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2019 (2) TMI 924 - HC - VAT and Sales TaxBenefit of Rule 9(1)(e) of the U.P.V.A.T. Rules denied - the goods in question were not specified in the original works contract, though according to the Tribunal, the goods were brought inside the State of U.P. by way of inter-state purchase for execution of the works contract by the assessee. Held that - There is no dispute as to the fact that the assessee had been awarded and it had executed indivisible works contract. Also, the Tribunal recorded a specific finding that the assessee had made import of the goods only for the purpose of execution of and applied the goods to the works contract, in paragraph nos. 9 and 10 of the impugned order. In face of such finding it had to be accepted, the assessee had imported the goods only for the purpose of execution of the works contract and not for the purpose of any other business, trading or other contract. Merely because there was no privity of contract between the contractee and the actual seller of the goods (from whom the assessee made the purchases), and though such seller was not known/specified at the time of the execution of the works contract document, it would make no difference to the eligibilty to deduction claimed by the assessee under Rule 9(1)(e) of the Rules, on deemed interstate sale arising upon transfer of property in goods involved in the execution of the works contract. On the findings recorded by the Tribunal, the goods in question had been moved from outside the State solely by reason of the pre-existing works contract and those goods had been applied only solely the execution of that works contract. Therefore, the deemed sale of goods arose, only by way of inter-state sale as the movement of goods was occasioned by the prior contract of sale, namely the works contract - Rule 9(1)(e), though worded differently from section 3-F(2)(i) of U.P.Trade Tax Act, 1948, it does not and it cannot be permitted to convey a different meaning. Since in the present case, the Tribunal recorded a specific finding that there pre-existed works contracts between the assessee and the contractees and further the assessee had purchased the goods from outside the State of U.P., only to execute those pre-existing works contracts, in absence of any further finding that such goods had been sourced from before or that they were not applied to the works contract or that there arose two sales, the assessee was clearly entitled to the benefit of deduction contemplated under Rule 9(1)(e) of the Rules. Revision allowed - decided in favor of assessee.
Issues Involved
1. Eligibility for deduction under Rule 9(1)(e) of the Uttar Pradesh Value Added Tax Rules, 2008. 2. Interpretation of the term "sale in the course of inter-state trade or commerce" under Rule 9(1)(e). 3. Applicability of the Supreme Court's ruling in Gannon Dunkerley-II to the present case. Issue-wise Detailed Analysis 1. Eligibility for Deduction under Rule 9(1)(e) of the Uttar Pradesh Value Added Tax Rules, 2008 The applicant-assessee, a works contractor, executed works contracts involving the installation and commissioning of Air Conditioner/Chiller Plants. For these contracts, the assessee imported goods from outside Uttar Pradesh. The assessing officer denied the benefit of deduction for the value of these imported goods, treating them as independent purchases. The first appellate authority granted partial relief, allowing deductions only for goods dispatched with an endorsement for delivery at the site of the works contract. The Tribunal, however, denied the deduction entirely, reasoning that the import contracts were independent of the works contracts. 2. Interpretation of the Term "Sale in the Course of Inter-state Trade or Commerce" under Rule 9(1)(e) The Tribunal's decision was based on the absence of an "inextricable link" between the works contract and the subsequent import contracts. The Tribunal found that the goods were specified in the contract documents and were used solely for executing the works contracts. However, it concluded that the import contracts were independent of the works contracts, thereby disallowing the deduction under Rule 9(1)(e). The assessee argued that Rule 9(1)(e) requires only that the inter-state sale results in the transfer of property in the goods. The Tribunal's finding that the goods were imported solely for executing the works contracts should suffice to satisfy this requirement. The revenue countered that since the source of the goods was not specified in the works contract, the deduction was not justified. 3. Applicability of the Supreme Court's Ruling in Gannon Dunkerley-II to the Present Case The High Court referred to the Supreme Court's ruling in Gannon Dunkerley-II, which restricts the State's legislative power to impose tax on inter-state transactions. The Supreme Court held that even in the absence of amendments to the Central Sales Tax Act, 1956, the provisions of Sections 3, 4, and 5 would apply to deemed sales in works contracts. The High Court concluded that the phrase "as a result of sale in the course of inter-state trade or commerce" in Rule 9(1)(e) should include all transactions covered under Section 3 of the Central Sales Tax Act, 1956. Judgment The High Court found that the Tribunal had recorded a specific finding that the works contracts pre-existed and that the goods were imported solely for executing these contracts. There was no finding that the goods were sourced independently or applied to any other purpose. Therefore, the assessee was entitled to the deduction under Rule 9(1)(e). The question of law was answered in favor of the assessee, and the revisions were allowed. No order as to costs was made.
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