Case Law Details
State of Kerala Vs Metro Minerals India (P) Ltd. (Kerala High Court)
The transfer of property in goods whether as goods or in some other form involved in the execution of a works contract shall be deemed to have taken place in the State, if the goods are within the State at the time of such transfer, irrespective of the place where the agreement of works contract is made, whether the assent of the other party to the contract is prior or subsequent to such transfer.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
The question of law arising in the above appeal is as to whether the transaction carried out by the respondent-assessee, pursuant to a contract entered into with M/s. KMC Construction Ltd., is an interstate sale or an interstate works contract, thus not exigible to tax within the State.
2. The respondent-assessee entered into a contract with one M/s.KMC Construction Ltd. for delivery and erection of a 3 stage-Nordwheeler Plant. The entire materials for the plant were sourced from Singapore and Calcutta, which were brought into the State in a knocked-down condition and erected at the site of M/s. KMC Construction Ltd. The Intelligence Officer found that the same is a works contract and the transfer of goods having occurred at the time of the accretion of the goods in the works, is a works contract. Such transfer having occurred within the State on accretion of the goods in the works it was found to be taxable within the State of Kerala. The First Appellate Authority rejected the appeal filed by the assessee. The Tribunal reversed the orders of the lower Authority, finding the same to be an interstate works contract.
3. We have examined the contract and the invoices, which are available in the files as produced before us by the learned Senior Government Pleader. We completely agree with the Tribunal. The goods were all sourced from outside the State and suffered tax on its interstate movement, where the purchases were made from Calcutta and for those materials imported from Singapore, the movement after it was cleared from the Port is exempted from tax. The respondent-assessee is the Branch with its Head Office at Delhi. The contract was with respect to the delivery and erection of the 3 stage-Nordwheeler Plant. Thus the transaction is an interstate works contract and hence not exigible to tax within this State.
4. We need only refer to the decision of a Division Bench of this Court in Siemens Ltd. v. State of Kerala and Another [(2001) 122 STC 1]. The Division Bench examined a provision in the Kerala General Sales Tax Act, 1963, which made taxable, the transfer of goods as goods or in any other form involved in the execution of a works contract taking place within the State; if the goods are within the State at the time of such transfer, irrespective of the place where the agreement was executed or the contract being prior or subsequent to such transfer. The Division Bench of this Court referring to authoritative pronouncements of the Hon’ble Supreme Court read down the provision, making it clear that it will not take in sales under Sections 3, 4 & 5 of the Central Sales Tax Act, if the assessee is able to prove that the property in goods were transferred in accordance with the principles of the above provisions. The situs of the goods, just prior to its accretion in the works, has absolutely no relevance in deciding the taxability, when the goods used in the works contract were sourced from outside the State or imported into the country.
5. The works contract executed by the respondent-assessee is an interstate works contract and the State of Kerala, merely for the reason that the plant was erected within the State, cannot levy tax on the transfer of goods in the form of goods or in any other form by accretion of such goods in the works; when the goods were sourced from abroad and another state, the latter of which was taxed in the State from which the purchase was made.
We hence reject the revision, approving the order of the Tribunal and answering the question in favour of the assessee and against the Revenue. Parties shall suffer their respective costs.
