Thiru B. Venkatasamy v. The Deputy Commercial Tax Officer,Arakonam

IN THE HIGH COURT OF JUDICATURE AT MADRASDate:- 25.06.2009CoramThe Honourable Mr. Justice F.M. IBRAHIM KALIFULLAandThe Honourable Mr. Justice B. RAJENDRANTax Case(Revision) No.2019 of 2006 Thiru B. Venkatasamy... Petitioner..vs..The Deputy CommercialTax Officer, Arakonam.... RespondentTax Case Revision filed against the order dated 25.9.1998passed by the Sales Tax Appellate Tribunal, Chennai in T.A. No.511 of1997 against the order of the Appellate Assistant Commissioner (CT)Vellore in A.P.No.275/95, dated 27.12.96 assessment year 1990-91 andagainst the order of the Deputy Commercial Tax Officer, Arakonam. Assessment Circle in TNGST No.564805/90-91 dated 28.2.95For Petitioner : Mr. K. Soundara RajanFor Respondent : Mr. Haja Naziruddin, Spl. Govt. Pleader (T)

O R D E R(Order of the Court was made by B. RAJENDRAN, J.)The assessee has filed this tax case revision against theorder dated 25.9.1998 passed by the Sales Tax Appellate Tribunal, Chennai in T.A. No.511 of 1997.

The assessee, a railway contractor, engaged in WorksContract. For the assessment year 1990-91, he had purchased G.I.pipes, G.I. pipe bond and lead, involving a turnover ofRs.4,61,264/- on issue of Form XVII, availing concessional rate oftax. The learned Assessing Officer, at the time of check ofaccounts, noticed that the items purchased by the assessee was notused in the manufacture or production of new commodity falling underthe I Schedule but only used the goods in execution of works contractas per the conditions of Section 3(3) read with Rule 22 of the Tamil https://hcservices.ecourts.gov.in/hcservices/ Nadu General Sales Tax Act,1959 and as per the Assessing Officer, thegoods purchased on the issue of Form XVII should have been used inmanufacture or production of a new commodity falling under FirstSchedule of Tamil Nadu General Sales Tax Act, 1959 for sale withinthe State of Tamil Nadu. Having come to the conclusion that therewas no production or manufacture involved with the purchase ofmaterials on issue of Form XVII, he levied the tax on thedifferential rate of tax at 5%.

Aggrieved against the same, the assessee preferred anappeal before the Appellate Assistant Commissioner(CT), Vellore inAp. No.275/95 relating to the assessment year 1990-91 and the Appellate Assistant Commissioner also came to the conclusion thatthere was no manufacture in respect of the purchased materials andthe product was not utilised in new manufacture but only for theworks contract and hence, confirmed the order of the AssessingOfficer, but reduced the penalty.

Aggrieved against the order dated 27.12.1996 passed bythe Appellate Assistant Commissioner, Vellore in A.P. No.275/95, theassessee preferred an appeal before the Tamil Nadu Sales TaxAppellate Tribunal in Appeal No.511/97. The Tribunal, thoughelaborately discussed in detail relating to the provisions of 3(3)(iii), came to the conclusion that there was no production ormanufacture involved with the purchase of goods utilised under FormXVII and dismissed the appeal, against which, the assessee has comeforward with this tax case revision before us.

The following substantial questions of law have arisen inthis tax case revision:-"(i) Whether the Appellate Tribunal wascorrect in holding that the concessional levy wasrightly disallowed since no goods weremanufactured inside the state for sale by him ofany goods liable to tax when the statute permitsthe petitioner to make use of XVII in the workscontract?2. Whether the Appellate Tribunal was correctin not considering the correct provision existsduring the year 1990-91, even though the same wasraised in the grounds and also argued at the timeof hearing?"

The appellant before us brought to the notice of therelevant provision as it then was available viz. Section 3(3)(iii),which is extracted hereunder:- https://hcservices.ecourts.gov.in/hcservices/ "(Sec.3(3) Notwithstanding anything containedin sub-section (1) or sub-section (2), the taxpayable by a dealer in respect of sale of anygoods, other than consumables, to another for useby the latter, in the manufacture inside the State(for sale by him of any goods mentioned in the First Schedule, other than those falling underitems 70(c) and 107 of the said Schedule, shall beat the rate of only three per cent on the turnoverrelating to such sale:))Note: Item 1: The Expression beginning with"for sale by him" and ending with "to such sale",the expression "for sale by him ......... to suchsale" was substituted by Act 34/91 – Gazette dated23.10.1991 – Effective from 5.9.1991. During 1.4.1990 to 4.9.1991, the expressionunder Section 3(3) (by Act 29 of 1990) was asfollows:-(Sec.3(3) Notwithstanding anything containedin sub-section (1) or sub-section (2), the taxpayable by a dealer in respect of sale of anygoods, other than consumables, to another for useby the latter, in the manufacture inside the Statefor sale by him of any goods liable to tax--(i) Under sub-section (1); or(ii) Under the First Schedule, other than those falling under items70(c) and 107 of the said Schedule; or(iii) involved in the execution of works contract, shall be at the rate of only three percent on the turnover relating to such sale:)"

A reading of this Section will clearly indicate thatsection 3(3)(iii) specifically provides that involved in theexecution of works contract shall be @ only 3% on the turnoverrelating to such sale would mean that if a product was purchasedutilising form XVII and that particular product is utilised in workscontract of that person, who has availed form XVII even in that casethe tax payable would be only at the concessional rates. https://hcservices.ecourts.gov.in/hcservices/

Learned counsel appearing for the appellant also broughtto the notice of this Court that this provision was available duringthe period between 1.4.1990 and 4.9.1991 the expression under Section3(3) (by Act 29 of 1990) was stated as above. Therefore, the subClause (iii) was in force till 4.9.1991. Admittedly, the assessmentyear in question is 1991 pertaining to the period from 1.4.1990 to31.3.1991, viz. during the relevant assessment period, the sub Clause(iii) was very much available under the Act, under which the Assessee, under law, is entitled to claim concession and the same wasrightly claimed by the Assessee. Unfortunately, they have not reliedon the relevant provision viz. 3(3)(iii), which would clearlyindicate the items utilised for the purpose of work contract also iseligible for concessional rate of tax.

As it is purely a question of law in the application ofrelevant provision, which was then available and the concessionsought for by the Assessee has been omitted to be considered by the Authorities below, we feel it necessary that the order of the Tribunal has got to be set aside and the concession under law iseligible to be given to the assessee and accordingly, the same isrestored and given to the assessee.

In view of the fact that the assessee is entitled toseek necessary concession of rate of interest as per Section 3(3)(iii) as it then was, which has been rightly claimed by him, we setaside the order passed by the Tribunal and allow the tax caserevision, answering the questions of law as stated above in favour ofthe assessee and against the revenue. No costs. Sd/Asst. Registrar/true copy/Sub Asst. Registrarssa. To1. The Deputy Commercial Tax Officer, Arakonam.2. The Appellate Assistant Commissioner(CT) Vellore.3. The Sales Tax Appellate Tribunal, Chennai1 cc To Mr.K.Soundararajan, Advocate, SR.26379+ 1 CC to the Spl. Government Pleader(Taxes) SR NO 26324T.C.(R) No.2019 of 2006PUR(CO)SRA(14/7/2009)