2007 (9) TMI 550 - HC - VAT and Sales Tax

Whether the supply of material to the contractor amounts to sale? - Held that - Supply of the material to the contractor is a sale in a case where while making the payment to the contractor the value of the goods are deducted. Therefore, the order of the Tribunal treating the supply of the materials to the contractors as a sale is upheld. See N.M. Goel & Co. v. Sales Tax Officer, Rajnandgaon 1988 (10) TMI 106 - SUPREME COURT OF INDIA Now coming to the question of the estimate of the turnover, perusal of the order of the Tribunal reveals that the Tribunal has simply confirmed the estimate of the turnover without considering the necessary details, namely, opening stock, purchases made from outside the State of U.P. and the closing stock. Even though, the supply of the materials to the contractors could not be furnished, but in the absence of such details, for the purposes of estimate, the opening stock, purchases made outside the State of U.P. and the closing stock are the relevant materials to be considered for each year.In view of the above, the Tribunal is directed to adjudicate the issue of determination of the turnover after taking into account the opening stock, purchases made outside the State of U.P. and the closing stock for each year. Revisions allowed in part

Summary

Issues:
- Whether the supply of materials to contractors constitutes a sale.
- Whether the estimate of turnover by the Tribunal was justified.

Analysis:
1. Supply of Materials as Sale:
The applicant, a department of the Defence Ministry, engaged contractors for construction work and supplied materials like cement, steel, etc., deducting their value from payments. The assessing authority treated these supplies as sales, leading to disputes. The applicant argued that the materials were used in their own building construction, not for sale. However, the Tribunal, citing precedents, held that such supplies to contractors constitute a sale when the value of goods is deducted from payments. The court upheld this view based on established legal principles and previous judgments.

2. Estimate of Turnover:
The Tribunal estimated the turnover without considering crucial details like opening stock, purchases from outside the State, and closing stock. Despite the absence of specific material supply details, these factors are essential for a proper turnover estimate. The court directed the Tribunal to reevaluate the turnover by taking into account these critical factors for each year in question. This decision aims to ensure a fair and accurate assessment of the turnover, emphasizing the importance of considering all relevant information for a just determination.

3. Conclusion:
The High Court allowed the revisions partially, setting aside the Tribunal's order and remanding the matter for fresh consideration. The Tribunal was instructed to review all three appeals, considering the observations made regarding the determination of turnover. This comprehensive analysis and direction by the court aim to ensure a fair and thorough assessment of the issues raised, emphasizing the importance of proper evaluation based on relevant details and legal principles.