| SooperKanoon Citation | sooperkanoon.com/56926 |
| Court | Sales Tax Tribunal STT Tamil Nadu |
| Decided On | Nov-12-1999 |
| Judge | J Kanakaraj, L Palamalai, A Member |
| Reported in | (2002)128STC373Tribunal |
| Appellant | Sundaram Industries Limited |
| Respondent | State of Tamil Nadu |
In this connection the Appellate Tribunal observed as follows : "But admittedly, the actual works of retreading take place within the State of Tamil Nadu. Simply because, the used or worn-out tyres were received from other States and after treading, those retreaded tyres were again sent to the customer residing in other States, the works contract does not cease to be a transaction under the Tamil Nadu General Sales Tax Act. Therefore we hold that the turnover relating to works contract for retreading and recapping of tyres is liable to be treated as a taxable turnover under the State Act." 2. However, the Tribunal remanded this part of the turnover to the assessing authority so as to fix the taxable turnover involving works contract under the Act by following the decision of the Supreme Court in [1989] 73 STC 370 (Builders Association of India v. Union of India) and the instructions of the Commissioner of Commercial Taxes. The assessee has preferred this revision aggrieved of the orders of the Appellate Tribunal in holding that the transactions relevant to retreading have to be taxed under the Act.
3. Mr. N. Sriprakash, the learned counsel for the petitioner, contended that worn-out tyres were collected from Kerala and they were repaired, retreaded, transported and delivered to a specified place in Kerala and therefore the entire transaction is nothing but inter-State works contract inasmuch as the contract in question involved movement of goods in the course of inter-State trade and commerce, no tax could be levied under Section 3B of the Act. Even after the expanded definition of "sale", consequent on the statutory amendment to Article 466(29A) the State derives power to tax sale or purchase under entry 54 of List II of the Seventh Schedule to the Constitution and this entry is subject to entry 92A of List I within Union List and therefore the works contract involving retreading within Tamil Nadu is subject to the legislation of the Parliament. However, in respect of inter-State works contract, only the Parliament has got powers to legislate and in the absence of any amendment to the Central Sales Tax Act in respect of inter-State works contract, the transactions have to be exempted both under the local Act and under Central Sales Tax Act. He further argued that Section 3B of the Act is subject to Clause (i) of Article 286 of the Constitution of India and Sections 3, 4 and 5 of the C.S.T. Act and quoted the following passages from the decision of the Supreme Court in [1993] 88 STC 204 in the case of Gannon Dunkerley & Co. v. State of Rajasthan "Similarly Clause (1) of Article 286 prohibits the State from making a law imposing or authorising the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State or (b) in the course of the import of goods into or export of the goods out of the territory of India. As a result of the said provision, the legislative power conferred under entry 54 of the State List does not extend to imposing tax on a sale or purchase of goods which takes place outside the State or which takes place in the course of import or export of goods. In view of the aforesaid limitations imposed by the Constitution on the legislative power of the States under entry 54 of the State List, it is beyond the competence of the State Legislature to make a law imposing or authorising the imposition of a tax on transfer of property in goods involved in the execution of a works contract, with the aid of Sub-clause (b) of Clause (29A) of Article 466, in respect of transactions which take place in the course of inter-State trade or commerce or transactions which constitute sales outside the State or sales in the course of import or export. Consequently, it is not permissible for a State to frame the legislative enactment in exercise of the legislative power conferred by entry 54 in State List in a manner as to assume the power to impose tax on such transactions and thereby transgress these constitutional limitations..........
...........It has been urged that the Central Sales Tax Act, 1956, which formulates the principles under Articles 269(3) and 286(2) is not applicable because after the Forty-sixth Amendment the Central Sales Tax Act has not been amended so as to make it applicable to transfer of property in goods involved in the execution of a works contract. On behalf of the States, it is submitted that since the Central Sales Tax Act has not been made applicable and no law as envisaged under Articles 269(3) and 286(2) has been enacted, limitation on the legislative power conferred on the States under entry 54 in the State List on the basis of Articles 269 and 286 cannot be invoked. We are unable to accept either of these contentions ...........
