2019 (8) TMI 376 - HC - VAT and Sales Tax

Works contract - Benefit of Sections 3, 4 and 5 of the Central Sales Tax Act, 1956 - purchase of cement and bitumen for the purposes of execution of works contract awarded to the assessee by National Highways Authority of India - Section 3-F(2)(b) of the U.P. Trade Tax Act, 1948 - HELD THAT - Under Section 3-F(2)(b)(i) read with Section 3-F(1)(b) of the U.P. Act, it is the statutory mandate that the amount representing the sales value of goods covered by Sections 3, 4 and 5 of the Central Act have to be necessarily excluded from the value of the works contract for the purposes of subjecting the same to assessment under the U.P. Act - the benefit that was being claimed by the assessee was not by way of exemption but a claim depending on the jurisdictional issue i.e. the state legislature did not have the legislative competence to impose tax on goods being imported to the State solely for the purpose of execution of the works contract. Once it is established by whatever evidence, that the movement of goods was occasioned from outside the State solely for the purposes of execution of the works contract, the provision of Section 3-F(2)(b)(i) of the U.P. Act would come into play on it's own. No further condition as contemplated by the Tribunal exists and, therefore, the assessee could not be required to establish from the terms of the works contract that the individual goods had been specified therein. The plea does not appear to have been considered by the Tribunal to any extent and the Tribunal appears to have rejected the claim on over simplistic and erroneous reasoning that the assessee had not informed NHAI about the goods that were applied to the execution of the works contract - In absence of specific findings being recorded as to whether the movement of goods from outside the State had been occasioned by the pre-existing works contract executed by the assessee, the question law (as framed above) has to be left unanswered at this stage. The matter is remitted to the assessing authority, as suggested by learned counsel for the applicant-assessee, to pass appropriate orders - appeal allowed by way of remand.

Summary

Issues Involved:
Interpretation of Sections 3, 4, and 5 of the Central Sales Tax Act, 1956 in relation to the purchase of cement and bitumen for works contract execution.

Detailed Analysis:

1. Background and Tribunal Order:
The revisionist filed against the Trade Tax Tribunal's order partially allowing the second appeal for the assessment year 2002-03. The Tribunal denied the benefit of Sections 3, 4, and 5 of the Central Sales Tax Act regarding the purchase of cement and bitumen for a works contract awarded by NHAI.

2. Contentions and Contracts:
The revisionist procured materials for the NHAI contract from a local company with NHAI's consent. Contracts for material supply were executed between the revisionist and the local company for the specific works contracts. Invoices and documents were provided as evidence of interstate procurement for contract execution.

3. Legal Principles and Precedents:
The revisionist argued that the goods were procured solely for works contract execution, making them inter-state sales under the Central Act. Reference was made to legal precedents emphasizing the movement of goods for contract execution as the determining factor for tax applicability.

4. Disputed Reasoning and Extraneous Factors:
The Tribunal's reasoning was challenged as irrelevant, focusing on the revisionist's failure to inform NHAI about material procurement. The revisionist contended that such factors were extraneous to the tax dispute and should not affect the tax claim.

5. Statutory Exclusions and Legislative Competence:
The revisionist relied on statutory provisions excluding certain sales values from works contract assessment under the U.P. Act, aligning with the Supreme Court's interpretation in Gannon Dunkerley case. The revisionist argued that the legislative competence did not extend to taxing goods imported solely for works contract execution.

6. Judicial Review and Remand:
The Court found the Tribunal's order unsustainable due to lack of specific findings on the goods' movement for contract execution. The matter was remitted to the assessing authority for reevaluation based on the provided evidence and legal principles. The revision was disposed of with instructions for expedited reconsideration.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the arguments, legal principles, disputed reasoning, and the Court's decision to remand the matter for further assessment.