Construction materials adjusted against contractor bills can constitute a taxable sale, and false concessional claims trigger statutory demand liability.

Construction materials supplied by a government entity to a contractor, with their value adjusted against the contractor's bills, are treated as a sale where property in the goods passes and consideration is received by set-off; tax under section 3G(2) of the U.P. Trade Tax Act is therefore attracted. A demand under section 3G(3) is also sustainable where concessional treatment was claimed on a wrong or false declaration, because the provision operates as a statutory demand mechanism and does not require a regular assessment proceeding. The contractual adjustment of the goods' value accordingly gives rise to taxable turnover and the consequential differential demand.

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Issues: (i) Whether supply of construction materials by the government entity to the contractor, with the value of such materials adjusted against the contractor's bills, amounted to a sale attracting tax under section 3G(2) of the U.P. Trade Tax Act; (ii) Whether the demand raised under section 3G(3) of the U.P. Trade Tax Act was unsustainable on the ground that the proceedings were not assessment proceedings.

Issue (i): Whether supply of construction materials by the government entity to the contractor, with the value of such materials adjusted against the contractor's bills, amounted to a sale attracting tax under section 3G(2) of the U.P. Trade Tax Act.

Analysis: The materials were purchased at concessional rate for the government entity's construction work and were then made available to the contractor for use in executing the work. The contract provided for adjustment of the value of the goods in the contractor's account, showing passing of property in the goods and receipt of consideration by way of set-off. On the principles applied in the cited Supreme Court decisions, such an arrangement is not a mere internal transfer but a completed sale for tax purposes.

Conclusion: The arrangement constituted a sale and section 3G(2) of the U.P. Trade Tax Act was rightly attracted, against the assessee.

Issue (ii): Whether the demand raised under section 3G(3) of the U.P. Trade Tax Act was unsustainable on the ground that the proceedings were not assessment proceedings.

Analysis: The liability under section 3G(3) follows from the wrong or false declaration of eligibility for concessional treatment, and the authority is required to raise the demand without undertaking a regular assessment. The provision operates as a demand mechanism based on the statutory consequences of the incorrect claim, not as a full assessment under the ordinary sense of the term.

Conclusion: The challenge on this ground failed and the demand under section 3G(3) was valid, against the assessee.

Final Conclusion: The contractual adjustment of the supplied materials' value amounted to a taxable sale, and the consequential differential tax demand was legally sustainable; the revision failed.

Ratio Decidendi: Where construction materials supplied under a contract are transferred to the contractor and their value is adjusted in the contractor's bills, the transaction constitutes a sale for tax purposes and attracts the statutory demand consequence provided by the taxing provision.

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