2019 (7) TMI 162 - HC - VAT and Sales Tax

Works Contract - Composition Scheme - benefit of section 3F(2) (b) of the U.P. Trade Tax Act - AO exclude excess of 5% of imported goods from value of the contract invoking Clause 3 of the scheme of compounding and tax under the normal mode of assessment - HELD THAT - The issue raised by learned Standing Counsel on Sections 3, 4 and 5 of the Central Act being not applicable in view of the different language of Rule 9 of the UP VAT Rules, had been considered and decided against the revenue in the case of M/S COMFORT SYSTEMS VERSUS COMMISSIONER COMMERCIAL TAX, U.P. 2019 (2) TMI 924 - ALLAHABAD HIGH COURT . Second submission advanced by learned Standing Counsel is concerned, clearly both appellate authorities have considered the material that was brought before them, and have thereafter concluded that there is no dispute to the fact that the assessee imported the goods against express and implied contracts and applied the same to the works contract pursuant to which it had made the import of goods. No material has been brought before this Court to doubt the correctness of that finding. Therefore, that submission advanced by learned Standing Counsel also cannot be accepted. The concept of subsequent sale was not relevant in the present case inasmuch as it was the assessee's clear and consistent case before the authorities that it had imported the disputed goods for execution of the civil works contract and as such assessee's case clearly fell under Rule 9(1) (b) of the UP VAT Rules. Revision dismissed - decided in favour of the assessee and against the revenue.

Summary

Issues:
1. Benefit of section 3F(2)(b) of the U.P. Trade Tax Act
2. Benefit of Section 3, 4, and 5 of the Central Sales Tax Act
3. Deletion of tax assessed based on composition scheme

Analysis:

Issue 1: Benefit of section 3F(2)(b) of the U.P. Trade Tax Act
The revision was filed against the judgment of the Commercial Tax Tribunal, where the Tribunal rejected the second appeal by the revenue. The dispute arose as the Assessing Officer excluded the value of goods imported by the assessee from the assessment made on a compounded basis, subjecting it to tax under normal assessment. The revenue argued that there was no provision to exclude goods covered under Central Sales Tax Act, making the assessee liable for full tax. However, the assessee contended that goods were imported and applied solely for the civil works contract, falling under the Central Act, and hence not subject to tax. The First Appellate Authority and Tribunal both affirmed that the goods were imported and applied for the contract, thus not liable for tax under the Central Act.

Issue 2: Benefit of Section 3, 4, and 5 of the Central Sales Tax Act
The revenue contended that the assessee should be taxed under the Central Act for goods imported, as there was no exclusionary clause under the UP VAT Act. However, the First Appellate Authority and Tribunal found that the goods were imported and used for the civil works contract, falling under Section 3 of the Central Act, thus not subject to tax. The judgment referred to the Gannon Dunkerley case to support this interpretation.

Issue 3: Deletion of tax assessed based on composition scheme
The Assessing Officer excluded the value of goods from the assessment under the compounding scheme, leading to the dispute. The revenue argued for full tax on the goods imported, while the assessee maintained that the goods were solely for the contract and not subject to tax. Both appellate authorities found in favor of the assessee, stating that the goods were imported and applied for the contract, falling under Rule 9(1)(b) of the UP VAT Rules. The judgment concluded that the earlier decision in a similar case applied, and the revision was dismissed in favor of the assessee.

In conclusion, the judgment upheld the decisions of the lower authorities, ruling in favor of the assessee on all three issues raised in the revision. The judgment provided detailed reasoning based on legal provisions and precedents to support the findings in favor of the assessee, emphasizing the application of relevant laws and rules in determining the tax liability of the assessee.