............For the reasons aforesaid, we are of the view that even in the absence of any amendment having been made in the Central Sales Tax Act (after the Forty-sixth Amendment) expressly including transfers of property in goods involved in the execution of a works contract, the provisions contained in Sections 3, 4 and 5 would be applicable to such transfers and the legislative power of the State to impose tax on such transfers under entry 54 of the State List will have to be exercised keeping in view the provisions contained in Sections 3, 4 and 5 of the Central Sales Tax Act. For the same reasons Sections 14 and 15 of the Central Sales Tax Act would also be applicable to the deemed sales resulting from transfer of property in goods involved in the execution of a works contract and the legislative power under entry 54 in State List will have to be exercised subject to the restrictions and conditions prescribed in the said provisions in respect of goods that have been declared to be of special importance in inter-State trade or commerce.......
............On behalf of the States it has been seriously contended that a deemed sale resulting from transfer of property in goods involved in the execution of a works contract can never be a sale in the course of inter-State trade or commerce and it cannot be an outside sale or a sale in the course of import since the transfer of property in the goods takes place only at the stage when the goods are incorporated in the works and that can take place only in the State where the work is required to be executed. On behalf of the contractors, on the other hand, it has been urged that a works contract can involve transactions constituting a sale in the course of inter-State trade and commerce as well as an outside sale or a sale in the course of import and that is a matter which will have to be considered in accordance with the principles contained in Sections 3, 4 and 5 of the Central Sales Tax Act keeping in view the terms and conditions of the particular contract. In this regard, the learned counsel have placed reliance on a number of decisions of this Court wherein the provisions of Sections 3 and 4 of the Central Sales Tax Act, 1956, have been considered. We do not propose to go into this controversy because the question whether a deemed sale resulting from transfer of property in goods involved in the execution of a particular works contract amounts to a sale in the course of inter-State trade or commerce under Section 3 of the Central Sales Tax Act or an outside sale under Section 4 of the Central Sales Tax Act or a sale in the course of import under Section 5 of the Central Sales Tax Act has to be decided in the light of the particular terms of the works contract and it cannot be decided in the abstract ............" 4. Referring to the decision of the Gauhati High Court in Projects and Services Centre v. State of Tripura reported in [1991] 82 STC 89 it was contended that in that case the use of materials made in a works contract in the State of Tripura was held to be inter-State nature in character and thus it was held that though the work was carried out in the State of Tripura still the goods moved from other State and therefore the transaction cannot be taxed as intra-State sale on the ground that the property therein passed to the buyer in the State of Tripura. In [1993] 90 STC 1, in the case of Co-operative Sugars Ltd. (Chittur) v. State of Tamil Nadu the Supreme Court has held that it was immaterial whether the sale/purchase took place within Tamil Nadu or within Kerala. So long as the movement of goods was an incident of sale/purchase it amounted to an inter-State sale/purchase. It is also not necessary that the contract of sale must expressly provide for the movement of goods. It is sufficient if the movement of goods is implicit in the sale. In East India Cotton Manufacturing Company Limited v. State of Haryana [1993] 90 STC 221 (P&H)[FB], the High Court held that "where grey cloth is sent by contractees from outside the State of Haryana and is processed in the State of Haryana into finished cloth by being subjected to processes such as bleaching, dyeing, sizing and printing and is thereafter sent back to the contractees outside the State, the movement of cloth is occasioned by the contract of sale within the meaning of Sub-clause (ii) of Clause (1) of Section 2 of the Haryana General Sales Tax Act and the transaction amounts to an inter-State sale within the meaning of Section 3 of the Central Sales Tax Act, 1956". In the case of Thomson Press (India) Ltd. v. State of Haryana [1996] 100 STC 417, the Punjab and Haryana High Court has held that once the contract occasions the movement of the end-product from one State to another, the inputs or the goods involved in the execution of the works contract shall also be deemed to have moved and the levy of sales tax in such a case would be outside the field of legislative competence of the State Legislature. By introducing a fiction, the State Legislature cannot convert a sale in the course of inter-State trade and commerce into a local sale. In fact, this is the view expressed by the Full Bench in conclusions 3 and 4 in the East India Cotton Manufacturing Company's case [1993] 90 STC 221 (P&H). This is also the position that emerges from the decision of the Supreme Court in Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204. In [1992] 87 STC 196 (SC) in the case of Commissioner of Sales Tax, U.P.v. Bakhtawar Lal Kailash Chand Arhti it was held that purchase of goods on behalf of ex-U.P. principals and dispatch to them to places outside the State are to be held as inter-State purchases. Referring to the case of State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory reported in [1953] 4 STC 205 the expression "in the course of was explained as follows : "The word 'course' etymologically denotes movement from one point to another, and the expression 'in the course of not only implies a period of time during which the movement is in progress but postulates also a connected relation." 5. Similarly the following observations have also been cited from the decision reported in AIR 1972 SC 23 in the case of Commissioner of Gift Tax, Kerala v. P.O. Timbers.
