Thiru B. Venkatasamy vs The Deputy Commercial Tax Officer

B. Rajendran, J.—The assessee has filed this tax case revision against the order 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 Works Contract. For the assessment year 1990-91, he had purchased G.I. pipes, G.I. pipe

bond and lead, involving a turnover of Rs. 4,61,264/- on issue of Form XVII, availing concessional rate of tax. The learned Assessing Officer, at

the time of check of accounts, noticed that the items purchased by the assessee was not used in the manufacture or production of new commodity

falling under the I Schedule but only used the goods in execution of works contract as per the conditions of Section 3(3) read with Rule 22 of the

Tamil Nadu General Sales Tax Act, 1959 and as per the Assessing Officer, the goods purchased on the issue of Form XVII should have been

used in manufacture or production of a new commodity falling under First Schedule of Tamil Nadu General Sales Tax Act, 1959 for sale within the

State of Tamil Nadu. Having come to the conclusion that there was no production or manufacture involved with the purchase of materials on issue

of Form XVII, he levied the tax on the differential rate of tax at 5%.

Aggrieved against the same, the assessee preferred an appeal before the Appellate Assistant Commissioner(CT), Vellore in Ap. No. 275/95

relating to the assessment year 1990-91 and the Appellate Assistant Commissioner also came to the conclusion that there was no manufacture in

respect of the purchased materials and the product was not utilised in new manufacture but only for the works contract and hence, confirmed the

order of the Assessing Officer, but reduced the penalty.

Aggrieved against the order dated 27.12.1996 passed by the Appellate Assistant Commissioner, Vellore in A.P. No. 275/95, the assessee

preferred an appeal before the Tamil Nadu Sales Tax Appellate Tribunal in Appeal No. 511/97. The Tribunal, though elaborately discussed in

detail relating to the provisions of 3(3)(iii), came to the conclusion that there was no production or manufacture involved with the purchase of

goods utilised under Form XVII and dismissed the appeal, against which, the assessee has come forward with this tax case revision before us.

The following substantial questions of law have arisen in this tax case revision:

(i) Whether the Appellate Tribunal was correct in holding that the concessional levy was rightly disallowed since no goods were manufactured

inside the state for sale by him of any goods liable to tax when the statute permits the petitioner to make use of XVII in the works contract-

Whether the Appellate Tribunal was correct in not considering the correct provision exists during the year 1990-91, even though the same was

raised in the grounds and also argued at the time of hearing?

The appellant before us brought to the notice of the relevant provision as it then was available viz. Section 3(3)(iii), which is extracted hereunder:

(Section 3(3) Notwithstanding anything contained in Sub-section (1) or Sub-section (2), the tax payable by a dealer in respect of sale of any

goods, other than consumables, to another for use by the latter, in the manufacture inside the State (for sale by him of any goods mentioned in the

First Schedule, other than those falling under items 70(c) and 107 of the said Schedule, shall be at the rate of only three per cent on the turnover

relating 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 such sale"" was

substituted by Act 34/91 � Gazette dated 23.10.1991 � Effective from 5.9.1991.

During 1.4.1990 to 4.9.1991, the expression u/s 3(3) (by Act 29 of 1990) was as follows:

(Section 3(3) Notwithstanding anything contained in Sub-section (1) or Sub-section (2), the tax payable by a dealer in respect of sale of any

goods, other than consumables, to another for use by the latter, in the manufacture inside the State for 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 items 70(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 that Section 3(3)(iii) specifically provides that involved in the execution of works contract shall be

@ only 3% on the turnover relating to such sale would mean that if a product was purchased utilising form XVII and that particular product is

utilised in works contract of that person, who has availed form XVII even in that case the tax payable would be only at the concessional rates.

Learned Counsel appearing for the appellant also brought to the notice of this Court that this provision was available during the period between

1.4.1990 and 4.9.1991 the expression u/s 3(3) (by Act 29 of 1990) was stated as above. Therefore, the Sub-clause (iii) was in force till

4.9.1991. Admittedly, the assessment year in question is 1991 pertaining to the period from 1.4.1990 to 31.3.1991, 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 was rightly claimed by the Assessee. Unfortunately, they have not relied on the relevant provision viz. 3(3)(iii), which

would clearly indicate the items utilised for the purpose of work contract also is eligible for concessional rate of tax.

As it is purely a question of law in the application of relevant provision, which was then available and the concession sought 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 is eligible to be given to the assessee and accordingly, the same is restored and given to the assessee.

In view of the fact that the assessee is entitled to seek necessary concession of rate of interest as per Section 3(3)(iii) as it then was, which has

been rightly claimed by him, we set aside the order passed by the Tribunal and allow the tax case revision, answering the questions of law as stated

above in favour of the assessee and against the revenue. No costs.