Joint Commissioner (CT)-III (SMR) vs MKS Industries

A. Selvam, J.—Challenge in this writ appeal is to the order dated September 17, 2008 passed in W.P. (MD) No. 786 of 2005. The respondent/petitioner is a registered dealer under the Tamil Nadu General Sales Tax Act 1959 and its duty is to purchase materials such as, steel rods and base materials from local markets and utilise the same for the purpose of making rolling shutters. Under the said circumstances, the assessing authority (Deputy Commercial Tax Officer-II), Rajapalayam, who has been arrayed as second appellant/second respondent has directed the respondent/petitioner to pay the tax in terms of section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 and the same has been challenged before the first appellate authority (Appellate Assistant Commissioner (CT)), Virudhunagar. The appellate authority (Appellate Assistant Commissioner (CT)), Virudhunagar has partly allowed the appeal and given a specific finding to the effect that the respondent/petitioner is entitled to get deduction as per section 3B(2)(b) and the first appellant herein/first respondent, Joint Commissioner (CT)-III (SMR) has taken suo motu revision and set aside the order passed by the appellate authority and restored the order passed by the second appellant/second respondent. The order passed by the first appellant herein/first respondent has been challenged by way of filing W.P. (MD) No. 786 of 2005 under article 226 of the Constitution of India.

The learned single judge after considering the factual situation and also manner of demand made by the second appellant/second respondent has allowed W.P. (MD) No. 786 of 2005 and thereby set aside the order passed by the first appellant/first respondent. Against the order passed by the learned single judge, the present writ appeal has been preferred at the instance of the respondents as appellants.

The learned Government Advocate appearing for the appellants/respondents has repeatedly contended that even though the respondent/petitioner has purchased raw materials for the purpose of making out rolling shutters and since it has sold the same, liable to pay tax u/s 3(2) of the Tamil Nadu General Sales Tax Act, 1959 and therefore, the order passed by the second respondent is perfectly correct and the appellate Tribunal has erroneously found that the respondent/petitioner has done its work on the basis of works contract and therefore entitled to get deduction as per section 3B(2)(b). But however, the first appellant/first respondent has rightly set aside the order passed by the appellate authority and the learned single judge without considering the nature of works done by the respondent/petitioner has erroneously come to a conclusion that the respondent/petitioner is entitled to get the deductions available u/s 3B(2)(b) and therefore the order passed by the learned single judge is liable to be set aside.

The learned counsel appearing for the respondent/petitioner has sparingly contended that in the instant case, the primary work of the respondent/petitioner is to purchase raw materials in the form of steel rods and base materials and on the basis of contract given to it, the same have been converted into rolling shutters and therefore, the entire work of the respondent/petitioner is based upon works contract and the respondent/petitioner is not entitled to pay tax u/s 3(2) of the Tamil Nadu General Sales Tax Act, 1959. Under the said circumstances, the order passed by the first respondent/first appellant herein is erroneous and the same is challenged by way of filing W.P. (MD) No. 786 of 2005 and the learned single judge after considering the nature of work done by the respondent/petitioner has rightly allowed the same and therefore, the order passed by the learned single judge does not require any interference.

It is seen from the divergent contentions put forth on either side that the respondent/petitioner has been doing the work of manufacturing rolling shutters by way of purchasing steel and other base materials.

The only legal point which has now winched to the fore in the present writ appeal is as to whether the respondent/petitioner is bound to pay tax as per the provisions of section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 or entitled to get deduction as per the provisions of section 3B(2)(b) of the said Act.

The learned Government Advocate appearing for the appellant/respondents has drawn the attention of this court to the following decisions:

(a) The first and foremost decision is reported in Apparels and Handloom Exporters Association and Others Vs. State of Tamil Nadu and Others, ;

(b) The second decision is rendered in Tax Case (Revision) Nos. 466 to 470 of 2006 ( Vinayaga Engineering Works Vs. State of Tamil Nadu, ), etc.

In the decision first referred, an illustration has been given for the purpose of exemplifying the provision of section 3B(2). In the decision second referred to, it has been held that in a case like this with identical factual situations, the assessee is bound to pay tax as per section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 towards finished goods.

In order to controvert the decisions as cited on the side of the appellants/respondents, the learned counsel appearing for the respondent/petitioner has relied upon the following decisions:

(a) The first and foremost decision is reported in The State of Tamil Nadu Vs. Tvl. The Premier Litho Works and The Secretary, Sales Tax Appellate Tribunal, ;

(b) The second unreported decision in Tax Case (Revision) No. 36 of 2010 dated June 19, 2013 Since reported as ECE Industries Limited Vs. State of Tamil Nadu, .

In both the decisions, identical matters have been dealt with and both the Division Benches have uniformly and consistently held that if a person carries on his work on the basis of works contract and in connection with works contract purchased raw materials and subsequently converted the same as finished goods, he is not liable to pay tax u/s 3(2) of the said Act and entitled to get deduction as per section 3B(2)(b) of the same. Since the decisions relied upon by the respondent/petitioner are later in point of time and since in the said decisions identical matters have been dealt with and ultimately found that in case of works contract, the person who engaged in the works contract, need not pay tax on finished goods as per section 3(2) of the said Act and he is entitled to get deduction u/s 3B(2)(b) of the said Act, it is needless to say that the contention put forth on the side of the appellants/respondents cannot be accepted, whereas, the contention put forth on the side of the respondent/petitioner is really having subsisting force.

The learned single judge after considering the nature of works assigned to the respondent/petitioner and also after considering the works done by the respondent/petitioner and also after considering the deduction available under the said section, has rightly allowed W.P. (MD) No. 786 of 2009 and in view of the foregoing enunciation of both the factual and legal aspects, this court is not in a position to make interference with the well merited orders passed by the learned single judge in W.P. (MD) No. 786 of 2005 and altogether the present writ appeal deserves to be dismissed. In fine, this writ appeal deserves dismissal and accordingly is dismissed without cost. The order passed in W.P. (MD) No. 786 of 2005 by the learned single judge is confirmed.