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

                                [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 -
           Karnataka Sales Tax Rules, 1957.                                  E

                 The appellant Company entered into an agreement
           with LT Company for execution of works contract. Its
           registered office is at Gujarat and branch office at
.'   1'
           Bangalore. Appellant received goods from the head office
                                                                        F
           situated at Gujarat for execution of work in Karnataka. It
           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,
     "\    effective from 1.4.2002 would apply to agreements entered G
           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
     of such year before the assessing authority to accept in
0    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]            ,t
        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.
               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
           rightly answered against the assessee. [Para 14] [1098-
           C-E]
                1.3 In view of the language employed in the amended       c
           provision, the appellant was clearly disentitled from
           composition for availing the benefit under sub-section (6)
           of Section 17. The expression "receives" would
           encompass receipt in any manner. Receipt by stock
           transfer is covered by the said expression. Therefore, the D
           High Court was justified in dismissing the Revision
     ).
           Petition. There is no scope for taking a different view in
           view of the clear language of sub-section (7) of Section
           17 as amended w.e.f. 1.4.2002. [Para 15] [1098-F-H;
           1099-A]
                                                                      E
                CIVILAPPELLATE JURISDICTION : Civil Appeal No. 584
           of 2008.
                From the final Judgment and Order c:fated 14.7.2004 of
           the High Court of Karnataka at Bangalore in S.T.R.P. No. 18 of
           2004.                                                          F

                                         WITH
                Civil Appeal Nos. 585, 586 & 589 of 2008.
                Subhash Sharma for the Appellant.                         G

,(   •\         Ms. Anitha Shenoy, Adv. for the Respondent.
                The Judgment of the Court was delivered by
               Dr. ARIJIT PASAYAT, J. 1. Leave gr.anted in SLP (C) Nos.
           12791-12794 of 2006.                                           H
    1095       SUPREME COURT REPORTS                  [2008] 1 S.C.R.


A         2. Challenge in these appeals is to the judgment of a
    Division Bench of the Karnataka High Court dismissing the
    Revision Petition filed under Section 23(1) of the Karnataka
    Sales Tax Act, 1957 (in short the 'Act').
        3. The controversy relates to assessment year 2002-2003.
B The appellant had filed the Revision Petitions questioning
  correctness of the order passed by the Karnataka Appellate
  Tribunal (in short the 'Tribunal') in STA Nos798-801 of 2003.
  The appeals were filed before the Tribunal under Section 22(1)
  of the Act against the order passed by the Joint Commissioner
c of Commercial Taxes (Appeals), Bangalore Division, Bangalore
  (hereinafter referred to as the 'Appellate Authority'). The said
  authority confirmed the provisional assessment orders of the
  Assistant Commissioner of Commercial Taxes, Bangalore
  (hereinafter referred to as the 'Assessing Authority') for the
D months of May, June, July and September, 2002.
           4. Factual position is almost undisputed and is as follows:
        The appellant is a limited company and has its registered
  office at Gujarat and branch office at Bangalore, Karnataka. It
E is a sub-contractor for M/s Larsen and Toubro Ltd. for execution
  of works contract. It is registered as a dealer under the Act as
  well as Central Sales Tax Act, 1956 (in short the 'Central Act'). It
  had opted for composition under Section 17(6) of the Act. But
  the benefit of composition was denied in view of the amendment
F to sub-section (7) of Section 17. The appellant undisputedly had
  re.ceived goods from the head office ,situated at Gujarat for
                                                                         t
  execution of the work in Karnataka.
       5. Stand of the appellant before the departmental
  authorities and the Tribunal was that the receipt of goods from
G the head office does not amount to receiving of goods. The
  Tribunal referred to sub-section (7) of Section 17 as amended
  by Act No.5 of 2002 w.e.f. 1.4.2002 and held that in fact the
  provision clearly applied to the case of the appellant.
                                                                         )   .
           6. The following questions were raised before the High
H
                      M/S INDIAN DAIRY MACHINERY CO. LTD. v.                 1096
                  ASSISTANT COMMNR. OF COM. TAXES [PASAYAT, J.]

                  Court in the Revision Petition:                                   A
...
      '    --'f        "I. Whether the Karnataka Appellate Tribunal was right in
                       concluding that the amendment to Section 17(7) of the
                       KST Act effective from 1.4.2002 would apply to
                       agreements entered into prior to 1.4.2002.
                                                                                    B
                       II. Whether the Karnataka Appellate Tribunal was right in
                       holding that even transfers to stock would be hit by the
                       amendment to Section 17(7) of the Karnataka Sales Tax
                       Act effective 1.4.2002?"

