TMI Blog2012 (7) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... t of works done for customers outside the State on the ground that the printing and design itself constitutes a property which is sold. As rightly pointed out by the Tribunal, the material used by the assessee for painting and design on the glazed tiles supplied by the customers outside the State do not constitute sale of goods, they are consumables used in execution of works contract. Therefore when section 5B is not attracted, section 17(6) is not attracted. Even otherwise it would be a case of inter-State sale. Thus KST is excluded. Revision dismissed. - S.T.R.P. No. 21 of 2007 - - - Dated:- 23-7-2012 - KUMAR N. AND KEMPANNA H.S., JJ. For the Appellant : Mahesh Wodayar, Additional Government Advocate, For the Respondent : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers stationed inside the State. It has claimed exemption from payment of works contract tax in respect of contract receipts received from the customers stationed outside the State in its annual returns. 3. The annual report of the company reveals that the company has received a sum of ₹ 3,63,765 under the head other income . A close scrutiny of the items constituting the head other income has revealed that this item comprises of interest received on security deposits, interest collected. The insurance, freight and other charges collected have been included in the gross contract receipts reported in form 4 which are offered to tax at the hands of the assessee-company. The income received by way of interest on R.Ds and securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to the Joint Commissioner of Commercial Taxes. The appellate authority held that the assessee has received contract receipts from the customers from outside State in respect of works executed inside the State of Karnataka and therefore it is a turnover under the KST Act which attracts tax at appropriate rates under the said Act. Therefore the claim for exemption of the assessee cannot be allowed and the entire gross receipts received by the assessee during the assessment year is to be subjected to tax since the work is executed within the State of Karnataka, the contention of the assessee that the transaction becomes an inter-State works contract cannot be accepted. 5. Aggrieved by the said order, the assessee preferred an appeal to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant only in the assessment years 1999-2000 and 2000-2001 in STA 1474 and 1475 of 2004 dated July 19, 2005. They held the nature of contract undertaken by the assessee is a pure labour contract wherein ink, stains, colours, glaze, vitrosa, medium are used as consumables. The figure or the design on tiles is not in the nature of goods transferred. Further, the inter-State sales undertaken by the appellant are also not liable for taxation under the KST Act for want of amendment of CST which has been done after the period of assessment in question. Therefore they held both the lower authorities have erred in levying tax as there is no transfer of property involved in the goods in contract undertaken by the appellant both within the State of Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 5B is attracted. In order to reduce the problem of maintaining accounts of labour plus material, the assessee has opted for payment of composition tax under section 17(6). If it is a pure labour contract where tiles are supplied from a customer after screen printing of designs, if they are supplied to the said customers, he is collecting only labour charges, there is no sale of goods. Section 5B is not attracted. Consequently section 17(6) is not attracted. 9. The dispute in the instant case is in respect of tiles supplied from customers outside the State. When the assessee has executed the work of screen printing of designs on the plain glazed tiles and has supplied them back to the customers who are outside the State is there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the Tribunal, the material used by the assessee for painting and design on the glazed tiles supplied by the customers outside the State do not constitute sale of goods, they are consumables used in execution of works contract. Therefore when section 5B is not attracted, section 17(6) is not attracted. Even otherwise it would be a case of inter-State sale. Thus KST is excluded. 12. In so far as the judgment of the apex court in the case of Indian Dairy Machinery Co. Ltd. v. Assistant Commissioner of Commercial Taxes [2008] 12 VST 386 (SC); [2008] 3 SCC 698, is concerned, the apex court was dealing with the effect of section 17(7) of the KST Act. Section 17(7) of the Act provides that nothing contained in sub-section (6) shall apply t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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