Works contract tax on mosaic tiles depends on whether the contract was for supply and laying, or flooring simpliciter.

Turnover attributable to mosaic tiles in works contracts was taxable only if the contract was ually for supply of tiles with laying and polishing, because the goods involved in execution of such a works contract would be exigible to tax under the Kerala General Sales Tax Act, 1963. If the contract was merely for mosaic flooring simpliciter, and tiles were only incidentally manufactured or processed for incorporation into the work, the intermediate product could not be separately taxed on that basis alone. The assessment and appellate orders were unsustainable because the authorities had not recorded a clear finding on the true nature of the contract, which had to be determined before taxability could be decided.

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Issues: Whether the turnover relating to mosaic tiles manufactured and used by the assessee in execution of contracts was liable to tax under the Kerala General Sales Tax Act, 1963, depending on whether the contracts were for supply of mosaic tiles with laying and polishing or were for mosaic flooring simpliciter.

Analysis: The legal position turned on the true nature of the contract. If the contract was for supply of mosaic tiles and their laying in the building, the turnover of the tiles would be exigible to tax as goods involved in the execution of the works contract. If, however, the contract was only for mosaic flooring simpliciter and the assessee merely converted raw materials into mosaic tiles incidentally for executing the work, the intermediate product could not be separately taxed merely because processing or manufacture had occurred before incorporation into the work. The authorities below had not recorded a clear finding on the actual nature of the contract and had proceeded only on the basis that mosaic tiles were manufactured and used in the work.

Conclusion: The matter required a definite finding on the nature of the contract before taxability could be decided, and the assessment and appellate orders could not stand on the material then considered.

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