The Supreme Court bench comprising Justice B.V. Nagarathna and Justice Prashant Kumar Mishra upheld the ruling of the Punjab and Haryana High Court. They stated that the tax shall be applicable to the dyeing chemicals present in the finished fabric, but not on the waste produced during the dyeing process.
The respondent-assessee, M/s A.P. Processors is a textile processor and is engaged in the execution of job work, duly registered as a dealer under the provisions of the Haryana Value Added Tax Act, 2003 (HVAT) and Central Sales Tax Act, 1956 (CST). However, the appeal before the Supreme Court was filed by the High Court.
The issue in dispute was levy of tax on chemicals used as consumables in the process of job work of dyeing of fabric by assuming that property in the goods has passed on to the principals.
The assessing authority concluded the assessment on the basis of observations and findings that all the dyes and chemicals used in the execution of job work of bleaching and dyeing are transferred as in physical form or as their inherent properties. Further, the Haryana Tax Tribunal upheld the levy of tax. Aggrieved by the same, the assessee filed an appeal before the High Court.
The High Court observed that the chemicals used in the job work are taxable but the pertinent question to be answered would be as to how much of dyes/colours are taxable which is transferred to the fabric when the whole quantity of consumable is not transferred.
Also stated that in the present case, it would be essential to determine the value of consumables transferred in the goods on which tax is leviable. While determining the actual loss of chemicals, dyes and colours where the fabric or textile undergoes various processes depends upon factual aspects which can be considered only by the Assessing Officer where parties can produce evidence in respect of their respective claims/contentions.
Thus, the High Court set aside the impugned orders issued by the tribunal. Also, remanded the matter back to the Assessing Officer to work out the details of the quantity of chemicals, dyes and colours that would get washed out in the process of dyeing and printing of fabrics undertaken by the assessee.
The Supreme Court affirming the decision of the High Court stated that “the matters have been remanded to the Assessing Officer to consider the case of the assessees as well as of the Appellants herein and to pass fresh orders in terms of the directions issued by the High Court. We do not find any reason to interfere with the impugned orders.”
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