Works contract consumables deduction: dyes in processed fabric were not deductible, while the chemical allowance remained undisturbed.

Consumables used in a works contract are deductible only where they are actually incurred in execution of the contract and do not involve any transfer of property in goods. On that basis, items such as water, electricity and fuel may qualify because they are consumed without identifiable existence in the end-product. Dyes used in processing were not deductible because they remained as colour in the fabric and did not cease to exist after use. Chemicals were not fully shown to have been consumed, but an estimated deduction had already been allowed and was not disturbed. The deduction claim therefore failed in respect of dyes, while the chemicals allowance was left intact.

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Issues: Whether dyes and chemicals used in the execution of the works contract were deductible as consumables under section 5C(1)(c)(iii) of the Kerala General Sales Tax Act, 1963.

Analysis: The deduction under section 5C(1)(c)(iii) applies only to consumables used in the execution of a works contract that do not involve any transfer of property in goods and are actually incurred in connection with the contract. Materials such as water, electricity and fuel, which are consumed without any identifiable transfer in the end-product, fall within that category. On the facts found, chemicals were not fully shown to have been consumed in the process, and the assessing authority had already allowed a deduction on estimate. Dyes, however, remained as colour in the processed fabric and therefore did not cease to exist in any form after use.

Conclusion: Dyes used in the process were not consumables deductible under section 5C(1)(c)(iii), and the estimated deduction allowed for chemicals was not interfered with. The claim failed.

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