Dyes and chemicals used in execution of works contract of dyeing involves transfer of property and are exigible to Sale tax
In the instant case, A. Vairavel (the Assessee) used dyes and chemicals in execution of works contract of dyeing. The Department argued thatthe said transaction involvestransfer of property involved in the use of dyes and chemicals used in works contract of dyeing and hence assessable under Section 3B of the of the Tamil Nadu General Sales Tax Act, 1959 (the Sales Tax Act).
Later on, the Hon’ble Tamil Nadu Sales Tax Appellate Tribunal held that there is no transfer of property involved in the use of dyes and chemicals used in works contract of dyeing and hence not assessable under Section 3B of the Sales Tax Act. It was further held that the activity in which the transfer of property in goods is too insignificant will not attract the provisions of the Sales Tax Act.
Being aggrieved, the Department filed an Appeal before the Hon’ble High Court of Madras against the order of the Hon’ble Tamil Nadu Sales Tax Appellate Tribunal.
The Hon’ble High Court of Madras relied on the decision of the Hon’ble Supreme Court in case of Rainbow Colour Lab Vs. State of Madhya Pradesh [(2000) 118 STC 9 (SC)], wherein it was held that the transfer of goods involved in works contract, viz., the purchase of dyes and chemicals outside the State would amount to ‘sale’ and is assessable under Section 3B of the Sales Tax Act.
Accordingly, the matter was decided in favour of the Revenue.
