2019 (11) TMI 387 - HC - VAT / Sales Tax

Deduction under Section 3F (2)(b)(i) of U.P. Trade Tax Act, 1948 - goods brought inside the State of U.P. by way of inter-State purchase for execution of works contract - Whether the reasoning and findings given by the Tribunal for confirming rejection of claim of deduction under Section 3F (2)(b)(i) of U.P. Trade Tax Act, 1948 in respect of goods brought inside the State of U.P. by way of inter-State purchase for execution of works contract, is sustainable in law? HELD THAT - Insofar as the applicability of Sections 3, 4 and 5 of the Central Act to such contracts is concerned, the issue has been dealt with and decided by an earlier decision of this Court in M/s Comfort Systems Vs. Commissioner Commercial Tax, U.P. 2019 (2) TMI 924 - ALLAHABAD HIGH COURT where it was held that - The order of the Tribunal cannot be sustained, inasmuch as, the Tribunal has clearly applied the exact opposite rule. Therefore, the matter is remitted to the Tribunal. Since the matter is being sent back to the Tribunal, no further observation is required to be made, as to the merits of the claim or as to the other finding recorded by the Tribunal that the goods had been purchased by the assessee, independent of the four works contract awarded to it or that there were two sales. That issue would remain to be re-agitated before the Tribunal on the strength of evidence existing on record. Revision allowed by way of remand.

Summary

Issues:
Appeal against Trade Tax Tribunal's order for A.Y.s 1992-93, 1990-91, and 1991-92 - Claim of deduction under Section 3F(2)(b)(i) of U.P. Trade Tax Act - Applicability of Sections 3, 4, and 5 of the Central Sales Tax Act - Existence of two independent contracts - Deemed inter-state sale - Remand proceedings concluded - Separate revisions arising from remand.

Analysis:

1. The revisions were filed against the Trade Tax Tribunal's common order for the assessment years 1992-93, 1990-91, and 1991-92. The Tribunal had dismissed the appeals filed by the assessee, confirming the first appeal authority's partial allowance of the appeal and remittance to the assessing authority.

2. During the pendency of these revisions, separate proceedings in remand concluded, giving rise to additional revisions to be addressed separately.

3. The arguments were heard from the counsel for the applicant-assessee and the Standing Counsel for the opposite party-revenue.

4. The main question raised in the revision was regarding the sustainability in law of the Tribunal's rejection of the claim of deduction under Section 3F(2)(b)(i) of the U.P. Trade Tax Act.

5. The assessee had engaged in electrical works contracts during the relevant assessment year with four contractees, importing goods from outside the State specifically for the execution of these contracts.

6. The claim for deduction under the U.P. Trade Tax Act was based on the import of goods solely for the purpose of executing the works contracts, supplying these goods only to the respective contractees.

7. The assessing officer rejected the claim, positing the existence of two independent contracts - one for the sale of goods to the assessee and the other for intra-State sales by the assessee to the contractees.

8. The first appeal highlighted findings favoring the assessee, emphasizing the import of goods solely for the works contracts, yet remanded the matter on other issues.

9. Before the Tribunal, the assessee reiterated that the imported goods were solely for the contract execution, supported by direct importation at works sites and other evidence indicating a single sale or purchase for the works contract.

10. The Tribunal, however, rejected the claim, citing the requirement for executing works contracts outside the State to claim benefits under the Central Sales Tax Act.

11. A previous decision by the Court clarified the interpretation of Rule 9(1)(e) of the Rules, emphasizing the eligibility for deductions on deemed inter-state sales arising from works contracts executed inside the State.

12. The Tribunal's decision was found to contradict this rule, leading to the remittance of the matter for reconsideration.

13. The Tribunal's order was deemed unsustainable due to the incorrect application of the relevant rule, necessitating a review.

14. As the matter was remanded, further observations on the merits of the claim were deferred for re-agitation before the Tribunal based on existing evidence.

15. The Tribunal was directed to expedite the review process within six months from the issuance of the order.

16. The specific question of law raised in the revision was left unanswered pending the Tribunal's reconsideration.

17. All revisions were disposed of with the above observations, awaiting the Tribunal's reassessment based on the clarified legal position.