"The critical words are 'in the course of and 'for the purpose'.
Therefore the gift should be proved to have been made not only 'in the course of carrying on the business, profession or vocation' but also bona fide for the purpose of such business, profession or vocation." 6. The reference made in [1999] 112 STC 1, in the case of Coromandal Fertilisers v. State of Andhra Pradesh was also referred to in the context of the expression "in the course of. The following passage from the decision of Dhiraj Lal Mehta v. Commissioner of Commercial Taxes reported in AIR 1963 Cal 442 has been quoted in regard to the expression "inter-State trade or commerce : "But the essential question to my mind in inter-State trade is whether the trade is such that the sale of goods requires movement of the goods from one State to another. Many are the tests, many more are the interpretations and great statutory and judicial battles have been fought to define inter-State trade. The controversy has led to the Constitution (Sixth Amendment) Act. The tests (1) where the contract is made, (2) where the contract is performed, (3) where the goods are produced and (4) where the title to the goods passes are all relevant tests which in my view may or may not, either separately or by combination, be conclusive to determine the basic question of what is an inter-State trade. This unfortunate expression "inter-State trade" was borrowed from American constitutional jurisprudence and engrafted into the Indian Constitution. It is a phrase that bears the scars of many judicial battles and legal controversies. Article 286(2) of the Constitution before the amendment provided : 'Except in so far as Parliament may by law otherwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter-State trade or commerce' : Now the expression 'inter-State trade or commerce' does not necessarily mean what it says. It is not confined to mean trade or commerce between the States as such between a seller State and purchaser-State. It is inter-State trade where goods sold or purchased under contracts of sale move from one State to another.
Trade movement of goods from one State to another is the insignia of inter-State trade though the trade is very often between individuals, firm, companies and corporations." 7. Again to explain the term "inter-State trade and commerce" the following passages were quoted from "words and phrases", Permanent Edition, Volume 22 : "The term 'inter-State commerce' is not a technical legal conception but a practical one." "The term 'inter-State commerce' means not only inter-State movement, but inter-State business." "An inter-State transaction contemplates consignor without, and consignee within, a State, or vice versa." " 'Inter-State commerce' comprehends intercourse for the purposes of trade in any and all of its forms, including transportation, purchase, sale and exchange of commodities between the citizens of different States ; and if any commercial transaction reaches an entirety in two or more States, and if the parties dealing with reference to that transaction deal from different States, then the whole transaction is a part of the inter-State commerce of the United States and subject to regulation by Congress under the Constitution." " 'Inter-State commerce' is not business done within a State, but is business done between two or more States, or business commenced in one State and ended in an other." "A single shipment of a commodity, as tobacco, from one State into another to be marketed, constitutes 'inter-State trade and commerce'." 8. In short Mr. N. Sriprakash contended that the transactions pertaining to retreading and recapping of tyres involved two States and the worn-out tyres moved from Kerala and the retreaded tyres again moved from Tamil Nadu to Kerala in pursuance of firm orders placed.
Therefore the transactions involved in retreading, namely the threaded rubber, vulcanizing cement, etc., should be construed as goods involved in the movement of goods from to one State to another and on that basis, the transactions should be construed as inter-State works contract and therefore the levy of tax under Section 3-B of the Act is totally incorrect. Inasmuch as there is no provision to tax inter-State works contract under the CST Act naturally, the entire turnover of the assessee has to be exempted from tax. Therefore, the direction given by the Appellate Tribunal to assess the value of materials involved in the retreading and recapping work under the TNGST Act is contrary to law and therefore the order has to be set aside.
