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The Commissioner, Trade Tax U.P. v. S/S Adhishashi Abhiyanta Nirwan Shalla U.P. Jal Nigam - SALES/TRADE TAX REVISION No. 2607 of 2004 [2006] RD-AH 17260 (5 October 2006)


This is an UNCERTIFIED copy for information/reference. For authentic copy please refer to certified copy only. In case of any mistake, please bring it to the notice of Joint Registrar(Copying).


Court no. 22

Trade Tax Revision no. 2607 of 2004.


Trade Tax Revision no. 3112 of 2004.


Trade Tax Revision no. 2474 of 2004.


Trade Tax Revision no. 2475 of 2004.

Commissioner of Trade Tax, U. P. Lucknow. ... Revisionist.


S/S Adhishashi Abhiyanta, Bareilly. ... Opp. Party.

Hon'ble Rajes Kumar, J

These four revisions under Section 11 of U. P. Trade Tax Act (hereinafter referred to as ''Act') for the assessment year 1991-92, 1992-93, 1993-94 and 1996-98 respectively arising from the order of the Tribunal dated 05.06.2004 and 24.06.2004.

Opp. party awarded certain contracts for construction to various contractors and in terms of agreement, supplied the materials to the contractors and while making the payment, deducted the price of the materials.  The Assessing Authority has treated the supplies of such materials as sales and the tax were levied accordingly.  The First Appellate Authority rejected the appeals.  Opposite Party filed appeals before the Tribunal.  The Tribunal allowed the appeals for the assessment year 1991-92, 1992-93 and 1996-97 and partly allowed the appeal for the assessment year 1993-94.  The Tribunal held that the supply of materials by the dealer to the contractors were not the sales.

Heard learned Counsel for the parties.

Issue involved in the present revisions are squarely covered against the opposite party by the Apex Court in the case of Karya Palak Engineer, C. P. W. D., Bikaner Versus Rajasthan Taxation Board, Ajmer and others, reported in JT  2004 (6) SC, 384, Apex Court held as follows:-

"The next contention urged on behalf of the appellant in the alternative is that on the facts of the cases in hand, there is no transaction of sale involved. For this strong reliance was placed on the relevant clauses of the agreement between the parties.  In the case of appellants in C. A. Nos. 8540-8544/2001the same is found in clause 10 of the agreement.  According to the learned counsel for the appellants, as per the terms in the above said clause the materials supplied to the contractors remained to be the absolute property of the Union and the same could not be removed on any account from the site of the work and was at all times open to inspection by the concerned authorities, it is also submitted that any materials supplied, remaining unused in the works contract, were to be refunded to the authority concerned and the contractors at all given point of time was only a ''custodian' of the material so supplied to him.  On the basis of the above, it was contended that the title in the property supplied to the contractor never ever got transferred nor any specific consideration has passed for the supply of the goods."

"This Court had an occasion to dealt with a similar clause where the Union of India entered into an agreement for the construction of certain works, wherein it agreed to supply materials such as cement, steel etc. (as in the case in hand) in the said case of M/S N. M. Goel & Co. Vs. Sales Tax Officer, Rajnandgaon and Anr. This Court held:-

"In order to be sale taxable to duty, there should be an independent contract- separate and distinct- apart from passing of the property, where a party purchases or procures goods from the government. Mere passing of property would not suffice.  There must be sale of goods.  The primary object of the bargain judged in its entirety must be viewed. In the instant case, clause 10 is significant. Though in a transaction of this type there is no inherent sale but a sale inheres from the transaction.  Clause 10 read in the proper light indicates that position. By use or consumption of materials in the work of construction, there was passing of the property in the goods to the assessee from the PWD.  By appropriation and by the agreement, there was a sale as envisaged in terms of clause 10 of the contract."

"In case of Rashtriya Ispat Nigam Ltd. Vs. State of A. P. this Court relying on the said judgment of M/S N.M. Goel & Co. (supra) held:-

"For the purpose of performance, the contractor was bound to procure materials.  But in order to ensure that quality materials are procured, the PWD undertook to supply such materials and stores as from time to time required by the contractor to be used for the purpose of performing the contract only.  The value of such quantity of materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or to become due thereafter to the contractor....."

"An attempt to distinguish the judgment in ''Goyal's case on facts came to be rejected by this Court in the above case of Rashtriya IspatNigam Ltd."

"In the instant case also by the use or consumption of material supplied in the work of construction, there was passing of property and by virtue of receipt of value of such transferred property by way of adjustment in bills the consideration has also passed which in our opinion, satisfied the definition of ''sale' in the local Sales Tax Act."

"In Cooch Behar Contractors Association Vs. State of West Bengal and Ors. This Court followed the decision in M/S N. M. Goel & Co. (supra) and considering a similar clause as is found in the appeal before us this court held that the goods supplied to the contractor by the contractee and price recovered from the contractor by way of adjustment of value of such goods was held to be a contractual transferred price which is liable to levy of sales tax. Therefore, we do not find any merit in the argument that even on facts that there was no sale in the transfer of material supplied made be the appellant to its contractors."

In view of the law laid down by the Apex Court, present orders of the Tribunal are liable to be set aside.

In the result, all the above four revisions are allowed. Orders dated 05.06.2004 and 24.06.2004 passed by the Tribunal are set aside.




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