                       7. Section 17(7) of the Act which has been introduced by     c
                  the Karnataka Amendment Act 5 of 2002, with effect from
                  1.4.2002 reads as under:
                       "Nothing contained in sub-section (6) shall apply to a dealer
                       who purchases or receives goods from outside the State
                                                                                     D
                       for the purpose of using such goods in the execution of
                       works contract"
          }
                        8. The legislature by introducing the above amendment to
                  sub-Section (7) of Section 17 of the Act has restricted the benefit
                  of composition amount for a dealer liable to tax under Section E
                  5-8 of the Act. By this amended provision, the Legislature
                  mandates that a dealer who purchases or receives goods from
                  outside the State for the purpose of using such goods in the
                  execution of works contract is not eligible for benefit of
                  composition amount for the works contract executed by him in F
                  that year in the State· in respect of works specified in the Sixth
          "r
                  Schedule to the Act.
                         9. Rule 8-8 of the Karnataka Sales Tax Rules, 1957 (for
                  short the 'Rules') provides the procedure for composition of tax
                  in the case of dealers executing works contract. Sub-rule (1) of G
                  Rule 8-8 of the Rules envisages that the assessee/dealer sfurll
                  submit an application in Form 8-AA to the assessing authority
          \       each year seeking composition benefit within One hundred and
                  twenty days from the date of commencement of the assessment
                  year or of the business, if he has commenced the business H
    1097       SUPREME COURT REPORTS                  [2008] 1 S.C.R.
                                                                                    •

A   during the course of the year.                                                  ...
                                                                         ~
         10. Sub-Rule (2) of Rule 8-B of the Rules mandates that
  the Assessing Authority after receipt of such application from
  the dealer/assessee, and after verifying the same, may permit
  the dealer, subject to the conditions specified in Sub-rule (1 ), to
B pay in lieu of the amount of tax payable by him during the year
  an amount by way of composition as provided in sub-section
  (6) of Section 17 of the Act.
                                                                         "'t

          11. Clause (ii) of sub-rule (2) of Rule 8-B of the Rules
c   envisages that the Assessing Authority shall give permission
    for composition within thirty days from the date of receipt of the
    application by the dealer/assesses under Sub-rule (1) of Rule
    8-B of the Rules.

           12. The High Court dismissed the Revision Petition holding
D that sub-section (7) of Section 17 has clear application. The
    stand taken before the Tribunal and the High Court was re-
    iterated in these appeals.

         13. Learned counsel for the respondent-State on the other
    hand supported the impugned judgment.
E
       14. It is to be noted that if the dealer wanted the benefit of
  sub-section (6) of Section 17, it was required to submit an
  application within one hundred twenty days from the date of
  commencement of the assessment year. The amended
F provision of sub-section (7) of Section 17 came into effect from
  1.4.2002. 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
G contract. lffor any reason, the assessee 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 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
H
            M/S INDIAN DAIRY MACHINERY CO. LTD. v.                    1098
        ASSISTANT COMMNR. OF COM. TAXES [PASAYAT, J.]

        being executed by him. The key words under Section 17 (6) of          A
. -"!   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 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     8
        contract Under Rule 88(1) of the Rules, 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.             c
        That again means, it is irrelevant, when the parties had entered
        into an agreement for the execution of works contract in the State.
        As already noticed, the relevant assessment year in question is
        2002-2003 (ending on 31.3.2003) and the assessee if it elected
        to compound the tax for this year, it was required to submit the
                                                                              D
        application as provided under rule 8-8 (1) of the rules. The
        amended provisions of sub-section (7) of Section 17 were given
        effect to from 1.4.2002. In view of the restriction imposed under
        the amended 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     E
        the goods by way of stock transfers from outside the State for
        the purpose of using such goods in the execution of works
        contract. Therefore, the first question of law raised by the
        appellant has been rightly answered against the assessee.
                                                                               F
   -r         15. The language used in sub-section (7) of Section 17 is
        very clear. It is to the effect that if a dealer purchases or receives
        goods from outside the State for execution of works contract
        within the State it is not entitled to the benefit of composition in
        terms of sub-section (6) of Section 17 and undisputedly, the
                                                                               G
        appellant has received the goods by way of stock transfer. In
        view of the language employed in the amended provision, the
   i.   appellant was clearly disentitled from composition for availing
        the benefit under sub-section (6) of Section 17. The expression
        "receives" would encompass receipt in any manner. Receipt by
                                                                               H
   1099        SUPREME COURT REPORTS               [2008] 1 S.C.R.


A stock transfer is covered by the said expression. The High Court
  was, therefore, justified in dismissing the Revision Petition. We
  find no scope for taking a different view in view of the clear
  language of sub-section (7) of Section 17 as amended w.e.f.
  1.4.2002.
B       16. The appeals fail and are dismissed with no order as
   to costs.
   N.J.                                      Appeals dismissed.