Works contractor proviso under sales tax law applies to fabricated steel structures despite change in product form

Fabricated structures made by a works contractor from iron and steel purchased for execution of works remain covered by the first proviso to section 5F of the Andhra Pradesh General Sales Tax Act, 1957, because the proviso must be read without the limiting words earlier struck down by binding precedent. The fact that the fabricated structures are treated as a different product from the raw material does not defeat the proviso's application. The document also notes that the correct rate of tax could not be finally determined on the existing record and required fresh examination on remand.

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Issues: (i) Whether fabricated structures made from iron and steel purchased by a works contractor are excluded from the first proviso to section 5F of the Andhra Pradesh General Sales Tax Act, 1957 on the ground that they are a different product after fabrication; (ii) Whether the matter concerning the applicable rate of tax required reconsideration.

Issue (i): Whether fabricated structures made from iron and steel purchased by a works contractor are excluded from the first proviso to section 5F of the Andhra Pradesh General Sales Tax Act, 1957 on the ground that they are a different product after fabrication.

Analysis: The proviso could not be applied in its original restricted form because the earlier binding decision had already struck down the limiting words requiring the goods to remain in the same form in which they were purchased. Once those words were treated as not part of the proviso, the distinction between the original iron and steel and the fabricated structures made from them ceased to matter for the purpose of the proviso. The conclusion that the fabricated structures were a different product from the raw material was therefore not decisive.

Conclusion: The fabricated structures remained covered by the first proviso to section 5F, and the contrary view taken by the authorities was set aside in favour of the assessee.

Issue (ii): Whether the matter concerning the applicable rate of tax required reconsideration.

Analysis: The record suggested that the goods may have been taxed at a higher rate than what would follow from application of the first proviso, but the factual basis for determining the correct rate had not been properly examined by the earlier authorities. The issue therefore required fresh consideration after hearing the parties.

Conclusion: The question of the correct rate of tax was remitted for reconsideration.

Final Conclusion: The assessee succeeded on the substantive applicability of the proviso to section 5F, while the question of the precise tax rate was sent back for fresh decision.

Ratio Decidendi: When a binding decision has read down limiting words in a proviso, the proviso must be applied without those words, and the benefit cannot be denied merely because the processed goods are treated as a different product from the original material.

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