Composition under sales tax law turns on the assessment year; stock transfer receipts from outside the State fall within the exclusion.

Eligibility for composition under the Karnataka Sales Tax Act is governed by the law in force for the relevant assessment year, not by the date of the underlying works contract. The amended section 17(7), effective from 1 April 2002, therefore applied to assessment year 2002-03 and operated as a bar where the dealer purchased or received goods from outside the State for use in executing works contracts. The term "receives" was construed broadly to include branch transfer or stock transfer of goods from outside the State, so such receipt fell within the exclusion from composition under section 17(6).

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Issues: (i) Whether the amendment to section 17(7) of the Karnataka Sales Tax Act, 1957 effective from 1 April 2002 applied to assessment year 2002-03 notwithstanding that the works contract agreement was entered into earlier; (ii) Whether receipt of goods by stock transfer from outside the State amounted to receipt of goods so as to attract the bar under section 17(7) and deny composition under section 17(6).

Issue (i): Whether the amendment to section 17(7) of the Karnataka Sales Tax Act, 1957 effective from 1 April 2002 applied to assessment year 2002-03 notwithstanding that the works contract agreement was entered into earlier.

Analysis: The composition benefit under section 17(6) had to be exercised for each assessment year by application within the period prescribed in rule 8B of the Karnataka Sales Tax Rules, 1957. The right to opt for composition depended on the law in force for the relevant assessment year, not on the date on which the underlying works contract agreement was executed. Since the amended section 17(7) came into force on 1 April 2002, it governed the assessee's option for assessment year 2002-03.

Conclusion: The amended section 17(7) applied to the assessee for assessment year 2002-03, and the issue was decided against the assessee.

Issue (ii): Whether receipt of goods by stock transfer from outside the State amounted to receipt of goods so as to attract the bar under section 17(7) and deny composition under section 17(6).

Analysis: Section 17(7), as amended, barred composition where a dealer purchases or receives goods from outside the State for use in executing works contracts. The expression "receives" was held to be wide enough to include receipt by branch transfer or stock transfer. On the admitted facts, the assessee had received goods from outside the State for execution of the works contract and therefore fell within the exclusion.

Conclusion: Receipt by stock transfer was covered by section 17(7), and the composition benefit was rightly denied, against the assessee.

Final Conclusion: The statutory bar to composition under the amended provision operated on the assessee's assessment-year option, and receipt of goods through stock transfer did not escape the exclusion; the denial of composition was upheld.

Ratio Decidendi: Eligibility for composition under the Karnataka Sales Tax Act is determined by the law applicable to the relevant assessment year, and the term "receives" in the amended exclusionary provision includes stock transfer or branch transfer of goods from outside the State used in executing works contracts.

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