The Commissioner, Trade Tax vs Sem India Co. Ltd.

Rajes Kumar, J.—These three revisions u/s 11 of U.P. Trade Tax Act (hereinafter referred to as "Act") are directed against the order of Tribunal dated 28.02.2000 relating to the assessment years 1990-91, 91-92 and 92-93.

Admittedly in the aforesaid years dealer/opposite party (hereinafter referred to as "Dealer") had executed the works contract in which used the stone boulders. The question involved in the present revisions relate to the taxability of the stone boulders, used in the execution of works contract. Assessing authority levied the tax on the stone boulders on the ground that the stone boulders had been purchased locally from the various parties. Bills made on the letter pad had been filed and it was not established that the tax had been paid on such Stone Boulders. Appeals filed by the dealer before the Deputy Commissioner (Appeals) have been rejected. Dealer filed second appeals before the Tribunal. Tribunal by the impugned order, allowed the appeals in part. Tribunal has deleted the tax levied on the turn over of stone boulders. However, sustained the tax on the turn over of sand and bajri. Tribunal has deleted the tax on the turn over of stone boulders on the ground that the assessment records reveal that the list of the parties from whom purchases of stone boulders had been made and the purchase invoices have been filed before the assessing authority which are available on record shows that the purchases had been made from the registered dealers.

Heard learned Counsel for the parties. Assessment records have been summoned and the same have been produced during the course of hearing.

Learned Standing Counsel submitted that in the assessment records bills issued by the sellers of the stone boulders on the letter pad are available. Registration number of such parties are not mentioned on the letter pad. He submitted that the Tribunal has recorded the incorrect finding that the bills of the sellers show that the purchases have been made from the registered dealers.

Bills of the sellers on the letter pad are available on assessment records. Except bills of M/s Sandeep Traders in none of the bills registration number of the seller are mentioned. It is surprising that how and on what basis Tribunal has recorded the finding that the bills available on assessment records show that the purchases have been made from the registered dealers. Finding of the Tribunal in this regard is patently incorrect and perverse and appears to be with ulterior motive.

Section 3-F of the Act read as follows:

Section 3-F. Tax on the right to use any goods or goods involved in the execution of a works contract.

(1) Notwithstanding anything contained in Section 3A, or Section 3AAA or Section 3-D but subject to the provisions of Sections 14 and 15 of the Central Sales Tax Act, 1956, every dealer shall, for each assessment year, pay a tax on the net turnover of-

(a) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment of other valuable consideration; or

(b) transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract,

at such rate not exceeding fifteen percent as the State Government may, by notification, declare and different rates may be declared for different goods or different classes of dealers.

(2) For the purposes of determining the net turnover referred to in Sub-section (1), the following amounts shall be deducted from the total amount received or receivable by a dealer in respect of a-

(a) transfer referred to in Clause (a) of Sub-section (1) whether such transfer was agreed to during that assessment year or earlier-

(i) the amount representing the sales value of the goods covered by Sections 3 4 and 5 of the Central Sales Tax Act, 1956;

(ii) the amount representing the value of the goods exempted u/s 4;

(iii) the amount received as penalty for default in payment or as damages for any loss or damage caused to the goods by the person to whom such transfer was made,-

(b) transfer referred to in Clause (b) of Sub-section (1),-

(i) the amount representing the value of the goods covered by Sections 3 4 and 5 of the Central Sales Tax Act, 1956;

(ii) the amount representing the value of the goods exempted u/s 4;

(iii) the amount representing the value of the goods on the sale or purchase whereof tax has been levied or is leviable under this Act at some earlier stage;

(iv) the amount representing the value of the goods manufactured in a new unit exempted u/s 4A or Section 4-AAA;

(v) the amount representing the value of the goods supplied to the contractor by the contractee, provided that the ownership of such goods remains with the contractee under the terms of the contract;

(vi)the amount representing the labour charges for the execution of the works contract;

(vii) all amounts paid to the sub-contractors as the consideration for execution of the works contract, whether wholly or in part:

Provided that no deduction under this sub-clause shall be allowed unless the dealer claiming deduction produces proof that the sub-contractor is a registered dealer liable to tax under this Act and that such amount is included in the return of turnover filed by such sub-contractor under the provisions of this Act;

(viii) the amount representing the charges for planning, designing and architects fees;

(ix) the amount representing the charges for obtaining on hire otherwise machinery and tools used for execution of the works contract;

(x) the amount representing the cost of consumables used in the execution of the works contract, the property in which is not transferred in the execution of the works contract;

(xi) the amount representing the cost of establishment and other similar expenses of the contractor to the extent it is relatable to supply of labour and services;

(xii) the amount representing the profit earned by the contractor to the extent it is relatable to the supply of labour and services.

(3) Where in respect of a transfer referred to in Clause (b) of Sub-section (1), the contractor does not maintain proper accounts or the accounts maintained by him are not found by the assessing authority to be worthy of credence and the amount actually incurred towards charges for labour and other services and profit relating to supply of labour and services are not ascertainable, such charges for labour and other services and such profit may, for the purposes of deductions under Clause (b) of Sub-section (2), be determined on the basis of such percentage of the value of the works contract as may be prescribed and different percentages may be prescribed for different types of works contract.

u/s 3-F of the Act value of the goods involved in the execution of the works contract are liable to tax. Admittedly stone boulders have been used in the execution of works contract and, therefore, the value of the stone boulders are liable to tax. In case, if the dealer has maintained proper books of account disclosing the value of the stone boulders and the same are properly verifiable then the same value should be adopted otherwise, in the absence of proper books of account, the value of the stone boulders are to be determined by way of best judgment assessment. The value of the goods are not taxable and liable to be deducted from gross turnover, in case if the case falls under various clauses of Section 3-F (2)(b) of the Act. Section 3-F (2) (b) (iii) of the Act says that the amount representing the value of the goods on the sale or purchase where of tax has been levied or is leviable under this Act at some earlier stage are liable to be deducted from the gross turnover. Therefore, to claim the deduction from the gross turn over dealer has to establish that on the sale or purchase the tax has been levied or is leviable under the Act at some earlier stage. In case if the dealer is able to prove that the goods had been purchased from registered dealer it can be said that the tax is leviable under the Act at the stage of registered dealer but if the dealer is not able to prove that the goods had been purchased from the registered dealer and the tax has been levied, the exemption on the value of the goods used in the execution of the works contract can not be allowed. Section 3-F of the Act has a over riding effect over the other provisions of the Act and, therefore, the assessment of the goods involved in the execution of the works contract has to be strictly made in accordance to the provision of Section 3-F of the Act and other provisions of the Act may not be relevant. Since in the assessment records only in the few bills, issued by the sellers registration number are mentioned, verification is required as to how much purchases have been made from the registered dealers. It is also necessary to enquire whether registration number mentioned in the bills is genuine and correct and the party is actually registered dealer under U.P. Trade Tax Act and the bills raised by it are genuine bills. This verification is more appropriately possible at the stage of assessing authority. Therefore, cases are being remanded back to the assessing authority to pass assessment orders afresh in the light of the observations made above.

For the reasons stated above, order of the Tribunal is liable to be set aside.

In the result, all the revisions are allowed. Order of the Tribunal is set aside and the matter is remanded back to the assessing authority to pass the assessment orders afresh in the light of the observations made above.