Deduction from contractor bills can amount to a sale, and turnover estimates must consider stock and purchase data.

Materials supplied to contractors and paid for by deductions from running bills were treated as a sale under the U.P. Trade Tax Act because the value of cement, steel, steel products and bitumen was deducted from contractor payments, and that legal character was upheld. The turnover estimate was not properly determined because the relevant material was not examined; opening stock, outside-State purchases and closing stock had to be considered for each assessment year before making a best judgment estimate. The matter was therefore remanded for fresh consideration on turnover, while the sale character of the supply remained affirmed.

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Issues: (i) Whether supply of materials by the assessee to contractors against deductions from running bills constituted a sale under the U.P. Trade Tax Act, 1948. (ii) Whether the estimate of turnover could be sustained without considering opening stock, outside-State purchases, and closing stock.

Issue (i): Whether supply of materials by the assessee to contractors against deductions from running bills constituted a sale under the U.P. Trade Tax Act, 1948.

Analysis: The supply of material to a contractor is treated as a sale where, while making payment to the contractor, the value of the goods supplied is deducted. The principle was already settled by the Supreme Court and had been followed consistently. On the facts, the assessee had supplied cement, steel, steel products and bitumen to contractors and deducted their value from payments.

Conclusion: The supply of materials to the contractors amounted to a sale and the finding of the Tribunal on this issue was upheld.

Issue (ii): Whether the estimate of turnover could be sustained without considering opening stock, outside-State purchases, and closing stock.

Analysis: The Tribunal had confirmed the estimate without examining the relevant material bearing on turnover determination. Even in the absence of details of actual supplies and deductions, the opening stock, purchases made outside Uttar Pradesh, and closing stock were material factors that had to be considered for each assessment year before estimating turnover.

Conclusion: The estimate of turnover was not properly determined and the matter required fresh consideration on the relevant material.

Final Conclusion: The revisions succeeded only to the extent of reopening the turnover determination, while the legal character of the supply as sale remained affirmed, and the matter was remanded for fresh adjudication of turnover.

Ratio Decidendi: Where material supplied to contractors is paid for by deduction from the contractor's bills, the transaction constitutes a sale; and any best judgment estimate of turnover must be based on all relevant material, including stock and purchase figures.

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