9. Mr. K. Soundararajan, the learned Government Advocate contended that the Appellate Tribunal has categorically stated that the actual works of retreading took place within the State of Tamil Nadu and therefore the turnover has to be rightly assessed under the Act. Further, the order was a remand order for the purpose of computing the turnover in the light of the decision of the Supreme Court in [1989] 73 STC 370 (Builders Association of India v. Union of India) and by following the instructions of the Commissioner of Commercial Taxes. Moreover the Kerala High Court in Hydrotec Engineers India Pvt. Ltd. v. State of Kerala [1997] 107 STC 420 has held that where the property in works contract completed in Kerala passed as a result of appropriation of goods taking place in Kerala, there is no question of inter-State sales. Therefore, in the present case also, the Appellate Tribunal has rightly concluded that the transactions are intra-State sales and only for computation of correct and sustainable turnover, the matter was remanded to the assessing authority and therefore there is no merit in the revision petition.
10. We have considered the rival contentions. To understand and appreciate the dispute involved in this case, it is necessary to refer to the material portions in Article 466(29A)(b) of the Constitution of India, Section 2(n) and Section 3B of the Act. They are : 366. In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say-- (b) a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;" "Section 2(n) : 'Sale' with all its grammatical variations and cognate expressions means every transfer of the property in goods (other than by way of a mortgage, hypothecation, charge or pledge) by one person to another in the course of business for cash, deferred payment or other valuable consideration and includes-- (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract ; and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made ; Explanation (3)(a).--The sale or purchase of goods shall be deemed for the purposes of this Act, to have taken place in the State, wherever the contract of sale or purchase might have been made, if the goods are within the State-- (i) in the case of specific or ascertained goods, at the time the contract of sale or purchase is made ; and (ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale or purchase by the seller or by the purchaser, whether the assent of the other party is prior or subsequent to such appropriation." "Section 3-B. Levy of tax on the transfer of goods involved in works contract.--(1) Notwithstanding anything contained in Sub-sections (2-A), (2-B), (3), (4), (7) and (8) of Section 3, or Section 7-A, but subject to the other provisions of this Act including the provisions of Sub-section (1) of Section 3, every dealer referred to in item (vi) of Clause (g) of section (2) shall pay, for each year, a tax on his taxable turnover of transfer of property in goods involved in the execution of works contract at the rates mentioned in Sub-section (2) of Section 3 or, as the case may be, in Section Explanation.--Where any works contract involves more than one item of work, the rate of tax shall be determined separately for each such item of work.
(2) The taxable turnover of the dealer of transfer of property involved in the execution of works contract shall, on and from the 26th day of June, 1986, be arrived at after deducting the following amounts from the total turnover of that dealer :-- (a) all amounts involved in respect of goods involved in the execution of works contract in the course of export of the goods out of the territory of India, or in the course of import of the goods into the territory of India or in the course of inter-State trade or commerce ; (b) all amounts for which any goods, specified in the First Schedule or 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 ; (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 the works contract, or such amounts calculated at the rate specified in column (3) of the Table below, if they are not ascertainable from the books of accounts maintained and produced by a dealer before the assessing authority.
Thus, works contract transactions are exigible to tax with effect from June 26, 1986 in respect of the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. Thus, the transfer of property in goods even in an indivisible contract could be brought to tax under Section 3-B of the Act subject to deductions contemplated therein. The imposition of tax under Section 3-B of the Act has been held to be intra vires of the Act by the Madras High Court in Larsen and Toubro Limited v. State of Tamil Nadu reported in [1993] 88 STC 289. In fact Section 3-B exempts goods involved in the execution of works contract in the course of export of the goods out of the territory of India or in the course of import of goods into the territory of India or in the course of inter-State trade or commerce. Thus, the constitutional provisions contemplated in Article 286 of the Constitution of India and Sections 3, 4 and 5 of the Central Sales Tax Act and also the restrictions contemplated in Sections 14 and 15 of the Central Sales Tax Act have been taken due note of in enacting Section 3-B of the Act. Therefore, the parameter contemplated by the Supreme Court in [1993] 88 STC 204 in the case of Gannon Dunkerley & Co. v. State of Rajasthan have been duly taken care of in Section 3-B of the Act while levying tax on the goods involved in the execution of works contract. It is relevant to refer to the observations of the Supreme Court in this case as to when the taxable event takes place in the works contract and the following observations relating to measure of tax in [1993] 88 STC 204 (Gannon Dunkerley & Co. v. State of Rajasthan) "Since the taxable event is the transfer of property in goods involved in the execution of a works contract and the said transfer of property in such goods takes place when the goods are incorporated in the works, the value of the goods which can constitute the measure for the levy of the tax has to be the value of the goods at the time of incorporation of the goods in the works and not the cost of acquisition of the goods by the contractor." 11. While referring to the contention of the State 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, the Supreme Court observed that : "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 466(29A)(b)." 12. Having regard to the above Supreme Court observations, it has to be held that the deemed sale contemplated in Section 2(n) of the Act takes place at the time of incorporation of the goods in the works contract.
