1989 (5) TMI 306 - HC - VAT and Sales Tax

Court sets aside tribunal decision, orders reexamination based on contract terms.

UP. Avas Evam Vikas Parishad Karyalaya Versus Commissioner of Sales Tax, UP., Lucknow

UP. Avas Evam Vikas Parishad Karyalaya Versus Commissioner of Sales Tax, UP., Lucknow - [1990] 78 STC 417 (All) Issues:1. Whether the materials supplied by the assessee to contractors constitute a sale liable to sales tax or a works contract.Analysis:The judgment involves two revisions under the U.P. Sales Tax Act, 1948, challenging the Sales Tax Tribunal's decision regarding the assessment year 1985-86. The assessee, a State Government Corporation, engaged in construction activities and supplied materials like cement and steel to contractors under strict terms and conditions. The contracts specified that the materials supplied by the assessee remained its property, and any misuse would have penal consequences. The Sales Tax Officer imposed sales tax on the supplies, leading to appeals and subsequent tribunal intervention.The primary issue for consideration was whether the supply of cement and steel by the assessee to contractors constituted a sale liable to tax or a works contract. The terms of the contracts between the assessee and contractors were crucial in determining the nature of the transactions. The contracts outlined conditions for material use, recovery for excess use, storage requirements, and damage accountability, indicating a close supervision by the assessee over the materials supplied. The assessee contended that it was not a dealer under the Sales Tax Act and the supplies were not sales but part of works contracts.The counsel for the assessee argued that the materials supplied were integral to the construction activities, and reliance was placed on a previous court decision with similar facts. It was emphasized that the entire contract needed to be considered to determine if it constituted a works contract or a sale. The Revenue's counsel acknowledged that the tribunal had not considered the relevant court decision and agreed that a fresh decision was necessary in light of the legal precedent cited by the assessee.In the final judgment, both revisions were allowed, setting aside the tribunal's order. The tribunal was directed to reexamine the case considering the observations made in the judgment and the legal principles established in the court decision referenced by the parties. Each party was instructed to bear their own costs, and a copy of the order was to be sent to the relevant tribunal as per statutory requirements.Overall, the judgment focused on the distinction between a works contract and a sale concerning the supply of materials in construction activities, emphasizing the need to consider the contract terms comprehensively to determine the nature of the transaction for sales tax purposes.