2006 (1) TMI 569 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of tax on goods involved in works contract under U.P. Trade Tax Act, 1948 for the year 1994-95.

Analysis:
The case involved a civil contractor who executed works contracts during the relevant year. The dealer did not maintain any books of account, and the assessing authority estimated the value of goods used in the works contract. The dealer received payments totaling Rs. 6,53,419, and after allowing for labor charges, the assessing authority taxed the balance amount. The first appeal partially allowed the dealer's appeal, upholding tax on certain items but deleting tax on others. The Commissioner of Trade Tax appealed to the Tribunal, which confirmed the first appellate authority's decision.

The Tribunal upheld the deletion of tax on cement and bricks based on the dealer not being an importer or manufacturer of those goods. However, the learned Standing Counsel argued that the dealer failed to prove that tax had been levied on these goods at an earlier stage, making the exemption illegal. Section 3-F of the Act imposes tax on goods involved in works contracts, with provisions for deductions from the total amount received by the dealer.

The Court noted that under section 3-F(2)(b)(iii), only goods on which tax has been levied or is leviable under the Act at an earlier stage are eligible for deduction. Since the dealer could not prove that tax had been levied on cement, sariya, and bricks, the deductions allowed by the Tribunal were deemed erroneous. Consequently, the Court allowed the revision, setting aside the Tribunal's order and allowing the Commissioner of Trade Tax's appeal.

In conclusion, the judgment clarified the application of section 3-F of the U.P. Trade Tax Act, emphasizing the requirement for dealers to establish that tax has been levied on goods to claim deductions. The decision highlighted the importance of providing evidence to support claims for tax exemptions on goods involved in works contracts under the Act.