In the light of the above position, the present case should be analysed.
The Manager Sundaram Industries Malanmallay Tea Estate, Limited, Kochadai, Vandiperiyar-685 533.
Madurai-625 016.
Please retread the following tyres and send per TVS to (station) Vandiperiyar and the railway/lorry receipt and the connected documents through direct in case we do not retire the bill and clear the goods within 30 days, you are at liberty to recall the goods and sell by auction or private sale on our account and realise the loss and expenses from us.
1. If tyres require any repair job, either in the side wall or shoulder area, the job can be done at party's risk only and without guarantee. Repair charges extra.
2. Whether it is found that extra work is involved in processing a tyre for retreading due to its special size and dimensions, the company will take it up as a special job and charge extra for processing of such tyre.
14. The order form clearly specifies that the work contemplated is retreading tyres as a job work either in the side wall or the shoulder area as the case may be. After completing the retreading work, the retreaded tyres have to be sent to an address at Vandiperiyar in Kerala State and the relevant typical bills dated November 28, 1987 read as follows :Name : SI Ltd. Name : C.S. PrathapAddress : Madurai Address : Vandiperiyar This is not a way bill and goods will not be delivered against this." Order Ref : 379 dated 20-11-1989 Retd, On 23-11-1989 and thro' CSO/VPR Sales Tax Registration No. TNGST No. 451042/86-87 Central RC No.104310/73-74TERMS : 1. Subject to the conditions in the order form and retread- ing charges.
2. Payment should be made by demand draft or cash imme- diately on receipt of this bill.
3. Interest at 18 per cent per annum will be charged if payment is not made within 30 days.
4. Sales tax or duties if levied by Government/Central or State/Local Authorities/Bodies will be charged extra.
In short, in respect of the retreaded tyres sent, the assessee has claimed a consolidated retreading charges and also freight charges for sending the goods. There is no difficulty in understanding the principles for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce. The Supreme Court has held in a number of cases that if the movement of goods from one State to another is the result of a covenant or an incident of contract of sale, then the sale is an inter-State sale. The inter-State movement must be the result of a covenant expressed or implied in the contract of sale or an incident of the contract. As rightly contended by the learned counsel for the petitioner, the passing of property in a particular State is not the relevant criteria for determining whether a sale is an inter-State sale or not provided the movement of goods was an incident of the sale.
However, the point for consideration in the present case is whether there is any inter-State sale in respect of the materials utilised in the retreading of the tyres which activity commenced and completed in the State of Tamil Nadu. In the decision reported in [1991] 82 STC 89 (Gauhati) (Projects and Services Centre v. State of Tripura) the contract was for the execution of the work of "supply, erection and commissioning of 66/11 K.V. 6.3 MVA sub-station at Sonaural in the State of Tripura". The terms of contract contemplated movement of goods from other States. Only in that context, the materials moved from other States to execute the works contract which was held that the transactions are inter-State sale in character and notwithstanding the place of delivery or the place where the property in the case passed the sale is inter-State sale in character. In the present case before us, no goods moved from the States for completing the retreading work and in fact the contract for retreading did not contemplate any movement of goods from other States to complete the contract. In [1993] 90 STC 1 [Co-operative Sugars (Chittur) Ltd. v. State of Tamil Nadu] the Supreme Court considered the sugarcane purchased in Tamil Nadu from agriculturists and moved to Kerala for crushing and it was held that there was no breakdown between the purchase and the movement of goods to another State and therefore the purchase of sugarcane was an inter-State purchase. However, in the present case in the retreading work, the materials have been incorporated in Tamil Nadu and therefore the completed sales took place in Tamil Nadu. The materials utilised in retreading work as such did not move or occasioned the movements of goods so as to consider any inter-State character of the transaction. In [1992] 87 STC 196 (SC) (Commissioner of Sales Tax, U.P. v. Bakhtawar Lal Kailash Chand Arhti) also the agent of ex-U.P. principals bought goods on behalf of the ex-U.P. principals and dispatched them and such transaction was held as inter-State in character as the movement of the goods from one State to another was occasioned by and was the result or the incident of the purchases.
