2019 (2) TMI 1017 - HC - VAT and Sales Tax

Deduction of taxable turnover referring to Sections 3, 4 and 5 of the Central Sales Tax Act - the opposite party dealer is neither agent nor middleman of Ex-U.P. Vendor but has himself purchased the goods from outside State of U.P. in his own account and has used in execution of work contract - exemption against the provision of Section 3(3) of U.P. Value Added Tax Act, 2008 read with Rule 9(10(e) of the U.P. Value Added Tax Rues - Held that - Issue stands decided in the case of M/S COMFORT SYSTEMS VERSUS COMMISSIONER COMMERCIAL TAX, U.P. 2019 (2) TMI 924 - ALLAHABAD HIGH COURT , where it was held that 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. The questions of law framed in the present revision is answered in affirmative i.e., in favor of the assessee and against the revenue - revision dismissed.

Summary

Issues:
1. Interpretation of Sections 3, 4, and 5 of the Central Sales Tax Act regarding taxable turnover deduction.
2. Granting exemption under Section 3(3) of U.P. Value Added Tax Act, 2008 read with Rule 9(10(e) of the U.P. Value Added Tax Rules.

Analysis:
The judgment by the Allahabad High Court pertains to a revision filed under Section 58 of the U.P. Value Added Tax Act, 2008 challenging the Tribunal's order. The respondent, a registered dealer engaged in work contracts, faced a tax assessment for the year 2012-13 amounting to ?17,86,157. The first appeal by the assessee before the Additional Commissioner led to a direction to recalculate the tax amount. Subsequently, both the assessee and the revenue filed a second appeal before the Commercial Tax Tribunal, Kanpur, where the assessee's appeal was allowed, and the revenue's appeal was rejected.

The primary issue revolved around the interpretation of Rule 9(1)(e) of the U.P. Value Added Tax Rules. The Tribunal's decision was influenced by a previous judgment highlighting that the phrase "as a result of sale in the course of inter-state trade or commerce" should not be limited to inter-state sales alone but should encompass transactions falling under Section 3 of the Central Sales Tax Act. The Tribunal's finding emphasized that the movement of goods for the works contract was crucial, regardless of the absence of a direct contract between the contractee and the seller.

The revisionist argued that the Tribunal failed to explicitly state that the movement of goods was pursuant to the works contract. However, the respondent contended that the goods were used in line with the contract, justifying the deduction claimed under Rule 9(1)(e) of the Rules. Citing the settled controversy from a previous case, the Court upheld the Tribunal's decision, emphasizing that the movement of goods for the works contract was sufficient to qualify for the deduction under the Rule.

After considering the arguments and the precedent set by a previous judgment, the Court ruled in favor of the respondent-assessee, dismissing the revision. The questions of law were answered affirmatively, supporting the assessee and rejecting the revenue's claims. The judgment concluded without imposing any costs on either party.