Deemed inter-State sale in works contracts supports deduction when goods are brought from outside the State for contract execution.

Goods moved from outside the State solely to execute a pre-existing works contract can be treated as covered by the deemed inter-State sale principle, so the statutory deduction of taxable turnover is available even without privity between the contractee and the seller. Applying Sections 3, 4 and 5 of the Central Sales Tax Act, 1956 and Rule 9(10)(e) of the U.P. VAT Rules, the Court followed its earlier ruling and held that no further specific factual finding was needed on the nature of the movement of goods. The questions of law were answered in favour of the assessee and against the revenue.

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Issues: Whether the assessee was entitled to deduction of the taxable turnover on the footing that the goods used in the works contract were brought from outside the State pursuant to the contract and were therefore covered by the principle of deemed inter-State sale.

Analysis: The revision arose under Section 58 of the U.P. Value Added Tax Act, 2008 for Assessment Year 2012-13. The dispute turned on the applicability of the statutory deduction provisions in the context of a works contract, read with the principles governing inter-State sale under Sections 3, 4 and 5 of the Central Sales Tax Act, 1956 and Rule 9(10)(e) of the U.P. Value Added Tax Rules. The Court relied on its earlier decision which held that where goods are moved from outside the State solely because of the pre-existing works contract and are used only for executing that contract, the absence of privity between the contractee and the seller does not defeat the deduction. The Court found that the controversy was already settled by that principle and rejected the revenue's contention that a more specific factual finding was necessary.

Conclusion: The questions of law were answered in the affirmative, in favour of the assessee and against the revenue.

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