Works contract turnover under Uttar Pradesh VAT must follow section 4(3), while inter-State goods remain deductible under Rule 9(1)(e).

In works contract cases under the Uttar Pradesh VAT framework, turnover is computed under section 4(3) read with Rule 8, while Rule 9 governs deductions and does not displace the statutory tax-computation formula. The embedded tax component in the gross amount is not to be taxed again, so the provisions must be read harmoniously. Goods brought from outside the State and used in executing the works contract fall within Rule 9(1)(e), and the corresponding value is deductible from the gross amount received or receivable. The matter therefore required recomputation of tax on that basis.

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Issues: (i) Whether the turnover arising from execution of works contract was liable to be computed under section 4(3) of the Uttar Pradesh Value Added Tax Act, 2008 along with Rule 8 and Rule 9 of the Uttar Pradesh Value Added Tax Rules, 2008. (ii) Whether the dealer was entitled to deduction under rule 9(1)(e) of the Uttar Pradesh Value Added Tax Rules, 2008 in respect of goods brought from outside the State and used in execution of the works contract.

Issue (i): Whether the turnover arising from execution of works contract was liable to be computed under section 4(3) of the Uttar Pradesh Value Added Tax Act, 2008 along with Rule 8 and Rule 9 of the Uttar Pradesh Value Added Tax Rules, 2008.

Analysis: Section 4 is the charging provision, and sub-section (3) provides the formula for computing tax where tax has not been separately realised. Rule 8(ix) similarly provides the formula for tax computation, while its proviso directs that turnover in works contract cases be determined under Rule 9. Rule 9 governs deductions in determining turnover in works contracts and does not displace the tax-computation mechanism in section 4(3). The tax component embedded in the gross amount cannot be subjected to tax again, and the provisions must be read harmoniously.

Conclusion: The turnover in works contract cases was to be computed under section 4(3) read with Rule 8, and the Tribunal was wrong in holding that section 4(3) did not apply.

Issue (ii): Whether the dealer was entitled to deduction under rule 9(1)(e) of the Uttar Pradesh Value Added Tax Rules, 2008 in respect of goods brought from outside the State and used in execution of the works contract.

Analysis: Rule 9(1)(e) permits deduction of amounts representing the value of goods transferred in execution of a works contract as a result of sale in the course of inter-State trade or commerce. The goods brought from outside the State for use in the works contract fell within that category, and the corresponding amount was required to be deducted from the gross amount received or receivable. The rule operates as a deduction provision in works contract cases.

Conclusion: The dealer was entitled to the deduction under rule 9(1)(e).

Final Conclusion: The revisions filed by the assessee succeeded on the applicability of section 4(3), while the Revenue's challenge to the deduction under rule 9(1)(e) failed. The matter was sent back for recomputation of tax in accordance with the declared legal position.

Ratio Decidendi: In works contract cases under the Uttar Pradesh VAT framework, tax on turnover is to be computed under section 4(3) read with Rule 8, and deductions under Rule 9 do not exclude the operation of the statutory tax-computation formula; goods transferred in inter-State trade for the works contract remain deductible under Rule 9(1)(e).

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