Inter-State sale proof and works-contract exclusion failed for want of contract evidence and factual foundation

Goods supplied under a commercial arrangement were treated as intra-State sales because the assessee did not prove, with contract documents and books of account, that the identified goods moved pursuant to a pre-existing contract of sale. A godown in Uttar Pradesh and transport descriptions alone were held insufficient to split the transaction into separate sales. The alternative plea that the supply fell under a works-contract exclusion was also rejected because that factual and legal basis had not been established before the lower authorities and could not be raised for the first time in revision. The assessment and appellate findings were left undisturbed.

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Issues: (i) Whether the goods supplied to the purchaser were liable to tax as an intra-State sale under the U.P. Trade Tax Act, 1948, or as an inter-State sale under the Central Sales Tax Act, 1956; (ii) Whether the assessee could, at the revisional stage, successfully invoke liability under Section 3-F of the U.P. Trade Tax Act, 1948 and the related exclusion under Section 3-F(2)(b)(i).

Issue (i): Whether the goods supplied to the purchaser were liable to tax as an intra-State sale under the U.P. Trade Tax Act, 1948, or as an inter-State sale under the Central Sales Tax Act, 1956.

Analysis: The decisive question was whether the movement of goods was occasioned by a pre-existing contract of sale. Mere existence of a godown in Uttar Pradesh and the description of the assessee as consignor in transport documents were held to be insufficient by themselves to split a single commercial arrangement into separate transactions. However, the Tribunal's further finding that more than one contract existed, that goods were imported and stored at the assessee's godown for different contracts, and that the assessee failed to produce the contract documents and books of account, was not shown to be perverse. The burden to establish that the identified goods moved in pursuance of a pre-existing contract rested on the assessee, and that burden was not discharged.

Conclusion: The levy treating the transactions as intra-State sales was upheld, and the assessee's claim of inter-State sale failed.

Issue (ii): Whether the assessee could, at the revisional stage, successfully invoke liability under Section 3-F of the U.P. Trade Tax Act, 1948 and the related exclusion under Section 3-F(2)(b)(i).

Analysis: The plea based on Section 3-F was not established before the assessing authority or the appellate authority on the basis of evidence. The true nature of the contract would involve mixed questions of fact and law, and such a case could not be introduced for the first time in revision after the factual foundation had not been laid. In the absence of a properly pleaded and proved works contract case, the claimed exclusion could not be granted.

Conclusion: The alternative plea under Section 3-F was rejected.

Final Conclusion: The revisions were devoid of merit, and the assessment and appellate findings were left undisturbed.

Ratio Decidendi: To claim the benefit of inter-State sale protection or a works-contract exclusion, the assessee must prove by reliable contract and accounting evidence that the particular goods moved under a pre-existing contractual arrangement; such a factual foundation cannot be supplied for the first time in revision.

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