TaxTMI 
TaxTMI 
2007 (8) TMI 440
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent and order dated March 14, 2002 passed by the Allahabad High Court in Writ Petition No. 741 of 2001 Reported as P.N.C. Construction Company Limited v. State of U.P. [2002] 128 STC 476. Civil Appeal No. 7256 of 2005 is the lead case in which the facts are as follow: M/s. P.N.C. Construction Co. Ltd. (assessee) is a public limited company incorporated under the Companies Act, 1956. It is registered under the U.P. Trade Tax Act, 1948. It entered into a contract with National Highway Authority of India, New Delhi, for construction of 4/6 lane of National highways of north, south, east and west of the Agra- Gwalior section of NH-3 and for laning of 24 to 41 kms., of Agra-Bholpur section of NH-3 in the State of U.P. Assessee was awarded work by the Construction Division, Agra and Mathura, for widening the roads, maintenance and repairs. Assessee applied for grant of "recognition certificate" under section 4B of the U.P. Trade Tax Act, 1948 (for short, "the Act") for purchase of raw materials for manufacture of hot mix. The Trade Tax Officer rejected the request of the assessee. Aggrieved by the said decision, an appeal was preferred before Deputy Commissioner (Appeals) which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he benefit of concessional rate of duty on the purchase of aforestated raw materials. Before the High Court, assessee further contended that it was open to the State to challenge the order of the Tribunal directing the A.O. to grant recognition certificate to the assessee; that the State did not challenge the decision of the Tribunal and, therefore, the impugned circulars dated January 17, 2001 and February 23, 2001 constituted colourable exercise of power by the Commissioner in order to get over the judgment of the Tribunal which was against the department. That, it was not open to the issuing authority to cancel the recognition certificate granted to the assessee by invoking the aforestated impugned circulars dated January 17, 2001 and February 23, 2001. At this stage, we may point out that the assessee did challenge the validity of the said circulars dated January 17, 2001 and February 23, 2001 before the High Court. However, the High Court has focused its attention only to the validity of the show cause notice dated May 9, 2001 by the A.O. threatening withdrawal of the recognition certificate. Before the High Court, it was contended on behalf of the State (Department) that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g any goods. Under section 2(gg) of the Act "purchase price" is defined to mean valuable consideration paid or payable by a person for purchase of goods less cash discount given by the seller. Under section 2(h) of the Act "sale" is defined to mean any transfer of property in goods for cash or deferred payment or for other valuable consideration including transfer of property in goods (whether as goods or in some other forms) involved in the execution of a works contract. Under section 2(i) of the Act "turnover" is defined to mean the total amount for which goods are supplied or distributed by way of sale by a dealer on his own account or on account of others for cash or deferred payment or for any other valuable consideration. Under section 2(ii) of the Act the expression "turnover of purchases" is defined to mean the total amount of purchase price paid or payable by a dealer in respect of purchases of goods made by him after stipulated production. Under section 2(m) of the Act the expression "works contract" is defined to include any agreement for carrying out building construction, manufacture, processing, fabrication, erection, installation, repair or commissioning of moveable ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the A.O. (issuing authority) which is subsequently cancelled on account of the aforestated two circulars dated January 17, 2001 and February 23, 2001. Hot mix is a notified item. On May 21, 1994 State of U.P. have issued Notification No. TT-2-1623/XI-7(159)/91-U.P.Act-15/48-Order-94 which stated that with effect from June 1, 1994 tax shall be payable at the rate of two per cent on the sale or purchase as the case may be, by a dealer holding a valid recognition certificate under section 4B(2) of any raw material covered by such certificate which raw material shall be used in the manufacture of notified goods. Similarly, by another Notification No. T.I.F.-2- 2383/XI-9(251)/97-U.P. Act-15-48-Order-98 dated November 23, 1998 the tax became payable in respect of declared goods (cement) at two per cent and at the rate of 2.5 per cent on other raw materials like sand, bitumen, furnace oil, HSD, lubricant, etc. Further under the said notification apart from chemical fertiliser and electrical energy, all other goods were separately classified as notified goods. To the same effect is the Notification No. K.A.NI.- 2-530/XI-7(159)/91-U.P.Act-15-48-Order 2000 dated February 17, 2000 which was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nnot come within the concept of "deemed sale" under article 366(29A) of the Constitution of India. Learned counsel further submitted that in the present case the department is not invoking the provisions of the Constitution. Learned counsel submitted that limited question involved in these civil appeals is: whether the case of the assessees came within section 4B(2) of the said Act. Learned counsel submitted that the very purpose of granting of recognition certificate is to give the benefit of concessional rate of duty to the assessee who buys raw materials for the manufacture of goods like doors, windows, etc. Learned counsel submitted that in the present case the assessees are buying the aforestated raw materials for construction of roads which cannot by any stretch of imagination be treated as goods. Learned counsel further submitted that roads are not saleable commodities. In the circumstances, learned counsel submitted that the assessees were not entitled to the benefit of the concessional rate of duty. Learned counsel further submitted that consumption and use of hot mix in the manufacture of roads cannot fall under section 4B(2) of the Act as the said section contemplates go....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In the present case, raw materials are bought by the assessee which are used in the manufacture of hot mix which is utilised for road construction. These facts are not in dispute. The question before us is: whether on the said facts the department was right in denying the benefit of section 4B of the Act to the assessee? Therefore, there was no need for adjudication. "Value addition" is an important concept which has arisen after the Forty-sixth Amendment to the Constitution. Prior to the said Amendment this court had taken the view in State of Madras v. Gannon Dunkerley Co. (Madras) Ltd. AIR 1958 SC 560 See [1958] 9 STC 353 (SC)., that "works contract" was an indivisible contract and the turnover of the goods used in the execution of the works contract could not, therefore, become exigible to sales tax. To overcome the effect of the said decision, the concept of "deemed sale" was introduced by Parliament by introducing sub-clause (b) of clause (29A) in article 366 of the Constitution which states that the tax on sale or purchase of goods would include a tax on transfer of property in goods involved in the execution of works contract. The emphasis is on the expression "trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Sales Tax Act, 1963. In the present case, as stated above, the notifications issued by the State Government from time to time show that different rates were prescribed for declared goods and other raw materials. "Cement" fell in the category of declared goods whereas sand, bitumen, furnace oil, HSD, lubricant, etc., fell in the category of other raw materials. The said notifications also indicate notified goods. "Hot mix" fell in the category of notified goods. Under section 4B(2) of the Act the recognition certificate enabled the assessee to buy the above raw materials at concessional rate of duty provided they were used in the manufacture of notified goods and such notified goods were intended to be sold by the assessees in the State or in the course of inter-State trade or commerce or in the course of export out of India. Raw materials came in the category of "goods" for the purposes of section 4B(2) of the Act. In the present case, the assessee has used cement, sand, bitumen, furnace oil, HSD, lubricant, etc., as raw materials in the manufacture of hot mix. The show cause notice dated May 9, 2001 impugned in the writ petition (before the High Court) proceeded on the basis....