Kec International Limited vs. The State Of West Bengal And Ors.
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The petitioner, KEC International Limited, is aggrieved by an order dated November 11, 2024, passed by the West Bengal Taxation Tribunal. The petitioner's grievance pertains specifically to the rate of tax levied at 14.5% on iron and steel used for the erectional work of high-tension transmission line towers. The Tribunal had partially remanded the matter to the Department, which subsequently passed further orders. The petitioner contends that iron and steel structures used in such works should be taxed at the rate applicable to declared goods, not at the higher rate for civil construction works.
Held
The Court held that iron and steel structures used for erecting high-tension transmission line towers do not lose their character as iron and steel. Relying on the Supreme Court's decision in B. Narasamma vs. Deputy Commissioner of Commercial Taxes, Karnataka & Anr., the Court reiterated that commercial goods, when merely subjected to some processing, finishing, or joining, remain commercially the same goods and cannot be taxed again if they retain their identity. The Court also referred to Singh Construction Company vs. State of Haryana & Ors., which affirmed that the loss of identity of goods does not prevent them from being goods for the purpose of deemed sale. Consequently, the Court found that these goods, being specified in Section 14 of the Central Sales Tax Act, 1956, are declared goods and should be taxed at the rate of 5% as per Section 18(3)(a) of the West Bengal Value Added Tax Act, 2003. The impugned order of the Tribunal and prior orders from the Commercial Taxes Appellate and Revisional Board and subordinate authorities were set aside. The matter was remanded to the Assessing Officer to recalculate the tax at 5% on the declared goods, subject to the petitioner providing necessary invoices and documents, and after affording a personal hearing. The Court also clarified that the books of accounts accepted by the Revisional Board should not be disturbed.
Key Issues
1. Whether iron and steel structures used by the petitioner for erecting high-tension transmission line towers lose their character as iron and steel structures at the point of accretion, thereby attracting a higher tax rate. Petitioner's Argument: The petitioner argues that the iron and steel used retain their identity as declared goods under Section 14 of the Central Sales Tax Act, 1956, and should therefore be taxed at the lower rate of 5% as specified for such goods under Section 18(3)(a) of the West Bengal Value Added Tax Act, 2003. They rely on Supreme Court decisions in B. Narasamma vs. Deputy Commissioner of Commercial Taxes, Karnataka & Anr. and Singh Construction Company vs. State of Haryana & Ors., which held that goods merely processed or joined together, without losing their commercial identity, remain taxable as such. Revenue's Argument: The judgment does not explicitly record the revenue's argument on this specific issue. However, the Tribunal's order, which is under challenge, levied tax at 14.5%, implying the revenue's position was that the goods attracted the higher rate applicable to other categories.
Sections Cited
Section 14, Section 18(3)(a), Section 18(1), Section 14 of the Central Sales Tax Act, 1956, Section 18 of the West Bengal Value Added Tax Act 2003
AI-generated summary — verify with the full judgment below
2025 Item No.4 Ct. No.01 RP/SM WPTT 6 of 2025 KEC International Limited Vs. State of West Bengal & Ors.
Mr. Shovit Betal
….For Petitioner Mr. A. Ray, Ld. GP Mr. T.M. Siddiqui, Sr. Adv. Mr. T. Chakraborty Mr. S. Sanyal
...For State
The petitioner is aggrieved by the order dated 11th November, 2024 passed in Case No.RN-692 of 2021 by the West Bengal Taxation Tribunal. There are two parts of the order, of which the petitioner is aggrieved only with regard to the rate of tax leviable at the rate of 14.5% on the iron and steel, which have been used by the petitioner for the purpose of erectional work of high tension transmission line tower. With regard to other portion of the order, the learned Tribunal had remanded the matter back to the Department and it appears that the Department has also passed certain orders.
We have elaborately heard Mr. Betal, learned advocate for the petitioner and Mr. Siddiqui, learned Senior Advocate for the respondent State.
2
The legal issue involved in this case is whether iron and steel structures that are used by the petitioner for the purpose of erecting high-tension transmission line tower would lose their character of iron and steel structures at the point of accretion. This issue is no longer res integra and has been decided by the Hon’ble Supreme Court in the case of B. Narasamma vs. Deputy Commissioner of Commercial Taxes, Karnataka & Anr. reported in (2016) 15 SCC 167 wherein it was held that where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type. Therefore, held, that the declared goods in question could only be taxed at the rate of 4% as iron and steel only and not the higher rate levied in respect of civil construction works generally. The Hon’ble Supreme Court took note of the decisions passed in the cases of Builders’ Association of India vs. Union of India reported in (1989) 2 SCC 645; Gannon Dunkerley follows:-
3 “Given the fact situation in these appeals, it is obvious that para 10 of this judgment in Pyare lal Malhotra case squarely covers the case against the State, where, 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. We fail to see how the aforesaid judgment can further carry the case of the Revenue.”
To the same effect is the decision in the case of & Ors. reported in (2020) 76 GSTR 250 wherein it was held as follows :
“8. From the above-cited decisions, the position emerges that the goods involved in the works contract are taxed as deemed sales. The restrictions under Article 286 of the Constitution of India would apply on the State legislature while taxing the works contract. The State Legislature has power to prescribe uniform rate of tax on the goods involved in the works contract in spite of the fact that different rates are prescribed under the Act for the constituents involved therein. Further that identity of the goods transferred is lost in the process does not prevent them from being goods.
The contention of learned counsel for the State that the goods when being incorporated were transferred in some other form and hence ingredients lose their identity, cannot be accepted, as there is a deemed sale of the ingredients of “hot mix material” and the loss of identity of goods does not prevent them from being goods for the purpose of deemed sale.”
4
Section 18 of the West Bengal Value Added Tax Act 2003 deals with levy of tax on taxable contractual transfer price. In sub-section (1) it is stated that subject to the provision of sub-section (2) the tax payable by a dealer, who is liable to pay tax under section 14 or sub-section (3) of Section 24 or sub- section (3) of Section 27C for transfer of property in goods involved in the execution of works contract, shall be levied on his taxable contractual transfer price at the following rate. Clause (a) of sub-section 3 of Section 18 states that the tax shall be at the rate of 5% where the goods represents those specified in Section 14 of the Central Sales Tax Act, 1956 and Clause (b) states that the rate will be 14.5% where goods represents other than those specified in clause (a) or clause (aa). Section 14 of the Central Sales Tax Act deals with certain goods to be of special importance in inter-State trade or commerce where under Clause (iv) iron and steel have been mentioned. So, these goods are declared goods. In the light of the above, the said goods can be charge only at the rate of 5% as they represent those specified in Section 14 of the Central Sales Tax Act, 1956. 6. For the above reasons, the order impugned in this petition as well as the order passed by the West Bengal Commercial Taxes Appellate and Revisional
5 Board and the order passed by the Senior Joint Commissioner, Commercial Taxes, Kolkata South Circle as well as the order passed by the Assessing Officer are set aside and the matter is remanded back to the Assessing Officer to calculate the rate tax at the rate of 5% in the declared goods, for which the petitioner shall produce necessary supply invoices and other documents that may be called for and the Assessing Officer shall take a fresh decision in this regard after affording an opportunity of personal hearing to the authorized representative of the petitioner as expeditiously as possible.
It is made clear that since the Revisional Board has accepted the books of accounts of the petitioner, the same should not be reviewed or disturbed and remained confined only with regard to the rate of tax on the specified goods.
With above direction, this petition is disposed of. [T.S. SIVAGNANAM] CHIEF JUSTICE [CHAITALI CHATTERJEE (DAS), J.]
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.