Polished granite slab used on floor is not tile under Karnataka Sales Tax Act Entry 8. that there is a distinction between polished granite stone or slabs and tiles-Supreme Court
ABCAUS Case Law Citation:
1038 (2016) (10) SC
Important Case Law Referred:
M/s. Vishwakarma Granites v. Commissioner of Commercial Taxes (Karnataka H.C)
Rajasthan SEB v. Associated Stone Industries (2000) 6 SCC 141
Aman Marble Industries Pvt. Ltd. v. CCE, Jaipur (2005) 1 SCC 279
Goa Granites4 , Chowgale and Company Pvt. Ltd. v. Union of India AIR 1981 SC 1014
Foredge Granite Pvt. Ltd. v. State of Karnataka STRP No. 58/1991
Poonam Stone Processing Industries v. Deputy Commissioner of Commercial Taxes, Gulbarga STC Vol. 94 page 182
Chowgale and Company Pvt. Ltd. v. Union of India AIR 1981 SC 1014
Brief Facts of the Case:
The present set of appeal(s) was preferred against the judgment of Karnataka High Court turning down the revisionary order passed u/s 12A(1) under the Karnataka Sales Tax Act, 1957.
The respondent dealer in the case was engaged in the business of manufacturing and trading in granite stone. The assessing authority finalised the assessment for certain assessment years allowing exemption on polished granite stone on the basis that polished granite stones were produced from out of the tax suffered from rough granite blocks. Thereafter, the assessing authority reopened the assessment. While passing the order of reassessment, the Assessing Officer opined certain amount had been allowed exemption as second sale mentioning in the order of assessment that the granite stones sold within the State were polished out of unpolished granite blocks locally purchased on demand of sales tax. The said authority referred to Entry No. 17(1) of Part S of second schedule appended to the Act which relates to granite stones, namely, (a) polished, (b) unpolished and (c) chips. The Assessing Authority observed that the polished and unpolished granite stones are under separate entries in the said schedule and such being the case, treating of sale of polished granite sold within the State which are obtained out of unpolished granite stones as sales inasmuch as they are suffered sales tax was not correct and, therefore, the exemption had been granted erroneously.
Being aggrieved by the aforesaid revisionary order, the assessee preferred an appeal before the appellate authority which allowed the appeal.
Observations made the Supreme Court:
The Hon’ble Supreme Court observed that though the High Court posed the question correctly and placed reliance on Aman Marble yet it had not correctly applied the principle in the correct perspective.
The Apex Court opined that in Aman Marble, the Court had held that it was not possible to accept that excavation of stones and thereafter cutting and polishing them into slabs resulted in a manufacture of goods. Also the decision in Foredge Granite had been restricted to the concept of polished granite block. The revisional authority relying on the pronouncement in Goa Granites had applied the test of separate and distinct commercial product that comes into existence from granite stones.
The Apex Court opined that there is a distinction between polished granite stone or slabs and tiles. If a polished granite stone is used in a building for any purpose, it will come under Entry 17(i) of Part S of the second schedule, but if it is a tile, which comes into existence by different process, a new and distinct commodity emerges and it has a different commercial identity in the market. The process involved is extremely relevant. However, that aspect had not been gone into by the High Court.
The Assessing Officer while framing the assessment order had referred to Entry 17(i) of Part S but without any elaboration on Entry 8. Entry 8 carves out tiles as a different commodity. It uses the words “other titles”. A granite tile would come within the said Entry if involvement of certain activities is established. To elaborate, if a polished granite which is a slab and used on the floor, it cannot be called a tile for the purpose of coming within the ambit and sweep of Entry 8. Some other process has to be undertaken. If tiles are manufactured or produced after undertaking some other activities, the position would be different. A finding has to be arrived at by carrying out due enquiry and for that purpose appropriate exercise has to be undertaken. In the absence of that, a final conclusion cannot be reached.
The order of the High Court and all the authorities was set aside and the matter was remitted to the Assessing Officer to re-adjudicate the matter keeping in view the observations made by the Apex Court.