Tyre retreading transfer treated as other form, not goods, because tread rubber lost its identity on incorporation.

Tread rubber used in tyre retreading was held to be transferred in some other form, not as goods, because it lost its original identity through scraping, affixation, fusion and vulcanisation and became inseparably embedded in the retreaded tyre. The relevant clarificatory order for the assessment years governed the classification, while the later clarification on newer technologies did not change the position for those years. On that basis, the applicable tax rate was 12.5% for assessment year 2011-12 and 14.5% for assessment year 2013-14, and the assessee's view was rejected.

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Issues: Whether tread rubber used in tyre retreading works was transferred in the form of goods or in some other form for the purpose of determining the applicable rate of tax.

Analysis: The dispute arose in the context of retreading operations under the Kerala Value Added Tax regime, where the assessee incorporated tread rubber strips manufactured by it into old tyres supplied by customers. The process involved scraping, affixation or fusion, and allied steps such as vulcanization, so that the tread rubber lost its original identity and became inseparably embedded in the retreaded tyre. For the relevant assessment years, the clarificatory order dated 7.4.2016 was treated as governing, and it proceeded on the basis that such transfer was not in the form of goods but in some other form. The later clarification dated 29.1.2020, which referred to newer retreading technologies, did not alter the position for the years in question.

Conclusion: The transfer of tread rubber in the execution of the works contract was in some other form and not in the form of goods. The applicable rate of tax was 12.5% for assessment year 2011-12 and 14.5% for assessment year 2013-14, and the assessee's view was rejected.

Final Conclusion: The Tribunal's orders were set aside and the questions of law were answered in favour of the Revenue.

Ratio Decidendi: Where goods used in a works contract lose their original identity through the process of incorporation and fusion into the finished product, the transfer is treated as a transfer in some other form, attracting the rate applicable to such transfer under the governing tax clarification for the relevant assessment year.

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