Case: M/S CRAFT INTERIORS (P) LTD Vs. THE JOINT COMMISSIONER OF COMMERCIAL TAXES(INTELLIGENCE), BANGALORE

particular type, andii. If separate commercial commodities emerge out of the (goods already taxed earlier), then the said new commercial commodity is liable to sales tax.This is what has been conferred in Rule 6(4)(m)(i) read with Explanation III to Rule 6(4) of which a reference has been made.22. In Vasantham Foundry Vs. Union of India and Others 1995(5) SCC 289, this Court reiterated the Prare Lal Malhotra and Others(supra) principle in para 25 as under:¬"25. Therefore, in our view ?cast iron casting? in its basic or rough form must be held to be ‘cast iron?. But, if thereafter any machining or polishing or any other process is done to the rough cast iron casting to produce things like pipes, manhole covers or bends, these cannot be regarded as ?cast iron casting? in its primary or rough form but products made out of cast iron castings. Such products cannot be regarded as ‘cast iron? and cannot be treated as ?declared goods? under Section 14(iv) of the Central Sales Tax Act. This view is not in conflict with the view taken in the case of Bengal Iron Corpn. [1994 Supp (1) SCC 310: (1993) 90 STC 47 ], but it is in consonance with the decision in that case.?23. The same principle has been recently reiterated in B. Narasamma Vs. Deputy Commissioner of Commercial Taxes, Karnataka and Another 2016(15) SCC 167. In para 18 thereof, the principle of Pyare Lal Malhotra and Others(supra) quoted hereinabove is considered. Rule 6(4)(m)(i) came up for consideration in B. Narasamma(supra) where this Court after noting the said Rule came to the conclusion in para 23 as under:¬?23. On facts in this case, it has been found that the appellant is engaged in 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. On facts, therefore, we find that the High Court?s judgment [State of Karnataka v. Anant Engg. Words, 2006 SCC OnLine Kar 840] is correct and does not need to be interfered with inasmuch as the iron and steel goods, after being purchased, are used in the manufacture of other goods, namely, doors, window frames, grills, etc. which in turn are used in the execution of works contracts and are therefore not exempt from tax.?24. What emerges from the scheme of the Act and Rules framed thereunder is that Rule 6(4)(m)(i) purports to grant benefit to the assessee by allowing deductions for the value of goods which have already suffered taxation and which goods substantially retain their original identity while being used in the execution of a works contract. Explanation III to Rule 6(4) clarifies it further by categorically providing that in case the goods are transformed into a different commodity which then is used in the execution of works contract, then the benefit of deduction cannot be availed.25. It is trite law that tax provisions granting exemptions/concessions are required to be strictly construed as recently held by this Court in M/s. Achal Industries Vs. State of Karnataka AIR 2019 SC 1653 .26. In our considered view, there is no variance between Rules 6(4)(m)(i) read with Explanation III and Section 5B of the KST Act, 1957 and what is contended by the appellant in assailing the validity of Rule impugned hereunder is misconceived and without substance.27. The judgment in Media Communications(supra) of which the learned counsel for the appellant has placed heavy reliance is of no assistance for the reason that mere rejection of special leave petitions by this Court at the motion stage would not be considered to be an approval of the view expressed by the High Court of Andhra Pradesh. That apart, para 7 of the judgment in Telangana Steel Industries and Others case(supra) has been noticed by the High Court in Media Communications(supra) and arrived to the conclusion that Telangana Steel Industries and Others(supra) lent support to the reasoning of the High Court.28. Para 7 of the judgment of this Court in Telangana Steel Industries and Others(supra) in fact disseminate the reasoning recorded by the High Court in Media Communications(supra) to invalidate the first and second proviso to Section 5B.?7. The above shows complexity of the concept of a different commercial product coming into existence because of manufacturing process undertaken. It is because of this that we do not propose to decide the controversy at hand, which is whether iron wires are separate commercial goods from wire rods from which they are produced, by trying to answer whether they are one commercial commodity or separate. The point has however arisen for consideration because we are concerned with a single point sales tax, which would not allow taxing of the same commodity again. It is also not in dispute that if the two goods at hand be different commodities, the single point taxing principle would not debar realisation of tax once again from the sale of wires. Shri Tarkunde?s whole emphasis is that goods in question cannot be regarded as two different commercial commodities. Let it be seen why this stand has been take by the learned counsel on behalf of the appellants and whether the same is sound??