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2018 (5) TMI 1797 - HC - VAT and Sales TaxLevy of tax - chemicals used as consumables in the process of job work of dyeing of fabric - tax is levied irrespective of the fact whether property in goods had been transferred or not. What is the quantum of transfer of property in goods while executing the job work of bleaching and dyeing? Held that:- In the process of dyeing, some portion of colour is embedded in the fabric which is passed on to the principals for whom the job work is undertaken whereas certain portion is used as consumable only - Consumables are items which are lost in the course of execution of works contract. Even though consumables are items which are lost to the contractor, but it is not a gain for the awarder. Admittedly, in the present case, the assessee is a textile processor and is engaged in the execution of job work. The grey fabric is received by the processor which is processed into finished cloth by subjecting it to various processes such as bleaching, dyeing, de-sizing and printing. The finished fabric after processing/manufacturing is sent back to the owner of the fabrics - also, certain chemicals are used which are consumables and which do not hold on to the cotton fabrics. After completion of the aforesaid processes, dyeing is undertaken which holds on to the cotton fabric giving lasting impression and ultimately converts the grey fabric into printed fabric which is marketed in the market. In the act of dyeing, as also in printing, certain amount of chemicals, dyes and colours are washed out and they do not remain embedded on the textile or fabric. Thus, the benefit of chemicals, dyes and colours which get washed out to this extent would be extended to the assessee-appellant. It would be pertinent to observe that what is taxable under the HVAT and CST Act is the value of the goods which get transferred to the customer in the execution of works contract either as goods or in any other form and not the value of goods used or consumed in the execution of the works contract, if such user or consumption does not result in transfer of property in those goods in any form to the customer. The tax on the entire value of chemicals consumed during the process of dyeing and job work are not to be included for the purpose of levy of VAT as substantial portion of the same is not transferred to the principal eventually. In Taktex Processing Complex vs. State of Kerala, [2002 (10) TMI 761 - KERALA HIGH COURT], the issue was whether the Tribunal was justified in holding that the chemicals and dyes used up in the execution of job works was taxable at the hands of the petitioner. It was held that the item dye used in the process of bleaching textile fabrics, could not be treated as a consumable mentioned in Section 5C(1)(c) (iii) of the Act. Having arrived at the conclusion that chemicals used in the job work are taxable but the pertinent question to be answered would be as to how much of dyes/colours are taxable which is transferred to the fabric when the whole quantity of consumable is not transferred - In the present case, it would be essential to determine the value of consumables transferred in the goods on which tax is leviable. While determining the actual loss of chemicals, dyes and colours where the fabric or textile undergoes various processes depends upon factual aspect which can be considered only by the Assessing Officer where parties can produce evidence in respect of their respective claims/contentions. The matter is remanded to the Assessing Officer to work out the details of quantity of chemicals, dyes and colours that would get washed out in the process of dyeing and printing of fabrics undertaken by the appellant - appeal disposed off by way of remand.
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