Works contract deemed sale tax applies where contractor fails to prove materials had already suffered tax.

A works contractor claimed exemption on the ground that cement and steel used in execution of the contract were supplied by the contractees and had already suffered tax. The court record showed, however, that the value of those materials was deducted from amounts payable to the contractor, and there was no reliable evidence that the goods had in fact borne tax in the contractees' hands. Applying the deemed sale concept under Article 366(29A) and single-point taxation principles, the Tribunal held that where goods used in a works contract have not suffered tax, the taxable turnover is assessable in the contractor's hands. The assessee therefore failed to establish prior tax incidence and was not entitled to exemption or relief.

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Issues: Whether the petitioner, a works contractor, was entitled to exemption or relief on the footing that cement and steel used in execution of the works were supplied by the contractees and had already suffered tax, so as to deny tax liability on the deemed sale involved in the works contract.

Analysis: The assessment related to a works contract under the Andhra Pradesh General Sales Tax Act, 1956. The materials used in the contract were claimed to have been supplied by the contractees, and it was urged that the petitioner was only a subsequent purchaser and that the goods had already suffered tax at the hands of the first purchaser. The record, however, showed that the value of the goods supplied by the contractees was deducted from the amounts payable to the petitioner, and neither before the revisional authority nor before the Tribunal was there reliable evidence that the goods had in fact suffered tax in the hands of the contractees. The Tribunal applied the principle that, where goods used in execution of a works contract have not suffered tax, the deemed sale is taxable in the hands of the contractor, consistent with single point taxation and the treatment of works contracts as deemed sales under Article 366(29A) of the Constitution of India. The challenge therefore failed on the basis of concurrent findings that the petitioner had not established prior tax incidence on the goods.

Conclusion: The petitioner was not entitled to exemption or relief. The taxable turnover arising from the works contract remained liable to tax in the petitioner's hands, and the finding was against the assessee.

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