2011 (2) TMI 1329 - HC - VAT and Sales Tax

Tax on the purchases of bricks - whether the assessee was neither the manufacturer nor importer of the bricks? Held that - In the present case, the purchase voucher of the purchases of bricks could not be furnished therefore the assessee failed to establish that the tax on the bricks have been levied or is leviable under this Act. In the absence of purchase voucher it has not been established that the brick-kiln owner from whom the bricks have been purchased was under the compounding scheme under section 7D of the Act and the tax has been paid under the compounding scheme. In the circumstances, the claim of exemption cannot be allowed. For the purposes of levy of tax under section 3F of the Act and the determination of the net turnover the point of levy of tax under the notification is not relevant. Under the Notification No. 2-711 dated February 27, 1997 only the rate of tax mentioned in the notification is relevant and not the point on which the commodity is liable to tax. Therefore, the argument of learned counsel for the assessee cannot be accepted. Against assessee.

Issues:
1. Tax liability on the purchases of bricks used in works contract.
2. Deduction on the value of goods for which tax has been levied or is leviable.
3. Burden of proof on the assessee regarding tax payment on purchases.
4. Point of tax liability determination under section 3F of the Act.

Analysis:
1. The case involved a revision under section 11 of the U.P. Trade Tax Act, 1948 against the order of the Tribunal for the assessment year 1996-97. The applicant, a civil contractor, executed a contract using cement, sariya, bricks, and ret bajri provided by the contractee. The assessing authority levied tax on the turnover of ret bajri and bricks due to the absence of purchase vouchers. The Deputy Commissioner passed an order levying tax on bricks used in the works contract. The Tribunal, however, allowed the appeal, deleting the tax on bricks as the assessee was neither the manufacturer nor importer, rejecting the State Representative's argument on the point of tax not being material for tax liability under section 3F of the Act.

2. Section 3F of the Act governs the determination of net turnover, providing deductions for goods on which tax has been levied or is leviable earlier. The burden lies on the assessee to prove tax payment on purchases. In this case, the assessee failed to produce purchase vouchers for bricks, leading to the inability to establish tax payment under the Act. As a result, the claim of exemption based on purchases from a compounding scheme brick-kiln owner was disallowed. The Tribunal's deletion of tax was deemed illegal as the purchase vouchers were not furnished, hindering the establishment of tax liability on the goods.

3. The judgment emphasized the importance of proving tax payment on purchases to claim deductions under section 3F of the Act. The failure to provide purchase vouchers for bricks led to the denial of exemption, highlighting the significance of maintaining proper documentation to support tax claims. The decision reaffirmed the burden on the assessee to establish tax liability on goods used in works contracts, underscoring the necessity of complying with tax regulations to avoid disputes and penalties.

4. The judgment clarified that the point of tax liability determination under the Act is not dependent on the notification but on the rate of tax specified. The argument that bricks are liable to tax at the point of manufacturer or importer was dismissed, emphasizing the relevance of tax payment proof over the point of tax imposition. The decision underscored the statutory requirements for tax deductions and liability determination, emphasizing adherence to documentation and legal provisions for accurate tax assessment in works contracts.

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