The definitions from "words and phrases" Permanent Edition and other decisions quoted also speak of inter-State movement of goods in pursuance of covenant expressed or implied in the contract of sale or as an incident of contract. In [1993] 90 STC 221 (P&H) in the case of East India Cotton Manufacturing Company Limited v. State of Haryana "the grey cloth sent by contractees from outside the State of Haryana was processed in the State of Haryana into finished cloth by being subjected to processes such as bleaching, dyeing, sizing and printing and thereafter sent back to the contractees outside the State. The movement of cloth was occasioned by the contract of sale within the meaning of Sub-clause (ii) of Clause (1) of Section 2 of the Haryana General Sales Tax Act and the transaction amounts to an inter-State sale within the meaning of Section 3 of the Central Sales Tax Act, 1956". In that case, the movement of processed grey cloth occasioned by the contract of sale was held as an inter-State sale. While considering whether supply of paper in the case of printing lottery tickets was exigible to tax, the Punjab and Haryana High Court in [1993] 90 STC 221 (East India Cotton Manufacturing Company Ltd. v. State of Haryana) at page 239 has observed as follows : "It cannot, therefore, be contended that the passing of property in the paper, etc., was only incidental and the contract was a composite one. We are not advisedly going into the question as to in respect of which goods the property passes in favour of the contractee in terms of Clause (ii) and in which it does not. In the nature of things, it must be left to the taxing authorities to determine whether goods in question are covered under Clause (ii) for purposes of levying of sales tax or not."State of Tamil Nadu v. Anandam Viswanathan [1989] 73 STC 1 (SC) which was relied on heavily in the above case the dispute was only in regard to the printing charges. In fact in that case tax was paid by the assessee on the paper involved in printing the question paper. On that basis it was held that the labour charges received are not to be taxed considering confidentiality involved in question paper printing. In Thomson Press (India) Ltd. v. State of Haryana [1996] 100 STC 417 (P&H) [FB] while considering the levy of tax on the turnover in printing of lottery tickets, the learned Judges in the above case held as follows : "Once the contract occasions the movement of the end-product from one State to another, the inputs or the goods involved in the execution of the works contract shall also be deemed to have moved and the levy of sales tax in such a case would be outside the field of legislative competence of the State Legislature, By introducing a fiction, the State Legislature cannot convert a sale in the course of inter-State trade and commerce into a local sale. In fact, this is the view expressed by the Full Bench in conclusions 3 and 4 in the East India Cotton Manufacturing Company's case [1993] 90 STC 221 (P&H) [FB]. This is also the position that emerges from the decision of the Supreme Court in Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204." 16. With due respects, we are not in agreement with the conclusion that once a contract occasions the movement of the end-product from one State to another in inputs or the goods involved in the execution of the works contract shall also be deemed to have moved to other States as held in the above decision for the following reasons : In the case considered in [1996] 100 STC 417 (P&H) [FB] [Thomson Press (India) Ltd. v. State of Haryana] the contract was for printing and supplying of lottery tickets. The Supreme Court in H. Anraj v. Government of Tamil Nadu [1986] 61 STC 165 has held that lottery tickets are "goods". We have held in T.C.R. No. 2363 of 1997 dated September 23, 1999 following the ratio of the decision of the Supreme Court in Builders Association of India v. Union of India [1989] 73 STC 370 at page 398 wherein the transfer of goods involved in a works contract to a single customer was considered in the case of M.R. Hornibrook (Pty) Ltd. v. Federal Commissioner of Taxation [1939] 63 CLR 272 that forms and registers supplied to Electricity Board which could not be utilised by anyone else also would be sale of goods. However, in the present case our disagreement is confined to the observation that even the raw materials used in the manufacture of the finished lottery tickets, the end-product intended for dealers in other States could be covered by the expression occasions the movement of goods. Even in the case reported in [1996] 100 STC 417 (P&H) [FB] [Thomson Press (India) Ltd. v. State of Haryana], only the finished product namely printed lottery tickets occasioned the movement of goods. The paper and the ink consumed in the manufacture of the printed lottery ticket as such did not occasion the movement of goods. To cite a hypothetical case, if a dealer in Kerala place an indent on a manufacture in Tamil Nadu, for supply of cement and the manufacturer in Tamil Nadu among others consumed lime, purchased from non-dealers in Tamil Nadu in the manufacture of cement could it be said that when cement is supplied to the Kerala dealer the lime purchased from non-dealers also occasioned the movement of goods and therefore no purchase tax is leviable under Section 7-A of the Act which contemplates levy of purchase tax in respect of the goods consumed in the manufacture in circumstances in which no tax was paid on the goods used in the manufacture. The material portion of Section 7-A of the Act is extracted below : "Section 7-A. Levy of purchase tax.--(1) Subject to the provisions of Sub-section (1) of Section 3, every dealer who in the course of his business purchases from a registered dealer or from any other person, any goods, the sale or purchase of which is liable to tax under this Act in circumstances in which no tax is payable under Section 3 or 4, as the case may be not being a circumstance in which goods liable to tax under Sub-section (2) of Section 3 or Section 4, were purchased at a point other than the taxable point specified in the First or the Second Schedule and either,-- (a) consumes or uses such goods in or for the manufacture of other goods for sale or otherwise ; or shall pay tax on the turnover relating to the purchase aforesaid at the rate mentioned in Section 3 or 4, as the case may be..........".
