A dealer registered under the Act is entitled to make inter- state purchase of goods covered by Clause (b) of Section 8(3) at concessional rate which are the following: "goods of the class or classes specified in the certificate of registration of the registered dealer purchasing the goods as being intended for resale by him or subject to any rules made by the Central Government in this behalf, for use by him in the manufacture or processing of goods for sale or (in the telecommunications network or) in mining or in the generation or distribution of electricity or any other form of power."
Rule 13 of the CST (R& T) Rules, 1957 gives detailed enumeration of the goods which a registered dealer can purchase from outside at concessional rate. The Rule reads as follows: ".
Prescription of goods for certain purposes:- The goods referred to in Clause (b) of sub-section (3) of Section 8, which a registered dealer may purchase, shall be, goods intended for use by him, as raw materials, processing materials, machinery, plant, equipment, tools, stores, spare parts, accessories, fuel or lubricants, in the manufacture or processing of goods for sales or in mining, or in the generation or distribution of electricity or any other form of power."
The CST Act originally provided concessional rate for purchase by traders for re-sale and by manufacturing and processing industries for production and sale of goods. However, pursuant to the constitutional amendment expanding the scope of "sale" covering various transactions, the CST Act was amended by Act 20 of 2002 wherein the definition of sale is recasted as following: "Sale" with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes.-
(i)a transfer, otherwise than in pursuance of contract, of property in any goods for cash, deferred payment or other valuable consideration;
(ii)a transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract;
(iii)a delivery of goods on hire-purchase or any system of payment by instalments;
(iv)a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;
(v)a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;
(vi)a supply, by way of or part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods."
By virtue of the above amendment, contractors are entitled to avail concessional rate for inter-state purchase of goods which are for sale in the course of execution of works contract, whether as goods or in some other form. It is by virtue of this provision, the petitioner applied for registration under the Act which was in fact granted to him with an endorsement in the certificate of registration that petitioner is entitled to make inter-state purchase of the following goods at concessional rate. "Cement, steel, sand, metal, construction tools, shuttering materials."
It is seen that even though amendment is introduced expanding the scope of sale in Section 2(g) of the Act, there is no corresponding amendment to Section 8(3)(b) of the Act or Rule 13 of the CST Rules. As already explained above, the two categories of dealers originally covered under the Act are traders engaged in purchase and resale and industries engaged in the manufacturing and processing of goods for sale. After the constitutional amendment, a new class of dealers emerged who are deemed sellers of goods in the course of business like execution of works contract, leasing, hire purchase etc. A works contractor is engaged in purchase and re-sale of goods which happens in the execution of works contract. As is evident from Section 2(g)(ii) itself, in the case of works contract, transfer of goods can happen in the same form or in some other form. This obviously means that contractors may engage in processing of goods for conversion of goods from one form to another form before sale or in the course of sale of such goods. Therefore, contractors are engaged not only in re-sale of goods but processing of goods and sale of such goods in the course of execution of works contract. So much so, contractors answer the description of processors of goods within the meaning of Section 8(3)(b) of the Act and we therefore feel they are entitled to avail concessional rate for purchase of the class of goods referred to in Rule 13 above stated.