2019 (2) TMI 924

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....n of law: "Whether in the facts and circumstances of the case, the order of the Tribunal dis-entitling the revisionist to the benefit of Rule 9(1)(e) of the U.P.V.A.T. Rules is legally sustainable on the reasoning that the goods in question were not specified in the original works contract, though according to the Tribunal, the goods were brought inside the State of U.P. by way of inter-state purchase for execution of the works contract by the assessee?" 3. Heard Sri Rahul Agarwal, learned counsel for the applicant-assessee and Sri B.K. Pandey, learned Standing Counsel for the revenue. 4. Briefly, the applicant-assessee is a works contractor who had been awarded different works contracts during the assessment year in question. Also, undisputedly, for execution of these contracts, the assessee imported certain goods. Basically, the works contract were for installation and commissioning of Air Conditioner/Chiller Plant. The assessing officer did not grant any benefit with respect to value of goods imported by the assessee for execution of the aforesaid works contract and treated those purchases to be independent of the works contract awarded to the assessee. The fir....

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....lue Added Tax Rules, 2008 (hereinafter referred to as 'the Rules'). For ready reference, Rule 9(1)(e) of the Rules is quoted as below: "Rule 9. Determination of turnover of sale of goods involved in the execution of a works contract- (1) Subject to other provisions of this Rule, the tax on turnover of sale of goods where such sale is affected by way of transfer of property in goods (whether as goods or in some other form) involved in the execution of a work contract shall be computed on the taxable turnover of sale of taxable goods. For the purpose of determining the taxable turnover of sale of such goods, the amounts specified below shall be deducted if they are included in the gross amount received or receivable in respect of the works contract:- (a) ....... ....... ....... (e) all amounts representing the value of goods in which property, has been transferred in the execution of the works contract as a result of sale in the course of inter-state trade or commerce." 7. It is thus submitted, for the purpose of grant of that deduction the assessee had only to establish, the sale made in the inter-state trade or commer....

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....ds (giving rise to the claim of exemption) must precede their transfer under the works contract. Second, transfer of the property in those goods must result or spring from the transaction of inter-state sale of those goods. The findings recorded by the Tribunal are to the effect, first a works contract was executed. Thereafter, the assessee caused the movement of goods from outside the state of U.P. for purpose of execution of the works contract. Third, as a fact, the assessee applied those goods to the works contract executed by it. Consequently, it has to be inferred that the property in those goods stood transferred to the contractee parties. 12. Merely because the works contract itself did not specify the place source or the exact specification of the goods imported would not be relevant, inasmuch as according to the Tribunal, the make of the goods, numbers and other specifications had been specified. Whether in the case of intra-state or inter-state sale of goods, it is for the contracting parties to conduct their affairs in the manner best suited to the circumstances that may exist, as per their mutual agreement. 13. Once the Tribunal had found that the movement of good....

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....above which curtail the ambit of the legislative competence of the State Legislatures, there is clause (3) of Article 286 which enables Parliament to make a law placing restrictions and conditions on the exercise of the legislative power of the State under Entry 54 in State List in regard to the system of levy, rates and other incidents of tax. Such a law may be in relation to (a) goods declared by Parliament by law to be of special importance in inter-State trade or commerce, or (b) to taxes of the nature referred to in sub-clauses (b), (c) and (d) of clause (29-A) of Article 366. When such a law is enacted by Parliament the legislative power of the States under Entry 54 in State List has to be exercised subject to the restrictions and conditions specified in that law. In exercise of the power conferred by Article 286(3)(a) Parliament has enacted Sections 14 and 15 of the Central Sales Tax Act, 1956. No law has, however, been made by Parliament in exercise of its power under Article 286(3)(b)". (emphasis supplied) 16. Then, in absence of any amendment to the Central Sales Tax Act, 1956, the Supreme Court framed a question noted in para 34 and answered in para 35 and 37....

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.... sale or a sale in the course of import since the transfer of property in the goods takes place only at the stage when the goods are incorporated into the works and that can take place only in the State where the works is required to be executed. On behalf of the contractors, on the other hand, it has been urged that a works contract can involve transactions constituting a sale in the course of inter-State trade and commerce as well as an outside sale or a sale in the course of import and that is a matter which will have to be considered in accordance with the principles contained in Sections 3, 4 and 5 of the Central Sales Tax Act keeping in view the terms and conditions of the particular contract. In this regard, the learned counsel have placed reliance on a number of decisions of this Court wherein the provisions of Sections 3 and 4 of the Central Sales Tax Act, 1956 have been considered. We do not propose to go into this controversy because the question whether a deemed sale resulting from transfer of property in goods involved in the execution of a particular works contract amounts to a sale in the course of inter-State trade or commerce under Section 3 of the Central Sales Ta....

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....r deductions on deemed inter-state sales alone, it may render the Rule largely redundant, inasmuch as a transaction of inter-state sale made inside the state of U.P. would never be referable to any works contract being executed inside the state of U.P. A works contract being executed outside the state of U.P. may never qualify for assessment inside the state of U.P. in the context of Rule 9(1)(e) of the Rules. The only other situation where the Rule may remain functional may be of sale in transit in pursuance of a works contract being executed inside the State of U.P. However, there does not appear any reason or circumstance to limit the applicability of the Rule to that species of interstate sale transactions alone. 21. Therefore, merely because there was no privity of contract between the contractee and the actual seller of the goods (from whom the assessee made the purchases), and though such seller was not known/specified at the time of the execution of the works contract document, it would make no difference to the eligibilty to deduction claimed by the assessee under Rule 9(1)(e) of the Rules, on deemed interstate sale arising upon transfer of property in goods involved in....