Inter-State movement of goods for a works contract qualifies for deduction from taxable turnover under U.P. trade tax law.

Goods manufactured outside Uttar Pradesh and moved into the State for execution of a works contract were treated as part of inter-State trade under Section 3 of the Central Sales Tax Act. On those facts, the value of the goods was attributable to inter-State movement and not to local taxable turnover in Uttar Pradesh, so it qualified for deduction under Section 3F(2)(b) of the U.P. Trade Tax Act, 1948. The governing principle is that where the deduction provision covers sales falling within Sections 3, 4 and 5 of the Central Sales Tax Act, goods brought into the State as an integral part of the contract are deductible from net turnover.

---

---

Issues: Whether goods manufactured outside Uttar Pradesh and brought into the State for execution of a works contract were covered by inter-State trade or commerce so as to qualify for deduction under Section 3F(2)(b) of the U.P. Trade Tax Act, 1948.

Analysis: The applicable framework under Section 3F of the U.P. Trade Tax Act, 1948 permits deduction from the net turnover of the value of goods whose sale falls within Sections 3, 4 and 5 of the Central Sales Tax Act. The assessee manufactured the goods at Vadodara and supplied them to the work site in Uttar Pradesh for execution of the contract. On those facts, the movement of goods from one State to another was integral to the contract and the value of such goods was attributable to inter-State movement rather than local taxable turnover in Uttar Pradesh.

Conclusion: The goods were covered by Section 3 of the Central Sales Tax Act and the assessee was entitled to deduction under Section 3F(2)(b) of the U.P. Trade Tax Act, 1948.

Ratio Decidendi: Goods manufactured outside the State and moved into Uttar Pradesh for execution of a works contract constitute inter-State movement of goods, and their value is deductible from the taxable turnover where the governing deduction provision so allows.

---