Mitsui Kensetsu India Pvt. Ltd. vs Commissioner of Trade Tax U.P. Lucknow

Arun Tandon, J.—Heard learned counsel for the parties. This trade tax revision has been filed by the assessee against the order of the Tribunal dated September 19, 2003, passed in Second Appeal No. 223 of 2003, whereby the appeal filed by the assessee has been dismissed.

Before this court a short legal contention has been raised, which is as follows:

It is not disputed between the parties that u/s 3F of the U. P. Trade Tax Act the net turnover referred to in sub-section (1) of section 3F has to be reduced by the amount representing the value of the goods transported under the works contract covered by sections 3, 4 and 5 of the Central Sales Tax Act, 1956 as would be apparent from reading of section 3F(2) (b) (i) itself.

The High Court in the case of Garg Photo Films, Agra v. Commissioner of Trade Tax [2005] UPTC 230 (para 7) has laid down as follows:

Section 3F(2) (b) (i) contemplates the deduction of the amount representing the value of goods covered by sections 3, 4 and 5 of the Central Sales Tax Act. If the works contract occasioned the movement of goods from outside the State of U.P. the use of such goods in the execution of works contract would be covered by section 3 of the Central Sales Tax Act. In the present case learned counsel for the applicant is not able to show that the movement of paper from outside the State of U.P. was occasioned by a particular works contract. In the present case, in the normal course of business photographic papers have been imported from outside the State of U.P. and kept as stock and whenever the papers were required for printing of photo films, the same was taken from the stock. In the circumstances, the case of the applicant is not covered u/s 3 of the Central Sales Tax Act. In the case of Santosh and Company [1999] UPTC 823 there was a pre-existing contract and the goods have been imported from outside the State of U.P. for the use in the execution of such works contract, the movement of goods was occasioned by the works contract. On these facts, the court held that imported goods is not liable to tax u/s 3F being in the course of inter-State u/s 3 of the Central Sales Tax Act.

Again in the case of The Commissioner Trade Tax Vs. S/s Indian Railway Construction Company Ltd. (All) ; The Commissioner Trade Tax Vs. S/s Indian Railway Construction Company Ltd. the High Court while interpreting the same section 3F(2)(b)(i) has explained in para 17 in UPTC (para 20 at page 389 in VST) as follows:

17....What is important is that the movement of goods is in pursuance of a prior contract of sale and both the movement of goods and sale must be inseparably connected. In the present case, it is seen that before the movement of goods, the contract of sale was in existence and movement of goods was in pursuance of contract which were used in the works contract, therefore, transaction was covered by the section 3 of the Central Sales Tax Act and the Tribunal has rightly held so.

From the aforesaid, it is apparently clear that what is important to be examined u/s 3F(2) (b) is as to whether the movement of the goods from outside the State in pursuance of a prior contract of sale and both the movement of goods and sale must be inseparably connected.

This court finds that such a plea was raised by the assessee in his written submissions filed before the Tribunal in the second appeal and which reads as follows:

The Tribunal under the order impugned has not explained the said issue in light of the law explained by the High Court in the aforesaid two judgments. There is absolutely no finding either way as to whether movement of the goods from outside Uttar Pradesh in the facts of the case was occasioned because of any pre-existing contract for use in the works contract and whether the movement of the goods and sale were inseparably connected.

In absence of any finding having been recorded either way on the aforesaid aspect of the matter, the order passed by the Tribunal cannot be legally sustained to that extent. The order is hereby set aside. Appeal No. 223 of 2003 is restored to its original number.

Let the Tribunal decide the appeal afresh by means of a reasoned speaking order in the light of the observations made above, after affording opportunity to the assessee, preferably within three months from the date a certified copy of this order is filed before the Tribunal.

So far as the second contention raised on behalf of the assessee qua the deduction claimed towards the payment made to the sub-contractor, said to be covered by section 3F(2) (b) (vii), is concerned, this court finds that the Tribunal has recorded a categorically finding that in terms of the proviso to section 3F(2) (b) (vii) the assessee had filed necessary documents for establishing that the sub-contractor was registered dealer, however, he did not produce any document or evidence which could establish that the money paid by the assessee to sub-contractor has been disclosed in his turnover by the sub-contractor.

The counsel for the assessee before this court for the first time submits that now the assessment order of the relevant year of the sub-contractor is available and from the aforesaid assessment order it is clear that the amount paid by the assessee to the sub-contractor has been disclosed in his turnover.

This court cannot enter into the said aspect of the matter at this stage for the first time. It was open to the assessee to produce the copy of the return/ assessment order or any other documentary evidence, as he may be advised, before the assessing authority at the time the proceedings were pending. It is too late in the day to permit the petitioner to challenge the order of the Tribunal with the help of documents which were not placed before it.

The order of the Tribunal to that extent is affirmed. With the aforesaid observation/direction the present trade tax revision is disposed of.