THE ADDITIONAL COMMNR.OF C.TAXES,BANGALO vs. AYILI STONE INDUSTRIES ETC.ETC

C.A. No.-001983-002039 - 2016Supreme Court18 October 2016Bench: DIPAK MISRA SHIVA KIRTI SINGH29 pages
For Petitioner: V. N. RAGHUPATHY
AI SummaryRemanded

What were the facts?

The assessee, Ayili Stone Industries, is a dealer in granite stone. The assessing authority initially allowed exemption on polished granite stone, considering it a second sale from tax-suffered rough granite blocks. Subsequently, the assessment was reopened, and the authority opined that polished and unpolished granite stones are separate commodities under Entry No. 17(1) of Part S of the second schedule to the Karnataka Sales Tax Act, 1957 (KST Act), and thus, exemption on polished granite sold within the state was erroneous. The assessee appealed, and the appellate authority set aside the revisional orders. The revisional authority, however, initiated suo motu revision under Section 12-A(1) of the Act, opining that the appeal order caused loss to the state exchequer. The High Court overturned the revisional authority's order, leading to the present appeals before the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the High Court had not correctly applied the principle in the correct perspective, despite posing the question correctly and relying on Aman Marble (supra). The Court noted that the decision in Aman Marble (supra) held that excavation and subsequent cutting and polishing of stones into slabs did not amount to manufacture. The judgment in Foredge Granite (supra) was restricted to polished granite blocks. The revisional authority applied the test of a separate and distinct commercial product, relying on Goa Granites (supra), which drew a distinction between slabs and tiles. Entry 17(1) of Part S deals with polished granites, unpolished granites, and chips, while tiles fall under Entry 8 in Part T. The Court observed that there is a distinction between polished granite stone or slabs and tiles. If a polished granite stone is used for any purpose, it comes under Entry 17(1). However, if it is a tile, which comes into existence by a different process, a new and distinct commodity emerges with a different commercial identity. The process involved is extremely relevant and was not adequately gone into. The Assessing Officer referred to Entry 17(1) without elaborating on Entry 8, which carves out tiles as a different commodity. A granite tile would come within Entry 8 if certain activities are established. The Court allowed the appeals, set aside the orders of the High Court and all authorities, and remitted the matter to the Assessing Officer for re-adjudication.

What were the issues?

1. Whether the activity of cutting and polishing rough granite blocks into granite tiles amounts to manufacture, and if the resulting product constitutes a different commercial commodity for the purpose of sales tax under the KST Act. Assessee's Contention (implied from High Court's reasoning and subsequent analysis): The process of cutting and polishing rough granite blocks into granite tiles amounts to manufacture, and the resulting tiles are a distinct commercial product. The assessee relied on decisions like M/s. Vishwakarma Granites v. Commissioner of Commercial Taxes, Foredge Granite Pvt. Ltd. v. State of Karnataka, and State of Karnataka v. Goa Granites. Revenue's Contention (implied from revisional authority's reasoning): Rough granite and granite tiles are separate and distinct commercial products. Granite tiles are not covered under Entry 17(1) of Part S of the second schedule but fall under Entry 8 in Part T of the second schedule to the KST Act, indicating they are a different commodity liable to tax as a first dealer. The revenue relied on the revisional authority's interpretation of the schedules and the distinction between polished granite stones and tiles.

Which sections of the Income-tax Act were involved?

Section 12-A(1),Section 24(1),Section 6B,Section 5-A,Section 5-B,Section 80-IA

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
Page 1 JUDGMENT Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOs. 1983-2039 OF 2016 [Arising out of SLP(C) NOs. 9733-9789 OF 2014] The Additional Commissioner of Commercial Taxes, Bangalore ...Appellant(s) Versus Ayili Stone Industries Etc. Etc. ...Respondent(s)

J U D G M E N T Dipak Misra, J. These appeals, by special leave, assail the common judgment and order passed by the High Court of Karnataka in STA No. 574-575/2011 and other connected matters preferred under Section 24(1) of the Karnataka Sales Tax Act, 1957 (for brevity, “the Act”), on 4th December, 2012 whereby it has overturned the order dated 25.02.2011 passed by the Additional Commissioner of Commercial Taxes, Zone-I, Bangalore in a batch of suo motu revisions under Section 12-A(1) of the Act whereby the revisional

Page 2 JUDGMENT 2 authority has opined that there had been an erroneous order in the appeal causing loss to the State exchequer and accordingly issued notices to the concerned assesses requiring them to participate in the revision petitions and file written objections and put for

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 24(1)

All 68 judgments and leading authorities on Section 24(1) →

Recent GST High Court judgments

Search GST case law →