Works contract VAT applies only to taxable turnover, not gross bills; impugned deduction direction was quashed.

In a works contract, VAT is leviable only on the taxable turnover attributable to the transfer of property in goods during execution of the contract, not on the gross amount of bills. A communication directing deduction of VAT on the gross bills was therefore unsustainable and was quashed. The assessing authority was directed to make a fresh assessment in accordance with law on the value of goods transferred in execution of the contract.

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Issues: Whether VAT could be directed to be deducted on the gross amount of bills in respect of a works contract, and whether tax was payable only on the taxable turnover determined under the Tripura Value Added Tax law.

Analysis: The contract was held to be a works contract. Tax in such cases is payable only on the taxable turnover, as determined under Sections 4 and 5 of the Tripura Value Added Tax Act, and not on the gross turnover. The impugned communication directing deduction of VAT on the gross bills was therefore unsustainable. The matter was sent back for assessment of the tax, if any, payable on the value of property in goods transferred in execution of the works contract.

Conclusion: The impugned communication was quashed and the assessing authority was directed to make a fresh assessment in accordance with law. The relief was granted in favour of the assessee.

Final Conclusion: Tax liability in a works contract must be confined to the taxable turnover of the goods transferred in execution of the contract, and not to the gross contract amount.

Ratio Decidendi: In a works contract, VAT can be levied only on the taxable turnover attributable to the transfer of property in goods during execution of the contract, not on the gross value of bills.

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