a) Value Added Tax – Works Contract – Use of Reinforced Iron and Steel used in Construction –Remains Declared Goods – Liable to tax @ 4%.
b) Value Added Tax- Works Contract – Use of Iron and Steel for Fabrication of Doors and Windows – Which are Used in Construction- Does not Remain Iron and Steel – Not Exempt From Payment of Tax, section 5B of The Karnataka Sales Tax Act, 1957 and section 4 of The Karnataka Value Added Tax Act, 2003.
FACTS
The group of appeals, concerning the rate of taxability o f declared goods i.e. goods declared to be of special importance u/s. 14 of the Central Sales Tax Act, 1956 were filed before the SC. The common issue involved in all these appeals was whether iron and steel reinforcements of cement concrete that are used in buildings looses 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 came from the State of Karnataka relatable to the provisions of the Karnataka Sales Tax Act, 1957, post 01.04.2005, and relatable to the Karnataka Value Added Tax Act, 2003. The facts in these appeals were more or less similar. Iron and Steel products were used in the execution of works contracts for reinforcement of cement, the iron and steel products becoming part of pillars, beams, roofs, etc. which were all parts of the ultimate immovable structure that is the building or other structure to be constructed.
In the other case appellant engaged in works contracts of fabrication and creation of doors, window frames, grills, etc. in which they claimed exemption under rule 6(4) of The Karnataka Sales Tax Rules, 1957, for iron and steel goods that went into the creation of these items, after which they said doors, window frames, grills, etc. were fitted into buildings and other structures. The High Court denied the exemption as the iron and steel is not used in the same form in which it was purchased against which appeal was filed by the appellant.
The SC heard all those appeals and delivered a common judgment.
HELD
Given the fact, situation in those appeals relating to use of iron and steel for reinforcement of cement for construction of building, the SC held that where, commercial goods without change of their identity as such, are merely subject to some processing or finishing, or are merely joined together, and therefore remain commercially the same goods which cannot be taxed again, given the rigor of section 15 of the Central Sales Tax Act. Accordingly it is taxable as declared goods attracting rate of 4% under both acts.
In case of use of iron and steel for fabrication and creation of doors, window frames, grills, etc. which were fitted into buildings and other structures the SC held that 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 payment of tax.
Accordingly, the SC disposed all these appeals.
