VAT Leviable on Supply of Cement, Steel and Bricks to Contractors by Govt Dept, for which Cost is Deducted from Bills of the Contractors: Uttarakhand HC [Read Judgment]

In the case of Commissioner of Commercial Tax vs Executive Engineer, Uttarakhand High Court has ruled that Value Added Tax ( VAT ) is leviable on the supply of cement, steel and bricks etc. to Contractors by Government Department, for which cost is deducted from the bills of the contractors.

The assessee in the instant case engaged in the construction work and a registered dealer and imported cement, sheet tiles & steel and self-manufactured tiles during the financial year. During the year he supplied cement, steel etc to the contractor.

During the assessment period, the Assessing Officer (AO) completed the assessment under the U.P. Trade Tax Act, 1948 and he also assessed regarding the sale of steel scrap, the sale of discarded items and tender forms. Finally, he declared the gross and net turnover Rs. 28,53,299.00 and Rs. 28,53,299.00 to tax Rs. 3,15,531.90 against the admitted tax Rs. 34,110.00.

Assessee raised objections against the order passed by the assessing authority. Therefore he approached the Appellate Authority but they dismissed the appeal of the Assessee. Thereafter, he filed a further appeal before the Trade Tax Tribunal. After analyzing the facts the Tribunal granted relief to the Assessee by allowing his appeal.  The assessment order in so far it relates to the tax levied in respect of the imported cement, sale of imported sheet tiles & steel and self-manufactured tiles was interfered with. Aggrieved by the order of the Tribunal the Revenue carried the matter before the Court by appeal.

The division bench comprising of Chief justice K.M. Joseph and Justice Sharad Kumar Sharma observed that while perusing the materials on record it was found that billing and payment of price was a method of accounting adopted by the department and it would not alter at the true character of transactions. This indicated that the cost incurred by the department was deducted from the bills of the contractor.

The Court further observed that the department agreed to supply from its stores iron, steel and cement for the construction work and to deduct the price of material so supplied and consumed from the construction from the final bill of the Assessee and all materials supplied to the contractors under the clause remain absolute property of the Government and could not be removed on any account from the site of the work and was at all times open to inspection by the Engineer-in-charge. The clause in fact inter alia provided that the contractor was bound to procure and to supply the material from stores as from time to time required for use of work for the purpose of contract only, and value of the full quantity of the materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or that became due thereafter to the contractor.

Finally, the Court held that Assessee in the present case is liable to pay Value Added Tax ( VAT ) on the supply of cement, steel, bricks etc to the contractors when the cost is deducted from the bills of the contractors also.