TaxTMI 
TaxTMI 
2018 (4) TMI 887
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.... of works contract on mosaic. As the gross amount had been charged by the assessees for supplying, laying, polishing of mosaic tiles and the value of the goods and labour charges being not separately shown by the assessees, the Assessing Authority allowed 30% towards labour charges and assessed the balance of 70% as sale of finished goods. 4. Aggrieved over the assessment made by the Assessing Authority, the dealers, preferred appeals, before the Appellate Assistant Commissioner (CT), Madurai (South), who remanded the matter back to the Assessing Authority, vide order dated 18.12.1998, to consider the charges and deductions allowable under Section 3B of the TNGST Act. 5. Against the orders of the Appellate Assistant Commissioner (CT), Madurai (South), the dealers filed appeals before the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai. 6. The Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Madurai, vide order dated 04.02.2002, allowed the appeals filed by the dealers holding that the sand used for the execution of works contract alone would be taxable and the value of other items used should be given exemption under Section 3-B(2)(c) of the ....
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.... is quite in order. (iv) Appellate Tribunal has failed to note that as soon as a separate commercial commodity, i.e., mosaic tiles emerged, it become taxable goods in view of the fact that the identity of the materials purchased from registered dealers are charged. Therefore, as per the decision in Kamatchi Laminations Vs. State of Tamil Nadu reported in 95 STC 378 and the decision in Tamil Nadu Mosaic Manufacturing Association reported in 97 STC 503, the order of the Tribunal is erroneous. (v) Appellate Tribunal has failed to interfere with the order of the Assessing Authority who had rightly assessed the turnover to tax under the TNGST Act in this case. (vi) In any event, the order of the Appellate Tribunal is against the principles laid down in the case of Nathan and Co., reported in TNCTJ (20) 1996-97. 8. Heard the learned Additional Government Pleader (Taxes) and perused the materials on record. 9. Let us consider as to how the Appellate Assistant Commissioner (CT), Madurai (South) has dealt with the facts and issues. For the sake of convenience, the order dated 18.12.1998, passed in the appeals filed by M/s.Raj Floorings (Respondent in T.C.No.....
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....tract from the nature of work, if other wise it was an indivisible works contract". 7. So, in this judgment, the High Court of Madras had held that laying and polishing for mosaic tiles in an indivisible contract. Whether this above decision is applicable to the instant case has to be considered? In the instant case, the assessing authority himself had stated that the appellant had collected charges for manufacturing, laying and polishing. So, this clearly proves that it is an indivisible contract and it is not a contract for sale of tiles. Further more, the higher judicial forums had held in several how the transactions of works contract has to be dealt in. 8. The Supreme Court of India, in the case of Builder's Association of India and others Vs. Union of India and others reported in 73 STC 37(SC) had declared that: "After the Forth-sixth Amendment, the works contract which was in indivisible one in by a legal fiction altered into a contract which is divisible into one for sale of goods and the other for supply of labour and service. After the 46th Amendment, it has become possible for the states to levy sales tax on the value of goods involved in a....
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....mmerce. (b) all amounts for which any goods, specified in the First schedule for second schedule, are purchased from registered dealers liable to pay tax under this Act and used in the execution of works contract in the same form in which such goods were purchased. (c) all amounts relating to the sale of any goods involved in the execution of works contract which are specifically exempted from tax under any of the provisions of the Act. (d) all amount paid to the sub-contractors as consideration for execution of works contract whether wholly or partly, provided that no such deduction shall be allowed unless the dealer claiming deductions, produces proof that the sub-contractor is a registered dealer liable to pay tax under this Act and that the turnover of such amounts is included in the return filed by such sub-contractors, and (e) all amounts towards "labour charges and other like charges" not involving any transfer of property in goods, actually, incurred in connection with the execution of works contract, or such amounts calculated at the rate specified in col.3 of the Table below, if they are not ascertainable from the books of accounts main....
