TaxTMI 
TaxTMI 
2016 (8) TMI 636
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....IL APPEAL NO.4318 OF 2007 CIVIL APPEAL NO.4319 OF 2007 CIVIL APPEAL NO. 7400 OF 2016 (ARISING OUT OF SLP(CIVIL) NO.15253 OF 2015) CIVIL APPEAL NOS. 7401-7872 OF 2016 (ARISING OUT OF SLP(CIVIL) NOS.18646-19117 OF 2015) CIVIL APPEAL NOS. 7873-7916 OF 2016 (ARISING OUT OF SLP(CIVIL) NOS.10081-10124 OF 2015) JUDGMENT R.F. Nariman, J. 1. Leave granted in SLP(C) Nos.15253/2015, 18646-19117/2015, 10081-10124/2015. 2. This group of appeals concerns the rate of taxability of declared goods - i.e. goods declared to be of special importance under Section 14 of the Central Sales Tax Act, 1956. The question that has to be answered in these appeals is whether iron and steel reinforcements of cement concrete that are used in buildings lose their character as iron and steel at the point of taxability, that is, at the point of accretion in a works contract. All these appeals come from the State of Karnataka and can be divided into two groups - one group relatable to the provisions of the Karnataka Sales Tax Act, 1957 and post 1.4.2005, appeals that are relatable to the Karnataka Value Added Tax Act, 2003. The facts in these appeals are more or less similar. Iron and Steel products are u....
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....ion; (vii) Plates both plain and chequered in all qualities; (viii) Discs, rings, forgings and steel castings; (ix) Tools, alloy and special steels of any of the above categories; (x) Steel melting scrap in all forms including steel skull, turnings and borings; (xi) Steel tubes, both welded and seamless, of all diameters and lengths including tube fittings; (xii) Tin-plates, both hot dipped and electrolytic and tin free plates; (xiii) Fist plate bars, bearing plate bars, crossing sleeper bars, fish plates, bearing plates, crossing sleepers and pressed steel sleepers--heavy and light crane rails; (xiv) Wheels, tyres, axles and wheels sets; (xv) Wire rods and wires-rolled, drawn, galvanized, aluminized, tinned or coated such as by copper; (xvi) Defectives, rejects, cuttings, or end pieces of any of the above categories;] Section 15 Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. Every sales tax law of a State shall, in so far as it imposes or authorizes the imposition of a tax on the sale or purchase of declared goods,....
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....sp; 4% (ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes) -do- From 15-7-75 4% (iii) skelp bars, tin bars, sheet bars, hoe-bars and sleeper bars; (iv) steel bars (rounds, rods, squares, flats, octagon and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths); (v) steel structurals (angles, joists, channels, tees, sheet piling sections, Z sections or any other rolled sections); (vi) sheets, hoops, strips and skelp, both black and galvanized, hot and cold rolled, plain and corrugated, in all qualities, in straight lengths and in coil form, as rolled and in riveted condition; (vii) plates both plain and chequered in all qualities; (viii) discs, rings, forgings and steel castings; sales by the first or the earliest of the successive dealers in the state liable to tax under this Act. ....
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....gned judgment dated 1.9.2006 in Civil Appeal No.4318 of 2007, and judgment dated 12.8.2004 in Civil Appeal No. 4149 of 2007 in favour of Revenue, and a detailed impugned judgment which is challenged by the State of Karnataka dated 10.12.2013 in State of Karnataka and etc. etc. v. M/s. Reddy Structures Pvt. Ltd. and etc. etc. in Civil Appeals arising out of SLP (Civil) Nos.18646-19117/2015. 11. Shri N. Venkatraman led the arguments on behalf of the assessees, after whom Shri S.K. Bagaria, Shri K.V. Viswanathan, and some others followed. According to learned counsel, the present matter is concluded by two judgments of this Court, namely, Builders' Assn. of India v. Union of India, (1989) 2 SCC 645, and Gannon Dunkerley and Co. v. State of Rajasthan, (1993) 1 SCC 364. The detailed judgment dated 10.12.2003 correctly extracts all the relevant passages from the aforesaid judgments to reach the conclusion that under the Karnataka Value Added Tax Act, 2003, the iron and steel products that are reinforced for cement concrete used in buildings and structures, remains exactly the same goods at the point of taxability - that is, the point of accretion, and that mere cutting into differ....
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....wo decisions, therefore, need to be set out. In Builders Association (supra), this Court held: "We are of the view that all transfers, deliveries and supplies of goods referred to in clauses (a) to (f) of clause (29-A) of Article 366 of the Constitution are subject to the restrictions and conditions mentioned in clause (1), clause (2) and sub-clause (a) of clause (3) of Article 286 of the Constitution and the transfers and deliveries that take place under sub-clauses (b), (c) and (d) of clause (29-A) of Article 366 of the Constitution are subject to an additional restriction mentioned in sub-clause (b) of Article 286(3) of the Constitution. [para 32] In Benjamin's Sale of Goods (3rd Edn.) in para 43 at p. 36 it is stated thus: "Chattel to be affixed to land or another chattel.- Where work is to be done on the land of the employer or on a chattel belonging to him, which involves the use or affixing of materials belonging to the person employed, the contract will ordinarily be one for work and materials, the property in the latter passing to the employer by accession and not under any contract of sale. Sometimes, however, there may instead be a sale of ....
