1995 (9) TMI 361 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the supply of building materials by a State Government Corporation to contractors amounts to a sale liable to sales tax under the U.P. Sales Tax Act.

Analysis:
The judgment involves revision petitions under section 11 of the U.P. Sales Tax Act filed by a State Government Corporation, challenging orders passed by the Sales Tax Tribunal for various assessment years. The controversy in all the revisions revolves around whether the supply of building materials by the Corporation to contractors constitutes a sale subject to sales tax. The Corporation acquires land for housing purposes, constructs houses, and supplies materials like cement, steel, and lime to contractors for construction activities.

The assessing officer, Assistant Commissioner (Judicial), and the Tribunal considered the supply as a sale and imposed tax accordingly. The key issue is whether the transaction between the Corporation and contractors qualifies as a sale based on the terms of the contract. The Tribunal analyzed the relevant contract terms, emphasizing the transfer of property and the nature of the transaction to determine the tax liability.

The Corporation argued that the material supply was intended to ensure quality construction and not as a sale. It relied on precedents like Oil and Natural Gas Commission case and Hindustan Housing Factory case to support its stance that the property in materials remained with the Corporation, indicating no sale. However, the Tribunal distinguished these cases based on the specific terms of the contracts involved in each situation.

The judgment referenced the Supreme Court's decision in N.M. Goel & Company case, where a similar issue arose regarding the supply of materials by a government department to contractors. The Court held that even if the materials remained the property of the government, the transaction could still constitute a sale based on the passing of property and consumption of goods in construction activities.

The judge, considering various legal precedents and the specific contract terms in question, concluded that the supply of building materials by the Corporation to contractors indeed amounted to a sale liable for sales tax under the U.P. Sales Tax Act. The judgment dismissed the revision petitions, upholding the Tribunal's decision and requiring the parties to bear their own costs.