SUNDARAM INDUSTRIES LIMITED Vs. COMMERCIAL TAX OFFICER

JUDGEMENT

(1.) The above writ petition is filed against the judgment dated 12.11.1999 made in Tax Case Revision No.3667 of 1997 on the file of the Tamil Nadu Taxation Special Tribunal.

(2.) The point for consideration in the present case is, whether there is any inter-State sale in respect of the materials utilised in retreading and recapping of the tyres, which retreading activity commenced and was completed in the State of Tamil Nadu, in pursuance of a contract entered into outside the State by the petitioner with customers residing out side the State of Tamil Nadu.

(3.) The facts, which form the basis for the dispute, are as follows: The petitioner is a registered dealer under the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the Act") and the Central Sales Tax Act, 1959 (hereinafter referred to as "the Central Act"). For the assessment year 1987-88, the first respondent, Assessing Authority brought to assessment 70 percent of the total receipts amounting to Rs.58,58,716.97ps at 5% after allowing an exemption of 30 percent towards labour charges amounted to Rs.17,57,615/-. The said amount was brought to tax under Section 3-B of the Act as works contract by rejecting the exemption claimed by the petitioner on the ground that pursuant to a contract entered into outside the State, the worn out tyres were entrusted to the petitioner by the customers outside the State of Tamil Nadu for the purpose of retreading and after completing retreading and recapping, the retreaded tyres were actually delivered to the customers in other States and therefore the transactions involved inter-State movement of goods and in such circumstances, the transactions have to be treated as inter-State works contract, not liable to tax under the Tamil Nadu General Sales Tax Act, 1959. This view was confirmed by the first Appellate Authority. The Second Appellate Authority, the Appellate Tribunal also non-suited the petitioner for its claim of exemption by observing that, admittedly, the actual works of retreading took place within the State of Tamil Nadu. Simply because the used or worn-out tyres were received from other States and after treading, these retreaded tyres were again sent back to the customers residing in other States, the works contract did not cease to be a transaction under the Tamil Nadu General Sales Tax Act and therefore the turnover relating to works contract for retreading and recapping of tyres was liable to be treated as a taxable turnover under the State Act. Since the Tribunal remanded the turnover relating to re-rubberising for fixing the correct taxable turnover by following the instructions given by the Commissioner of Commercial Taxes in Act Cell-I, 127106/89, dated 23.10.1989 in consequences of a decision of the Supreme Court in BUILDERS ASSOCIATION OF INDIA AND OTHERS VS. UNION OF INDIA AND OTHERS reported in 73 STC 370, the Appellate Tribunal remanded the turnover relating to works contract also to the assessing authority to fix the taxable turnover by following the above said instructions.