17. Definitely the answer is in the negative only inasmuch as lime purchased from non-dealers and consumed in the manufacture of goods would be covered by Section 7-A of the Act which is in consonance with the ratio of the decision of the Supreme Court in [1993] 88 STC 98 in the case of Hotel Balaji v. State of Andhra Pradesh. In the present case before us, the contract was for retreading old tyres. The job work was completed in Tamil Nadu. Thus the taxable event took place when the goods were incorporated in completing the job work in Tamil Nadu.
Thereafter the retreaded tyres were sent to Kerala by raising bills for the retreading charges. In commercial parlance worn-out tyres and retreaded tyres are different goods. Therefore by no stretch of imagination it could be construed that the inputs in the retreading work occasioned the movement of goods. In this connection, it is relevant to refer to the decision of the Kerala High Court in the case of A. Anthony Swamy v. State of Kerala reported in [1994] 94 STC 477.
In that case, the petitioner was running a tyre retreading business and was registered as a small-scale industrial unit. He claimed exemption on the turnover of sale of goods produced and sold by the unit. The claim in that case related to the transfer of property in goods involved in the execution of the tyre retreading work. The Tribunal in this case relying on the decision of the Supreme Court in Builders Association of India v. Union of India [1989] 73 STC 370 held that retreading activity is a specie of works contract and it is possible for the State to levy sales tax on the price of goods and materials used in works contract as if there was a sale of such goods and materials. It was further held that tax shall be levied only on the price of goods and materials used in the retreading activities. In that context, the High Court held that "it cannot admit of any doubt that in view of the amended provisions of the Constitution and the Act, there is a deemed sale of only the materials involved in the retreading and there is no sale of the retreaded tyre as such. In this perspective, it cannot be stated that there is sale of the goods produced. There is no sale of retreaded tyre. Unless, there is a sale of the goods produced, the small-scale industrial unit will not be entitled to the exemption relied on. The finding of the Tribunal is that there is no sale of goods produced, i.e., "the retreaded tyre". Thus, in the present case also, we are very firm in our view that there was deemed sale of the materials consumed or used in the manufacture of retreaded tyres in Tamil Nadu and therefore according to Section 3-B of the Act, tax is to be levied on the materials used in retreading job by the Tamil Nadu Government. The materials used in retreading work did not occasion movement of goods to Kerala. Only the retreaded tyres were sent to Kerala after completing the contract of retreading. The charges claimed were for the retreading work only. There was no sale of retreaded tyres as such in the present case and therefore the movement of retreaded tyres did not involve any sale of goods so as to construe any inter-State sale falling under Section 3 of the CST Act. In fact no tax was levied on the retreaded tyres in the present case and that tax has been levied only on the inputs or materials used in the retreading job work. Thus, we find that the conclusion reached by the Appellate Tribunal that retreading and recapping work done by the appellant in this case is exigible to tax is in order. However, the order of the Appellate Tribunal is one of remand and we also feel that an opportunity has to be given to the assessee to claim deductions as contemplated in the Act with reference to the provisions of the Act at the relevant time. Therefore the remand order of the Appellate Tribunal by upholding the exigibility to tax in respect of the materials or inputs used in the retreading or recapping work is quite in order and no interference is called for. In such circumstances, the tax revision stands dismissed.
18. And this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.
19. Issued under my hand and the seal of this Tribunal on the 12th day of November, 1999.