M/S INDIAN DAIRY MACHINERY CO. LTD. versus ASSISTANT COMMISSIONER OF COMMERCIAL TAXES

Citation: [2008] 1 S.C.R. 1092 · Decided: 22-01-2008 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Dismissed

Judgment (excerpt)

[2008] 1 S.C.R. 1092 
.., 
MIS INDIAN DAIRY MACHINERY CO. LTD. 
A 
v. 
ASSISTANT COMMISSIONER OF COMMERCIAL TAXES 
(Civil Appeal No. 584 of 2008) 
JANUARY 22, 2008 
B 
"' 
[DR. ARIJIT PASAYAT AND P. SATHASIVAM, JJ.] 
Karnataka Sales Tax Act, .1957 - s. 17(6) and 17(7) (as 
amended) - Benefit of composition of tax - Claim of - Dealer-
assessee received goods by way of stock transfers from outside c 
the State for execution of works contract within the State -
Agreement between parties entered into prior to 1.4.2002 -
Amended provision of s. 17 (7) coming into effect from 1.4. 2002 · 
- Held: In view of the amended provision of s. 17(7), assessee 
~ 
not entitled to benefit of composition - Expression 'receives' D 
includes receipt in any manner and also receipt by stock 
transfer - Further, assessee opting for composition of tax for 
relevant assessment year did not submit the requisite 
application - Option for composition benefit was not dependent 
on the date when parties entered into an agreement -
E 
Karnataka Sales Tax Rules, 1957. 
The appellant Company entered into an agreement 
with LT Company for execution of works contract. Its 
1' 
registered office is at Gujarat and branch office at 
.' 
Bangalore. Appellant received goods from the head office 
situated at Gujarat for execution of work in Karnataka. It F 
opted for the benefit of composition under s. 17(6) of the 
Karnataka Sales Tax Act, 1957. In view of amendment to 
s. 17(7) the benefit of composition was not given. The 
tribunal held that the amendment to s. 17(7) of the Act, 
G 
" 
effective from 1.4.2002 would apply to agreements entered 
\ 
into prior to 1.4.2002; and that the transfers to stock were 
hit by the amendment to s. 17(7) of the Act. Appellant filed 
revision petition. The High Court dismissed the revision 
petition holding thats. 17(7) was applicable. Hence the 
1092 
H 
1093 
SUPREME COURT REPORTS 
[2008] 1 S.C.R. 
A present appeal. 
Dismissing the appeals, the Court 
HELD: 1.1 The amended provision of sub-section (7) 
of Section 17 of the Karnataka Sales Tax Act, 1957 came 
B into effect from 1.4.2002. The language used in sub-
section (7) of Section 17 is very clear. The amended 
provision clearly excludes the dealer from the benefit of 
sub-section (6) of Section 17 of the Act if he purchases or 
receives goods from outside the State for the purposes 
,, of using such goods in the execution of the works 
contract. If the assessee-dealer had intended to opt for 
composition of tax under section 17 (6) of the Act, 
necessarily he had to submit the application within one 
hundred and twenty days from the date of commencement 
0 of such year before the assessing authority to accept in 
lieu of tax payable under Section 5-B of the Act on the 
total value of the works contract being executed by him. 
The key words under Section 17 (6) of the Act are the tax 
payable during the year by way of composition an amount 
on the total consideration for the works executed by the 
E contractor in that year in the State. Option to be exercised 
for composition benefit is not dependent on the dates of 
the agreements entered into by the parties for execution 
of the works contract. Under Rule 88(1) of the Karnataka 
Sales Tax Rules, 1957 the dealer/assessee is required to 
-
submit the application seeking composition benefit for 
each assessment year within the time prescribed from the 
date of commencement of such year or of the business, if 
he has commenced the business during the course of 
the year. That again means, it is irrelevant, when the parties 
had entered into an agreement for the execution of works 
contract in the State. [Para 14] [1097-F-H; 1098-A-C] 
1.2 The relevant assessment year in question is 2002-
2003 (ending on 31.3.2003) and if the assessee elected to 
compound the tax for this yaar, it was required to submit 
-i the application as provided under rule 8-B (1) of the rules. 
-+ 
' 
t , 
MIS INDIAN DAIRY MACHINERY CO. LTD. v. 
1094 
ASSISTANT COMMNR. OF COM. TAXES [PASAYAT, J.] 
In view of the restriction imposed under the amended A 
-'f 
provision, the assessing authority could not have 
permitted the appellant company to elect to pay the tax 
under Section 17(6) of the Act, since admittedly the 
appellant received the goods by way of stock transfers 
from outside the State for the purpose of using such B 
goods in the execution of works contract. Therefore, the 
first question of law raised by the appellant has been 
right

Excerpt shown. Read the full judgment & AI analysis in Lexace.