2018 (3) TMI 1365 - HC - VAT and Sales Tax

Whether the Commercial Tax Tribunal has erred in law in holding that supply of cement, steel and bricks etc. to the contractors by the Government Department, for which cost is deducted from the bills of the contractors, does not amount to sale and is it not liable to tax? Held that - it is admitted by Mrs. Beena Pandey, learned Standing Counsel for the State of U.P. that the respondent is a registered dealer - there is no reason to not apply the principle laid down by the Hon ble Apex Court in M/s N.M. Goel and Co. 1988 (10) TMI 106 - SUPREME COURT OF INDIA , where it was held that The costs of materials so supplied and consumed in the construction work have been deducted from the final bill of the petitioner, showing that there was sale of those materials. If the department had not supplied those materials, the petitioner would have purchased the same from the market. The Tribunal to the extent it is impugned is set aside and the order of the Assessing Officer restored - revision allowed.

Issues Involved:
1. Interpretation of the term "sale" under the U.P. Trade Tax Act, 1948 in the context of supply of materials by Government to contractors.
2. Assessment of tax liability on the supply of cement, steel, bricks, and other materials to contractors by the Government Department.
3. Application of legal precedents to determine the taxability of transactions involving transfer of property.
4. Analysis of relevant clauses and provisions under the U.P. Trade Tax Act in relation to the definition of "sale" and the inclusion of the Government as a dealer.

Detailed Analysis:

1. The primary issue in this case revolved around the interpretation of the term "sale" under the U.P. Trade Tax Act, specifically concerning the supply of materials like cement, steel, and tiles by the Government Department to contractors. The Commercial Tax Tribunal had to determine whether such transactions constituted a sale and were liable to tax.

2. The assessment under the U.P. Trade Tax Act involved the respondent being taxed for the sale of imported cement, steel, self-manufactured tiles, steel scrap, discarded items, and tender forms. The Appellate Authority and the Tribunal had differing opinions on the tax liability, leading to the revision filed by the State of Uttarakhand.

3. The Tribunal's decision was influenced by previous judgments of the Allahabad High Court, emphasizing the need for a transfer of property to constitute a sale. The Tribunal relied on legal precedents to support the tax imposition on certain items, while the revisionists argued for a broader interpretation based on subsequent Supreme Court rulings.

4. The analysis of relevant legal provisions, including Section 2-h of the U.P. Trade Tax Act, highlighted the inclusion of the Government as a dealer and the definition of sale in the context of works contracts. The court emphasized the need for a separate contract beyond the transfer of property to establish a taxable sale.

5. Ultimately, the High Court referred to a Supreme Court judgment in M/s N.M. Goel and Co. to guide their decision-making process. The court concluded that the transactions in question did constitute a sale based on the principles outlined in the Supreme Court ruling, leading to the allowance of the revision and the setting aside of the Tribunal's order.

This detailed analysis of the judgment showcases the legal complexities involved in determining tax liability on transactions involving the supply of materials by the Government to contractors under the U.P. Trade Tax Act.

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