Commercial goods without change of their identity as such remain commercially the same goods which cannot be taxed again

Supreme Court

Supreme Court: In the matter where the question for consideration before the bench of Dr. A.K. Sikri and R.F. Nariman, JJ was that whether iron and steel reinforcements of cement concrete that are used in buildings lose their character as iron and steel at the point of taxability i.e at the point of accretion in a works contract, the Court held that the commercial goods without change of their identity as such, are merely subject to some processing or finishing, or are merely joined together, and therefore remain commercially the same goods which cannot be taxed again, given the rigor of Section 15 of the Central Sales Tax Act.

The Court further held that works contracts that are liable to be taxed after the 46th Constitution Amendment are subject to the drill of Article 286(3) of the Constitution read with Section 15 of the Central Sales Tax Act, namely, that they are chargeable at a single point and at a rate not exceeding 4% at the relevant time. Further, the point at which these iron and steel products are taxable is the point of accretion, that is, the point of incorporation into the building or structure.

In the present case the appellant is engaged in works contracts of fabrication and creation of doors, window frames, grills, etc. in which they claimed exemption for iron and steel goods that went into the creation of these items, after which the said doors, window frames, grills, etc. were fitted into buildings and other structures. Upholding the decision of the High Court of Karnataka, it was held that the iron and steel goods, after being purchased, are used in the manufacture of other goods, namely, doors, window frames, grills, etc. which in turn are used in the execution of works contracts and are therefore not exempt from tax. [B. Narasamma v. Deputy Commissioner Commercial Taxes Karnataka, 2016 SCC OnLine SC 807, decided on 11.08.2016]

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