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.... 78 STC 147 in the case of S.Chandrasekaran Vs. State of Tamil Nadu in which the appellants was a proprietor of a concern which manufacture mosaic floor tiles and under took the laying of mosaic flooring. An agreement was entered into by the appellants and the customer. Which provided that the appellants would supply, lay and polish mosaic flooring and agree the cost per square feet. The customer has to pay by way of advance 3% of the value of works 35% of the value of the work after delivery of the tiles. 20% after laying of tiles and balance after polishing. The customer has to bear the charges for transport charges for material to the customers place and to make available sand, cement, electricity, water, support labour and was polish and turpentine. The Assistant Commercial Tax Officer held that 65% of the total value of the work represented the price of mosaic tiles supplied and brought that amount to tax under TNGST ACT 1959. While disposing of the case, the High Court had held as follows: "That there was no tangible material before the Assistant Commercial Tax Officer to arrive at the conclusion that 65% of the value of the works represented, value of the tiles, thi....
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....ces which would cover; (a) labour charges for execution of the works; (b) amount paid to a sub-contractor for labour and service; (c) charges for planning, designing and architect's fees; (d) charges for obtaining on hire or otherwise machinery and tools used for the execution of the works contract; (e) cost of consumables such as water, electricity, fuel etc. used in the execution of the works contract, the property in which is not transferred in the course of execution of works contract and (f) cost of establishment of the contractor to the extent it is relevable to supply of labours and services; (g) other similar expenses relatable to supply of labour and services and; (h) profit earned by the contractor to the extent it is relatable to supply of labour and services. The amounts deductible under those heads will have to be determined in the light of the facts of a particular case on the basis of the material produced by the contractor". 15. So far as the case is concerned, the appellants was having separate accounts for the materials that had been purchased and utilised in the course o....
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....7. The points for consideration in the 40 appeals are: "(i) Whether the assessment made under Sec.3-B of the TNGST Act, 1959 by the Assessing Officer and remanded confirmed by the Appellate Assistant Commissioner is justifiable or not ? (ii) Whether the penalty of Rs. 18,494/- under Section 12(3)(b) of the Act in MTA.No.352/00 only in the case of Tvl.Ponmari Mosaic Flooring works for the year 1993-94 sustained by the Appellate Assistant Commissioner is correct or not ?" 8. Points (i) and (ii) : We have gone through the entire records relating to these appeals in details. The scrutiny of the appeal records relating to these appeals revealed that the Assessing Officer had granted relief to the extent of 30% of the total turnover related to the execution of works contract done by the appellants and considered 70% of the turnover related to the works contract for the purpose of levy of tax. Further scrutiny of the appeal records revealed that the Assessing Officer had taken a stand that the appellants have not maintained separate accounts for various inputs used for the execution of works contract. Contrary to this learned counsel at the time of hear....
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....ore, we are of the view that the sand used for the execution of works contract alone is taxable and the value of other items used should be given exemption under Section 3(B)(2)(c) of the TNGST Act, 1959. At the time of hearing the learned counsel had also brought to our notice the Notification in G.O.P.No.198 CT & RE dated 25.03.1989. According to which sand used is not taxable for tax for the period from 1989-90 to 1993-94 with effect from 25.03.1989. From the above said Notification it is clear that the sand used for the execution of works contract is liable to be taxed for the following years 1986-87, 1988-89, 1994-95, 1995-96 and 1996-97. The sand used for the execution of works contract, which are to be taxable, is worked out as follows after adopting a reasonable G.P. of 10%. .......... Tvl.Raj Floorings: Tvl.Raj Mosaic Tile Works: With the above modification the concerned Assessing Officer is directed to levy appropriate rate of tax for the turnover sustained in respect of sand. The rest of the turnover sustained by the Appellate Assistant Commissioner in all the above appeals are hereby ordered to be deleted. Further, we also set aside t....