2013 (11) TMI 1513 - HC - VAT and Sales Tax

Court grants tax deduction to dealer in works contract for rolling shutters, upholding writ petition.

The court upheld the decision allowing the writ petition, setting aside the order directing tax payment under section 3(2) and granting deduction under ... Whether the respondent/petitioner is bound to pay tax as per the provisions of section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 or entitled to get deduction as per the provisions of section 3B(2)(b) of the said Act - Held that:- identical matters [2009 (7) TMI 1159 - MADRAS HIGH COURT] and [2013 (7) TMI 492 - MADRAS HIGH COURT] have been dealt with and both the Division Benches have uniformly and consistently held that if a person carries on his work on the basis of works contract and in connection with works contract purchased raw materials and subsequently converted the same as finished goods, he is not liable to pay tax under section 3(2) of the said Act and entitled to get deduction as per section 3B(2)(b) of the same. Since the decisions relied upon by the respondent/petitioner are later in point of time and since in the said decisions identical matters have been dealt with and ultimately found that in case of works contract, the person who engaged in the works contract, need not pay tax on finished goods as per section 3(2) of the said Act and he is entitled to get deduction under section 3B(2)(b) of the said Act, it is needless to say that the contention put forth on the side of the appellants/respondents cannot be accepted, whereas, the contention put forth on the side of the respondent/petitioner is really having subsisting force. - Decided against Revenue. Issues: Challenge to order under Tamil Nadu General Sales Tax Act, 1959 - Applicability of tax under section 3(2) versus entitlement to deduction under section 3B(2)(b).Analysis:The case involved a challenge to an order passed under the Tamil Nadu General Sales Tax Act, 1959, concerning the liability to pay tax under section 3(2) versus the entitlement to deduction under section 3B(2)(b). The respondent, a registered dealer purchasing materials for making rolling shutters, was directed by the assessing authority to pay tax under section 3(2). The appellate authority partially allowed the appeal, granting a deduction under section 3B(2)(b), which was set aside by the first respondent, leading to the filing of W.P. (MD) No. 786 of 2005 under article 226 of the Constitution of India.The main contention revolved around whether the respondent's work constituted a works contract exempt from tax under section 3B(2)(b) or if tax was applicable under section 3(2). The Government Advocate argued for tax liability under section 3(2), while the respondent's counsel asserted that the work was based on a works contract, justifying the entitlement to deduction.The court considered precedents cited by both parties, highlighting conflicting decisions on similar matters. The respondent relied on cases supporting exemption under works contract, emphasizing that such decisions held that tax need not be paid on finished goods under section 3(2) but deductions were available under section 3B(2)(b).Ultimately, the court upheld the decision of the learned single judge who allowed the writ petition, setting aside the order of the first respondent. The court found that the respondent's work was indeed based on a works contract, entitling them to the deduction under section 3B(2)(b). Consequently, the writ appeal was dismissed, confirming the order of the learned single judge in W.P. (MD) No. 786 of 2005.