L.SATHEEK Vs. STATE OF KERALA

JUDGEMENT

(1.) Two questions arise from the order of the Tribunal, which are re-framed as under:

(2.) The assessee is a works contractor and had compounded certain works. In the present revision for the relevant year we are concerned with works which were not compounded. The assessee had been awarded work of road tarring, wherein crushed metals were used. The crushed metal was admittedly mixed with hot bitumen and used in tarring. The assessee's claim that crushed metal is a consumable was rightly rejected by the Tribunal. While tarring, there is accretion of the crushed metal in the work and, hence, it cannot be treated as a consumable. We, hence, answer the first question in favour of the Revenue and against the assessee.

(3.) With respect to the next question, the learned Counsel for the assessee mainly relies on the assessments carried out in the previous years. The assessee admittedly had continuous work for consecutive years. At the close of the year, there were works which were in progress, for which there were no payments received also. The assessee had been offering only the the work for which payments are received in that assessment year for the purpose of taxation. The Assessing Officer in the previous years took the proportion of the payment received as against the total of such payments received and the closing work in progress, for the purpose of computing the percentage of the work carried out in an year. This percentage was applied to the cost of materials, wages paid for labour, hire charges and consumables to arrive at the total expenditure. From the contract receipt and total expenditure, the gross profit was arrived at, and this percentage was applied to the cost of materials. The primary fallacy in the said computation of taxable turnover is that the tax would only be levied on the basis of the contract receipt and not on the basis of transfer of goods which in a works contract is occasioned by accretion of goods in the works. The method adopted in the previous years also gives short shrift to the definition of turnover and taxable turnover as found in the statute. When there is accretion of goods there is a transfer of property in goods and incidence of tax thus arise; despite the fact that the payment stands deferred.