The judgment establishes the importance of legal definitions and interpretations of 'sale', 'works contract', and 'deemed sale' in determining the entitlement to concessional rate of duty under tax laws.

JUDGMENT:

KAPADIA, J.

1. Leave granted in Special leave petitions.

2. This batch of civil appeals is directed against the judgment and order dated 14.3.02 passed by the Allahabad High Court in Writ Petition No.741 of 2001.

3. Civil Appeal No.7256 of 2005 is the lead case in which the facts are as follow.

4. M/s. P.N.C. Construction Co. Ltd. (assessee) is a public limited company incorporated under the Companies Act, 1956. It is registered under the U.P. Trade Tax Act, 1948. It entered into a contract with National Highway Authority of India, New Delhi, for construction 4/6 lane of national highways of north, south, east and west of the Agra-Gwalior section of NH-3 and for laning of 24 to 41 kms. of Agra-Bholpur section of NH-3 in the State of U.P. Assessee was awarded work by the Construction Division, Agra and Mathura, for widening the roads, maintenance and repairs.

5. Assessee applied for grant of recognition certificate under Section 4-B of the U.P. Trade Tax Act, 1948 (for short, the Act) for purchase of raw-materials for manufacture of Hot Mix. The Trade Tax Officer rejected the request of the assessee. Aggrieved by the said decision, an appeal was preferred before Dy. Commissioner (Appeals) which was also dismissed vide order dated 24.4.97. Aggrieved by the decision, the assessee preferred Second Appeal No.75 of 1997 before the Trade Tax Tribunal, Agra, which came to the conclusion that Hot Mix was manufactured by the assessee in the plant from cement, sand, bitumen, furnace oil, HSD, Lubricant etc. for the construction of roads. The Tribunal found that the A.O. had in fact granted recognition certificate to M/s. National Highway Construction Company, Mathura and M/s. Oriental Construction Engineers Ltd., Mathura, for manufacturing of Hot Mix. Therefore, the Tribunal allowed the assessees appeal and directed the A.O. to grant recognition certificate for the purchase of cement, sand, bitumen, furnace oil, HSD, Lubricant etc. (raw-materials) against Form No.3-B at a concessional rate of tax. Consequently, the A.O. issued recognition certificate in favour of the assessee for the purchase of the aforestated raw-materials. Pursuant to the recognition certificate, assessee purchased the said raw-materials against Form No.3B.

6. However, on 17.1.2001 the Commissioner, Trade Tax, U.P. issued a circular stating that purchase of raw-materials used in the construction of roads, cannot be made against Form No.3B. This circular dated 17.1.01 was followed by another circular dated 23.2.01 to the effect that recognition certificate under Section 4B of the Act with regard to purchase of bitumen, chemical compound etc. against Form No.3B should be reviewed by the A.O. (issuing authority). Pursuant to the aforestated two circulars dated 17.1.01 and 23.2.01 (impugned circulars), show cause notice was issued on 9.5.01 to the assessee herein as to why the recognition certificate earlier granted to the assessee should not be revoked. The impugned notice dated 9.5.01 as well as the aforestated two impugned circulars dated 17.1.01 and 23.2.01 were challenged by the assessee before the High Court vide Writ Petition No.741 of 2001.

7. The main contention of the assessee before the High Court was that the raw-materials used by the assessee in execution of works contract constituted deemed sale under Article 366(29A) of the Constitution of India and, therefore, the assessee was entitled to the benefit of concessional rate of duty on the purchase of aforestated raw-materials. Before the High Court, assessee further contended that it was open to the State to challenge the order of the Tribunal directing the A.O. to grant recognition certificate to the assessee; that the State did not challenge the decision of the Tribunal and, therefore, the impugned circulars dated 17.1.01 and 23.2.01 constituted colourable exercise of power by the Commissioner in order to get over the judgment of the Tribunal which was against the Department.

8. That, it was not open to