S.KUMARS LIMITED Vs. COMMISSIONER OF COMMERCIAL TAX

JUDGEMENT

(1.) By this Writ Petition under Article 226 of the Constitution of India, petitioner S. Kumars Ltd. has challenged the order dated 19.10.2011 passed by respondent No.2 Divisional Deputy Commissioner, Commercial Tax in Revision Case No.01/2011/State/remand u/S.62 (1) of the Commercial Tax Act, 1994 rejecting the revision petition of the petitioner. The Divisional Dy. Commissioner held that petitioner was liable for payment of tax u/S.9 and 9-B of the Act on the value of dyes and chemicals used/consumed by the petitioner in the job work contract of processing of grey cloths and Divisional Dy. Commissioner has treated it as transfer on property under the works contract.

(2.) Briefly stated the facts of the case are that the petitioner is a registered dealer under the M.P. Commercial Tax Act, 1994 (Hereinafter called The Act for brevity) and engaged in the processing business of the grey cloths for itself (company) and for others on job work basis. The petitioner has received grey cloths from other manufacturers on job work basis; finished it and makes it a commercially saleable product.

(3.) Counsel for the petitioner has vehemently urged the fact that the process involved is of washing, cleaning, bleaching and dying as per instructions of petitioner company and in return the company received process charges or job work charges. In the process, the petitioner company requires and uses chemicals and dyes, which are purchased as consumable goods. And for assessment year 2003-04 the original assessment order was passed on 29.01.2007, whereby the Assessing Officer had levied Commercial Tax on the value of the chemicals, dyes and packing material consumed while treating the grey cloth, as sale u/S.9 of the Act. Besides the Assessing Officer also levied tax u/S.9-B of the Act on the estimated value with addition of dyes and chemicals consumed in the processing of grey cloths used for manufacture on job work basis. Thus the tax u/S. 9 was levied in addition to the tax u/S.9-B of Commercial Tax Act 1994. It is the contention of the Counsel for the petitioner company that under Section 2(t) of the Commercial Tax Act 1994 "a transfer of property in goods whether as goods or in some other form, involved in the execution of a work contract" is liable to tax u/S.9-B of the Act. The Assessing Authority had erred in treating the job work as a works contract and moreover no transfer of property in any form of the substance took place while doing the job work on the grey cloth. Primarily Counsel argued that chemicals used in process of grey cloths had not been consumed and could not be termed as being transferred. To substantiate his arguments, Counsel stated that there are other materials like water, electricity and manpower, which are also used/consumed in processing of the grey cloths but not liable to tax besides dyes chemicals are akin to washing and cleaning, and, therefore, do not involve 'transfer' of any property as alleged. Moreover grey cloth is sent to the petitioner by the owner for, processing only; and that the cloth was returned back and no transfer of property i.e. dyes and chemicals can be said to have taken place. Thus Counsel submitted that basic ingredients for levying tax was missing, despite which, both of the orders of assessment dated 29.01.2011 and 29.08.2007 passed by Revisional Authority u/S.62(1) of the Act was contrary to the provisions of law. Therefore, Counsel prayed that the impugned order dated 29.10.2011 (Annexure-P/1) may be set aside holding that the petitioner is not liable for any tax under Section 9 and 9-B of the Commercial Tax Act, 1994 on the value of chemicals and dyes used/consumed in processing of grey cloths on job work.