State Of Kerala vs. M/S.Contour Ready Mix Private LTD.

Facts

The Revenue has filed a revision petition challenging an order of the Kerala Value Added Tax Appellate Tribunal. The assessee, M/s. Contour Ready Mix Private Ltd., engaged in manufacturing and selling ready mix concrete, claimed input tax credit on a 'transit mixture' fixed on a Leyland Chassis for the year 2008-09. The Assessing Officer rejected the claim, stating the item was in the negative list as per SRO No. 324 of 2005. The Appellate Authority dismissed the assessee's appeal. The Tribunal, however, held that the authorities below failed to properly identify the item and that the machine in question was capital goods eligible for input tax credit.

Held

The Court found considerable force in the assessee's argument. A plain reading of the notification indicated it referred to a machine used for mixing concrete with the aid of labour. The definition of 'Capital goods' under Section 2(x) of the KVAT Act includes delivery vehicles. The transit mixer, mounted on a vehicle, transports ready mix concrete without spoiling the mix. It is not a machine for mixing concrete using labour alone, but rather an equipment that keeps the ready mix from solidifying until it reaches the site. The Tribunal's finding that the machinery in question cannot be strictly called a delivery vehicle but is essential for effective delivery of goods, and that delivery vehicles are excluded from the negative list, was also noted. The Court held that the machine in question does not come within Entry 7 of the notification and is therefore entitled to input tax credit. The questions of law were found against the Revenue.

Key Issues

1. Whether a mixture fixed in the chassis of an Ashok Leyland is eligible for input tax credit as held by the Tribunal, concerning Section 2(x) of the KVAT Act and SRO 324/05. 2. Whether the Tribunal failed to interpret SRO 324/05 in accordance with its object. 3. Whether item No. 7 in SRO 325/05 covers the mixing machine fixed in the chassis of an Ashok Leyland. 4. Whether the mixture purchased by the assessee can be considered as 'capital goods' as defined under Section 2(x) of the KVAT Act. 5. Whether the transit mixture and ready mixture are covered by Entry 7 of SRO 324/05. Revenue's arguments: The Revenue contended that the machine squarely falls under 'concrete mixing machine' as per Entry 7 of the notification, which is issued under Section 2(x) of the KVAT Act. Assessee's arguments: The assessee argued that Entry 7 must be read with the phrase 'used in connection with supply of labour and services', implying it only covers machines mixing concrete using labour. A transit mixer, used for transporting ready mix concrete, does not fit this description.