2018 (7) TMI 400 - HC - VAT and Sales Tax

Tax Treatment of Iron & Steel Goods in Works Contracts: Exemption Clarification & Concessional Rates

The High Court affirmed that iron and steel goods used in works contracts for fabrication purposes, incorporated into buildings and structures, were not ... Concessional rate of duty - Declared Goods -iron and steel goods used in works contracts of fabrication and creation of doors, window frames, grills etc. - Section 15 of the Central Sales Tax Act - Held that:- The issue is covered by the decision in the case of Smt B. Narasamma V/s. Deputy Commissioner, Commercial Taxes, Karnataka & Another [2016 (8) TMI 636 - SUPREME COURT], where it was held that the Assessee engaged in the works contracts of fabrication and creation of doors, window frames, grills etc., in which they claimed exemption for iron and steel goods that went into the creation of these items, after which the said doors, window frames, grills etc., were fitted into buildings and other structures and therefore the declared goods of iron and steel would not lose their character as declared goods and were taxable at the concessional rate only. The Learned Counsels at the Bar also agreed that the facts in the present case that the iron and steel goods produced by the petitioner were used in the reinforcement work of the RCC by the Assessee and therefore taxability of iron and steel goods would be subject to the restrictions under Section 15 of the CST Act. Petition disposed off. Issues:Interpretation of exemption for iron and steel goods in works contracts under the Central Sales Tax Act.Analysis:The judgment refers to a decision by the Hon'ble Supreme Court regarding the taxability of iron and steel goods used in works contracts involving fabrication and creation of doors, window frames, grills, etc. The Supreme Court held that such goods, even after being fitted into buildings and structures, would not lose their character as declared goods and would be taxable at a concessional rate only. This interpretation was based on the principle that goods subject to processing or finishing, without a change in their commercial identity, cannot be taxed again under Section 15 of the Central Sales Tax Act.In another case mentioned in the judgment, the Appellate Tribunal had ruled against the assessee, arguing that iron and steel products, when incorporated into cement concrete, changed form and thus were no longer declared goods. However, the Supreme Court disagreed with this reasoning and set aside the judgments against the assessee, affirming that the declared goods in question could only be taxed at a rate of 4%.The High Court's judgment in the present case was found to be correct as it determined that the iron and steel goods, used in the fabrication of doors, window frames, grills, etc., which were further incorporated into buildings and structures, were not exempt from tax. The court concluded that the taxability of these goods was subject to the restrictions outlined in Section 15 of the Central Sales Tax Act, particularly when they were used in reinforcement work for RCC by the assessee.Ultimately, the Revision Petitions in the present case were disposed of in similar terms as the aforementioned decisions, with no costs imposed. The judgment provides a comprehensive analysis of the tax treatment of iron and steel goods in works contracts under the Central Sales Tax Act, drawing on precedents set by the Hon'ble Supreme Court and emphasizing the application of relevant statutory provisions in determining tax liability.