2010 (7) TMI 920 - HC - VAT and Sales Tax

Stock transfers for works contracts exempt under U.P. Trade Tax Act

The court clarified that goods received via stock transfer from outside U.P. for works contracts are exempt under section 3F(2)(b)(i) of the U.P. Trade ... Whether the value of the goods received by stock transfer by the assessee from its office outside U.P. and used in execution of the works contract is covered by section 3 of the Central Sales Tax Act and is deductable from the net taxable turnover? Held that:- The goods received by the assessee in U.P. by way of stock transfer from its branch outside U.P. and consumed for execution of a pre-existing works contract amounts to sale or purchase of goods in the course of inter-State trade or commerce which is covered under section 3 of the Central Sales Tax Act. The value of such goods is therefore liable to be deducted under section 3F(2)(b)(i) of the Act from the net turnover of the assessee. Accordingly, there is no error of law in the impugned order of the Tribunal. The question raised in these revisions is answered accordingly, in favour of the assessee and against the Revenue. Issues:Interpretation of section 3F(2)(b)(i) of the U.P. Trade Tax Act, 1948 regarding the exemption of goods received from outside the state as a result of stock transfer for execution of works contracts.Analysis:The case involved a contractor registered in U.P. who transferred material from an office outside U.P. for executing works contracts within U.P. The assessing authority imposed tax on the value of transferred material, leading to an appeal. The Trade Tax Tribunal later reduced the tax liability, citing exemption under section 3F(2)(b)(i) of the U.P. Trade Tax Act, 1948 for goods received from outside U.P. for works contracts.The key legal question raised was whether goods received via stock transfer from outside U.P. for works contracts are exempt from tax under section 3F(2)(b)(i) of the U.P. Trade Tax Act. The Revenue argued that such goods are not covered by the Central Sales Tax Act, while the assessee contended that the sale value of such goods is deductible in calculating the net turnover.The U.P. Trade Tax Act, 1948 imposes tax on the transfer of property in goods involved in works contracts. Section 3F allows deductions from the net turnover, including the sales value of goods covered by the Central Sales Tax Act. The court analyzed the provisions to determine the applicability of the exemption for goods received via stock transfer.The court referred to precedents where goods brought from outside U.P. for works contracts were considered exempt under section 3F(2)(b)(i) of the Act. The court emphasized that the movement of goods from one state to another for works contracts falls under the purview of the Central Sales Tax Act, warranting deduction from taxable turnover.In light of the legal provisions and precedents, the court concluded that goods received via stock transfer from outside U.P. and used in works contracts constitute inter-State trade, making them eligible for deduction under section 3F(2)(b)(i) of the Act. The court dismissed the revisions, upholding the Tribunal's order and ruling in favor of the assessee.Therefore, the judgment clarifies the interpretation of section 3F(2)(b)(i) of the U.P. Trade Tax Act, 1948, affirming the exemption of goods received from outside the state via stock transfer for works contracts and their deductibility from the taxable turnover as per the Central Sales Tax Act.