CST

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

24 January 2011 CST applicability on welding flux material used to convert steel coil into pipe. with caselaws & section.

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
Follow

24 January 2011 CST is applicable in case of inter state sale. Why case laws is required , i could not understand.

Querist : Anonymous

Querist : Anonymous (Querist)

24 January 2011 the company has recieved free issue coil from customet. The company has to convert these coils into pipes. Now for manufacture of pipe weld flux is used. conversion charges are for example Rs. 400 per meter. Now company has dispatches theses pipes from Gujarat to Karnataka. Question is weld flux can be treated as raw material OR consumable? if its raw material then CSt has be collected on material value since this is works contract. And if the weld flux is consumed during production process it is consumable and hence no CSt will be collected.

AS an auditor i feel since the physical form of weld flux is visibly seen on the pipes, this is material where there is transfer of property and CSt will be applicable in this case.Weld flux is seen physical on pipe where welding has been done and it is carried away with pipe. There is transfer of property as per me.

Now management is saying weld flux is consumable and hence no cst is applicable.

In this case is there any transfer of property of material weld flux. Initially it is in powder form once welding is done on pipe it is converted into solid form .

Is there any case law of such type.

i feel defination of sale in section 2(g)(ii) is relevant here
please help me with your expert opinion

Upgrade to CAclubindia Pro. Subscribe Now!

Querist : Anonymous

Querist : Anonymous (Querist)

24 January 2011 in coversion charges Rs. 400 per meter , bifurcation as to how much is material and labour is not identifiable. Hence as per cst rules 20% standard can be considered as labour value.
The company has invoiced customer Rs. 400 per meter mentioning conversion chrages form coil to pipes, Cost of free issue coil mateial is also mentioned + excise on converision charges and value of free issue material. total invoice value = conversion charges + excise on (value of free issue coil and conversion charges) However no CST is charged. if feel cst should be charges on weldflux value used.

Please reply asasp.