Works contract deduction under VAT rules allowed where imported goods were used in the contract and not independently sourced.

Goods brought from outside Uttar Pradesh for execution of a pre-existing works contract satisfied the statutory condition for deduction under Rule 9(1)(e) of the U.P. Value Added Tax Rules, 2008. The Tribunal's factual finding that the goods were purchased, moved into the State, and applied in the project, with no material showing independent sourcing or any break from the works contract, was ative. On that basis, the deduction could not be denied on speculation, and the assessee was entitled to the benefit of the rule. The revision failed.

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Issues: Whether the assessee was entitled to deduction under Rule 9(1)(e) of the U.P. Value Added Tax Rules, 2008 in respect of goods imported from outside U.P. for execution of a pre-existing works contract.

Analysis: The Tribunal had recorded a factual finding that the goods were imported from outside the State of U.P. and were used in a project within the State. The finding was that the goods were purchased and moved only for execution of pre-existing works contracts and that there was no material showing that the goods were sourced independently of those contracts or remained unconnected with the works contract. On those facts, the statutory condition for deduction under Rule 9(1)(e) stood satisfied. The Court also treated the governing principle as one where, once the movement of goods from outside the State is occasioned by the works contract and the goods are applied to that contract, the deduction cannot be denied on speculation.

Conclusion: The assessee was entitled to the benefit of deduction under Rule 9(1)(e) of the U.P. Value Added Tax Rules, 2008, and the revision failed.

Ratio Decidendi: Where goods are brought from outside the State pursuant to a pre-existing works contract and are found to have been applied to that contract, deduction under Rule 9(1)(e) cannot be denied absent a contrary finding that the goods were independently sourced or not used for the works contract.

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