PRAKASH ENTERPRISES Vs. STATE OF KERALA
HIGH COURT OF KERALA
STATE OF KERALA
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G. Sivarajan, J. -
(1.) THE matter arises under the Kerala General Sales Tax Act, 1963 (for short, "the Act" ). THE same assessee is the revision petitioner in all these cases. THE State is the respondent. THE assessment years concerned are 1990-91 to 1995-96 both inclusive.
(2.) THE main question involved in all these cases is regarding the liability to tax on the turnover of ingots which have been used in the execution of works contract, namely, the manufacture of empty tins. Hence all these revisions are disposed of by this common judgment.
The assessee is a dealer in grocery items. It is also engaged in works contract. For all these years the assessee had entered into agreement with third parties for execution of job-works, viz. , manufacture of empty tins. The third parties supplied tin sheets for the said purpose. The assessee obtained tin ingots which are required for the manufacture of tins by way of inter-State transactions by issuing "c" Forms. 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 S. 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 Tribunal that the levy of tax on the sales turnover of ingots as well as the estimation of the sales turnover of ingots by adding gross profit at 25 per cent is illegal. The contention was that the ingots were not sold but only consumed for the manufacture of tins. The Tribunal noted that the Assessing Authority had levied tax on the turnover of i ngots used for fabricating sheets supplied by third parties for conversion and returned empty tins. It was also noted that for the assessment year 1990-91 tin ingots consumed for the manufacture of tins is goods worth Rs. 64,451. 47 and the fabrication charges received during the year was Rs. 1,52,778 from which it is evident that the fabrication charges received is inclusive of the value of tin ingots. The Tribunal further considered the legality of the levy of tax on the turnover of tin ingots under explanation (3a) to S. 2 (xxi) of the Act and observed as follows: "here tin sheets are supplied by third parties. For the conversion of tin sheet into tins tin ingots are essential ingredients and thus there is transfer of tin ingots to complete the work entrusted and the fabrication receipt is inclusive of the value of tin ingots. We therefore are of the view that the levy of tax made to the turnover of tin ingots consumed for the conversion process for all the years, viz. , 1990-91 to 1994-95 is quite in order. " The Tribunal held that the sale value fixed by the assessing Authority by adding gross profit of 25 per cent is also reasonable. The Tribunal accordingly sustained the levy of tax on the turnover of tin ingots as well as the estimation of turnover of tin ingots. The Tribunal, however, did not interfere with the order of the first appellate authority with respect to other additions.
Sri. N. Venkitarama Iyer, learned counsel for the assessee, submits that the assessee is engaged in the job-work of fabricating tins, that the sheets required for themanufacture of tins are supplied by the customers and the tin ingots required for the manufacture of tins by using the sheets supplied by the customers are purchased by way of inter-State transaction by issuing C Form declarations and that the turnover of tin ingots used in the fabrication of tins is not liable to tax under the Act. The counsel also submitted that even assuming that the turnover of tin ingots used in the fabrication of tins is exigible 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.
(3.) 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 S. 2 (xxi) of the Act. THE Government pleader further submitted that this is not an item exempted under S. SC 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 (2003 (3) KLT (SN) 64 ). 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 cent made to the purchase value of tin ingots is also reasonable and does not call for any interference by this Court.
We have considered the rival submissions. The admitted facts are as follows: The assessee had entered into agreement for job-work of manufacture of tins for its customers. The customers had supplied tin sheets for the manufacture of tins. The assessee had purchased tin ingots from outside the State by issuing C Forms and used the same in the execution of the job-work of manufacture of tins. The assessee is entitled to purchase goods specified in the certificate of registration issued under the Act by issuing C Form declarations for getting the concessional rate of tax at 4 per cent under s. 8 (1) (b) read with S. 8 (3) (b) and also in the C Form prescribed under S. 8 (4)read with R. I2 (1) of the Central Sales Tax (Registration and Turnover) Rules, 1957. The declaration is that the goods purchased by issuing C Form are being intended for resale by him or subject to any rules made by the Central Government, in that behalf, for use by him in the manufacture or processing of goods for sale or in mining or in the generation or distribution of electricity, or any other form of power.;
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