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....ales tax by the States are intended to deal with different topics and one could not be projected or read into another and each one of them has to be obeyed while any sale or purchase is taxed under entry 54 of the State List. We, therefore, declare that sales tax laws passed by the legislatures of States levying taxes on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract are subject to the restrictions and conditions mentioned in each clause or sub-clause of Article 286 of the Constitution. We, however, make it clear that the cases argued before and considered by us relate to one specie of the generic concept of "works contracts". The case-book is full of the illustrations of the infinite variety of the manifestation of "works contracts". Whatever might be the situational differences of individual cases, the constitutional limitations on the taxing power of the State as are applicable to "works contracts" represented by "building contracts" in the context of the expanded concept of "tax on the sale or purchase of goods" as constitutionally defined under Article 366(29-A), would equally apply to other spe....
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....ost of acquisition of the goods by the contractor. We are also unable to accept the contention urged on behalf of the States that in addition to the value of the goods involved in the execution of the works contract the cost of incorporation of the goods in the works can be included in the measure for levy of tax. Incorporation of the goods in the works forms part of the contract relating to work and labour which is distinct from the contract for transfer of property in goods and, therefore, the cost of incorporation of the goods in the works cannot be made a part of the measure for levy of tax contemplated by Article 366(29-A)(b)." [paras 31, 37, 41 and 45] 15. At this juncture, it is important to note the fact situation in a typical case before us. The Karnataka Appellate Tribunal in an order dated 18.10.2010 in Civil Appeals arising out of SLP(C) Nos. 18646-19117 of 2015 narrates the factual position thus: "Different types of steel bars/ rods of different diameters are used as reinforcement (like TMT bars, CTD bars etc). The reinforcement bars/ rods need to be bent at the ends in a particular fashion to withstand the bending moments and flexural shear. The main reinf....
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....t, in the agreement between the Government of Karnataka, Minor Irrigation Department and the said appellant (who was a civil contractor engaged in the civil construction activity), specification for placement and binding together of reinforcement bars/ rods were stipulated by the Government of Karnataka as follows: "Reinforcing steel shall conform accurately to the dimensions given in the bar bending schedules shown on the relevant drawings. Bars shall be bent cold to the specific shape and dimensions or as directed by the Engineer in-charge using a proper bar bender, operated by hand or power to attain proper radii of bends." "PLACING OF REINFORCEMENTS: All reinforcement bars shall be accurately placed in exact position shown on the drawings and shall be securely held in position during placing of concrete by annealed binding wire not less than 1mm. in size and conforming to IS;280, and by using stays, blocks or metal chairs, spacers, metal hangers, supporting wires or other approved devices at sufficiently close intervals. Bars will not be allowed to end between supports not displaced during concreting or any other operation over the work .... As far as....
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....n and Steel". Perhaps even this would not have been clear enough. The entry, to clearly have that meaning, would have to be: "Iron and Steel irrespective of change of form or shape or character of goods made out of them". This is the very unusual meaning which the respondents would like us to adopt. If that was the meaning, sales tax law itself would undergo a change from being a law which normally taxes sales of "goods" to a law which taxes sales of substances, out of which goods are made. We, however, prefer the more natural and normal interpretation which follows plainly from the fact of separate specification and numbering of each item. This means that each item so specified forms a separate species for each series of sales although they may all belong to the genus: "Iron and Steel". Hence, if iron and steel "plates" are melted and converted into "wire" and then sold in the market, such wire would only be taxable once so long as it retains its identity as a commercial goods belonging to the category "wire" made of either iron or steel. The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate ....
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....t to the original order of 11.1.2002 and thus dismissed the revision petition stating that no question of law arose. Ordinarily, we would have set aside the judgment and remanded the matter back to the High Court to determine the matter on merits, but at this point of time we find this would not serve any purpose. Instead, it is enough to set aside both the judgments impugned by the assessees, dated 1.9.2006 and 12.8.2004, in light of the law laid down in Builders Association and M/s. Gannon Dunkerley (supra), and declare that the declared goods in question can only be taxed at the rate of 4%. 19. In the State Appeals, we find that the lead impugned judgment in Civil Appeals arising out of SLP(C) Nos.18646-19117 of 2015 dated 10.12.2013 is an exhaustive judgment which has considered not only the facts in great detail but also the law laid down by the Supreme Court. We affirm the said judgment and dismiss the appeals of the State of Karnataka. Civil Appeal No.4319 of 2007 M/s. Ananth Engineering Works v. State of Karnataka 20. This appeal is by the assessee from a judgment dated 26.10.2006 allowing a revision against the Appellate Tribunal's order dated 19.1.2006. In thi....