(emphasis supplied)29. So far as the submissions made by the learned counsel for the appellant on merits in reference to the five impugned notices of provisional assessment served under Section 28(6) is concerned, whether the assessee was eligible under Rule 6(4)(m) (i) is a question of fact which has to be determined in the assessment proceedings and since the provisional assessment has not been finalised due to pendency of the instant proceedings, it may not be advisable for this Court to dilate on the subject issue of the notices served upon the appellant at this stage and leave it open to the appellant to address before the assessing authority in the pending appropriate assessment proceedings, if so advised.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]18. From the bare perusal of the provision of the KST Act and KST Rules, 1957 indicated above, it clearly envisages that Section 5B of the KST Act is a charging provision which empowers the State to levy tax on the transfer of property in goods involved in works contract. At the same time Rule 6(4)(m)(i) read with Explanation III to Rule 6(4) of the KST Rules clarifies that the same goods can be taxed only once and cannot be made subject matter of multiple incidence of tax and the goods which have suffered taxation undergoes transformation into a different commodity altogether and is then used in the execution of a works contract, the same being a different commercial commodity is liable to be taxed. The justification which has been tendered by the appellant in reference to five notices impugned in the instant proceedings for the assessment years 1998¬1999 to 2002-2003 is a question of fact to be examined by the assessing authority who has served him the notices.19. We are clear, in our view, that Section 5B of the KST Act and Rule 6(4)(m)(i) of the KST Rules operate in different spheres. Section 5B is a charging provision for levy of sales tax whereas Rule 6(4)(m)(i) is a provision for deduction from tax. Under Section 5B, tax can be levied on transfer of property in the goods whether as goods or in some other form whereas Rule 6(4)(m)(i) provides for a deduction in respect of the goods which have already suffered tax and which are used in the same form. Thus, in our view, it appears to be in clear consonance with the charging provision and does not militate against Section 5B of KST Act, 1957.What emerges from the scheme of the Act and Rules framed thereunder is that Rule 6(4)(m)(i) purports to grant benefit to the assessee by allowing deductions for the value of goods which have already suffered taxation and which goods substantially retain their original identity while being used in the execution of a works contract. Explanation III to Rule 6(4) clarifies it further by categorically providing that in case the goods are transformed into a different commodity which then is used in the execution of works contract, then the benefit of deduction cannot be availed.In our considered view, there is no variance between Rules 6(4)(m)(i) read with Explanation III and Section 5B of the KST Act, 1957 and what is contended by the appellant in assailing the validity of Rule impugned hereunder is misconceived and without substance.27. The judgment in Media Communications(supra) of which the learned counsel for the appellant has placed heavy reliance is of no assistance for the reason that mere rejection of special leave petitions by this Court at the motion stage would not be considered to be an approval of the view expressed by the High Court of Andhra Pradesh. That apart, para 7 of the judgment in Telangana Steel Industries and Others case(supra) has been noticed by the High Court in Media Communications(supra) and arrived to the conclusion that Telangana Steel Industries and Others(supra) lent support to the reasoning of the High Court.So far as the submissions made by the learned counsel for the appellant on merits in reference to the five impugned notices of provisional assessment served under Section 28(6) is concerned, whether the assessee was eligible under Rule 6(4)(m) (i) is a question of fact which has to be determined in the assessment proceedings and since the provisional assessment has not been finalised due to pendency of the instant proceedings, it may not be advisable for this Court to dilate on the subject issue of the notices served upon the appellant at this stage and leave it open to the appellant to address before the assessing authority in the pending appropriate assessment proceedings, if so advised.