc., to the petitioner for epoxy powder coating. The assessee carries out powder coating of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der which is purchased by him from outside Kerala. Thus, for the assessment years in question to which they relate, as already mentioned, the Tribunal found that the petitioner/assessee is not entitled to claim the benefit of concessional rate, even though form 18 declaration was filed. For the year 1996-97, however, the Tribunal has proceeded to reject the appeal filed by the State, as also the crossobjection filed by the assessee against the order of the appellate authority, directing the grant of concessional rate under section 5(3) of the Act. The questions of law raised by the petitioner/assessee are as follows: (i) Whether the decision of the Tribunal that the assessee is not eligible for concessional rate on the strength of form 18 declarations as per section 5(3) of the KGST Act, is tenable when it was clear that the epoxy powder transferred by this appellant through executing the work of coating it on the metal cabinets that was supplied by the customers was used by those customers in the manufacturing of their finished products? (ii) Whether the concessional rate of sales tax under section 5(3) of the KGST Act, 1963 against valid form 18 declaration which is ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is a transfer of epoxy powder from assessee/respondent to customers? (ii) Whether on the facts and in the circumstances of the case, the Tribunal is justified in upholding the view of the Appellate Assistant Commissioner that the assessee/respondent is eligible for concessional rate of tax as provided under sub-section (3) of section 5 of the KGST Act, 1963? We heard Smt. K. Latha, learned counsel for the petitioner/assessee and Shri Muhammed Rafiq, learned Senior Government Pleader appearing on behalf of the State. Smt. Latha, the learned counsel would contend that on the facts as they emerge, it is clear that the assessee has transferred the goods, i.e., epoxy powder in the execution of works contract and these goods are raw material/component parts for the products of the customers. Epoxy powder was sold (through transferring it in the execution of the works contract). It is after issuing such declaration that the customers purchased the raw material (epoxy powder from the petitioner/assessee). It is the case of the assessee that epoxy powder was never used by the assessee for its own use. It is stated that the petitioner had neither used the epoxy powder for its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be substituted and it read as follows: (3) Notwithstanding anything contained in sub-section (1) or sub-section (2), the tax payable by a dealer in respect of any sale of industrial raw materials, component parts or packing materials which is liable to tax at a rate higher than two per cent when sold to industrial units for use in the production of finished products inside the State for sale or for packing of such finished products inside the State for sale, as the case may be, shall be at the rate of only two per cent on the taxable turnover relating to such industrial raw materials, component parts, or packing materials, as the case may be: Provided that this sub-section shall not apply where the sale of such finished products is not liable to tax either under this Act or under the Central Sales Tax Act, 1956 (Central Act 74 of 1956) or when such finished products are exported out of the territory of India: Provided further that the provisions of this sub-section shall not apply to any sale unless the dealer selling the goods furnishes to the ssessing authority in the prescribed manner a declaration duly filled in and signed by the dealer to whom the goods are sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products within the State. It is subject to the further condition that the sale of the finished products is subject to tax either under the KGST Act or the CST Act. Thus, when raw materials/ component parts/containers or packing materials are sold to an industrial unit, the elements of the section can be stated as follows: There must be a sale of industrial raw materials/component parts/ containers or packing materials to industrial units. It must be for use in the production of finished products within the State for sale or for packing of such finished products inside the State for sale. The industrial raw materials/component parts/containers or packing materials must be exigible to tax at a higher rate than 2 per cent. The sale of finished products must be liable to tax either under the KGST Act or CST Act. In such circumstances, if there is a declaration as contained in form 18 issued by the purchaser certifying the facts which warrant the invocation of the provision, the seller of the industrial raw materials/component parts/containers or packing materials will be eligible for being assessed at the concessional rate. Sale is defined in the Act as follows: section 2(xx ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee does is a works contract. The assessee does not carry out any manufacturing activity. The assessee carries out electro-painting by making use of the epoxy paint. Even proceeding on the basis that the paint used by the assessee would amount to an industrial raw material, we would think that the assessee is not entitled to the benefit of the provision insofar as the provision actually contemplates the sale of industrial raw material to an industrial unit for use in the production of finished product, no doubt, inside the State. There is no case for the assessee that the paint is actually used by the purchaser in the production of any finished product. It is only when the raw material or component part is actually used by the purchaser for the purpose of manufacturing of a finished product that the question of applying the concessional rate arises. Admittedly, the manufacturer only makes use of the cabinet to which the paint has been applied by the assessee. We would think that the law contemplates that the manufacturer himself uses the raw materials or the component parts as the case may be, for production of the finished product. When there is only a works contract by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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