STATE OF TAMIL NADU Vs. RAJ FLOORINGS

JUDGEMENT

(1.) The present tax case, filed at the instance of the Revenue, relating to the assessment year 1993-94, was admitted on the following substantial questions of law:

(2.) The assessee herein purchased raw materials from registered dealers and unregistered dealers for manufacture of mosaic tiles. On the contract executed on supply, laying and polishing of mosaic tiles, the assessee claimed deduction under section 3B(2)(b) of the Tamil Nadu General Sales Tax Act (hereinafter referred to as "the TNGST Act") in respect of the raw materials purchased from registered dealers. The assessing officer viewed that in the execution of the works contract, the assessee had used finished product and that various materials that had gone into the manufacture of mosaic tiles were not admittedly used in the same form to claim deduction under the Act. Since what had been transferred in the execution of the works contract is a different commercial commodity on manufacture from raw materials, the registered dealers were not eligible for deduction under section 3B(2)(b) of the TNGST Act.

(3.) After referring to the decision of this court in the decision Tamil Nadu Mosaic Manufacturers Association v. State of Tamil Nadu, 1995 97 STC 503he submitted that the deduction that could be allowed in such cases would be only on labour charges for execution of the works; amount paid to a sub-contractor for labour and service; charges for planning, designing and architect's fees; charges for obtaining on hire or otherwise, machinery and tools for the execution of the works contract cost of consumables such as water, electricity, fuel, etc., used in the execution of the works contract; the property which is not transferred in the course of execution of works contract; cost of establishment of the contractor to the extent it is relatable to supply of labour and services; other similar expenses relatable to supply of labour and services and profit earned by the contractor to the extent it is relatable to supply of labour and services.