The Hindu Business Line : Rolling shutters: ‘ST on basic materials not legal’

Chennai, Nov. 14 The Madras High Court set aside the order of the Joint Commissioner of Commercial Taxes – (CT-III), Chennai, levying sales tax under Section 3(2) of the TN General Sales Tax Act on basic materials such as iron and steel used in the manufacture of rolling shutters.

Allowing a writ petition from MKS Industries, Rajapalayam, challenging the suo motu revisional order dated 23-7-2004 of the JCT (R-1) modifying the order of the Appellate Asst Commissioner (CT), Virudhunagar granting tax relief to the petitioner on tax liability on such purchase, Mr Justice K. Chandru held that the revisional authority had not carefully looked into the order of the Appellate Asst Commissioner as the materials used had already suffered tax, and hence no tax liability would arise.

According to the petitioner, the assessing authority (Deputy Commercial Tax Officer-II, Virudhunagar) had not made the assessment in terms of Section 3-B(2) of the TN General Sales Tax Act. The industrial unit was producing rolling shutters after purchasing materials such as steel rods and base materials from local markets.

They were, therefore, entitled to tax exemption on the turnover. But the assessment was made without granting exemption.

The Appellate Asst Commissioner (CT) on appeal by the petitioner, set aside the assessment on turnover of Rs 1.96 lakh as the assessment was not maintainable and hence it was ordered to be deleted.

The JCT, R-1, citing a judgment of this High Court in 129 STC 167 (Apparels & Handloom Exporters Association vs State of TN) ruled that the tax would have to be paid on the value of materials purchased for manufacture of rolling shutters.

Confirming the order of assessment, R-1 said the tax paid on purchase of basic materials could not be excluded in the assessment.

The petitioner submitted that this was not a case where they had purchased raw materials such as iron and steel and made a new product.

Using the raw materials, they had only assembled rolling shutters and this could not be said to be a new product so as to carry tax on the entire value of the goods.

The Judge said that when a clear finding was given by the Appellate Asst Commissioner in his order regarding the description of the goods, it was not open to the revisional authority to interfere with the said finding.

Hence, the order of the JCT could not stand scrutiny by this court, the Judge held, and set aside same.

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