The State Of Andhra Pradesh vs. M/S. Bhooratnam And Company
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The Revenue (State of Andhra Pradesh) filed these Tax Revision Cases challenging the common order of the Sales Tax Appellate Tribunal. The Tribunal had set aside the order of the Additional Commissioner (CT) and restored the order of the Appellate Deputy Commissioner (CT), thereby quashing the penalty imposed by the Commercial Tax Officer on M/s. Bhooratnam & Company. The assessee, engaged in works contracts and manufacturing cement pipes, purchased cement against 'G' Forms based on a G2 Certificate. The Revenue contended that the assessee utilized cement in works contracts, violating declarations and making them liable for penalty under Section 5E and Section 7-A(2) of the APGST Act, 1957. The assessee argued they were permitted to purchase cement against 'G' Forms as per a circular and that cement pipes manufactured by them and used in works contracts constituted a deemed sale.
Held
The Court held that the Tribunal's finding that the assessee was entitled to purchase cement for the production of finished goods at a concessional rate was correct. The Tribunal correctly reasoned that cement pipes manufactured by the assessee and used in works contracts should be treated as finished goods. While the sale of these cement pipes in the context of works contracts amounts to a deemed sale under Section 5F of the Act, there was no sale of the cement itself in its raw form. The Court also noted that applying the circular dated 08.01.2005 retrospectively to previous assessment years without a specific clause for retrospective effect was not justified. Prior to G.O.Ms.No.496 dated 17.07.2001, contractors were eligible to purchase cement via 'G' Forms. After the G.O., dealers were eligible for concessional tax if cement was used for manufacturing finished goods for sale. Cement pipes were considered finished goods, and their sale in works contracts was a deemed sale. Therefore, there was no sale of the purchased cement for manufacturing cement pipes. The Court relied on the finding of the High Court of Andhra Pradesh in B. Seenaiah & Co. Vs. Commercial Tax Officer, which supported the concept of deemed sale in works contracts. The Tax Revision Cases were dismissed.
Key Issues
1. Whether the assessee, a works contractor and manufacturer of cement pipes, was entitled to purchase cement at a concessional rate of tax by issuing 'G' Forms, considering the circular dated 08.01.2005 which stated that contractors executing works contracts were not entitled to such purchases under Section 5E of the APGST Act, 1957. Contentions: Petitioner (Revenue): Argued that the assessee utilized cement in the execution of works contracts, thereby violating the declaration and becoming liable for penalty under Section 5E read with Section 7-A(2) of the APGST Act, 1957. Relied on the circular dated 08.01.2005. Respondent (Assessee): Contended that they purchased cement against 'G' Forms based on their G2 Certificate and a circular dated 23.10.1998 permitted works contractors to purchase goods against 'G' Forms. Further argued that cement pipes manufactured by them and used in works contracts constituted a deemed sale. Also noted that G.O.Ms.No.496 dated 17.07.2001 withdrew the concessional rate on cement purchase.
Sections Cited
Section 5E, Section 7-A(2), Section 5F
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Before: AND
Ilq _Slate Of Andhra Pradesh, Represented by the State Representative before STAT D.No. S-4-4O4 to +08 Nampa'[V, Andnia prrO"sn-'
7 THE HON'BLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE N.TUKARAMJI TAX REVISION CASE Nos.7O 65 and LO7 of2OOa COMMON ORDER: (per Hon'bte si Justr'ce P.SAM KosrrY7 These three Tax Revision Cases are filed by the petitioner/ Revenue challenging the common order dated 13.07.2OO7 passed by the Sales Tax Appellate Tribunal (for short, 'the Tribunal') in Tribunal Appeal Nos.334l06, 335106 and 336/06 which are pertaining to the same r( spondent/ assessee. The point of contention and grounds raised to challenge the impugned orders in all three Tax Revision Cases being common, they are heard together and decided by this common order.
Heard Sri Rajeshwar Rao, learned Special Standrng Counsel for Commercial Taxes appearing for the Revcnue and Sri Bhaskar Reddy Vemireddy, learned counsel for the assessee.
For the sake of convenience, thc l:rcts in Tax Rcvision Case No.7O of 2OO8 are taken up as the lcad case. 4. lride th.e said common order d:rtcd 13.O7.2OO7, the Tribunal had allowed the appeals preferrcd b1 Lhe assessee b-r' scttrng aside Lhe order passed by the Additional Commissioner (CT). Hycle rabad,
2 l i I i I I I I ! I I I I i ; I 1 l (herein referred to as, the'Revisiona-l Authority') and restored the order of the Appellate Deputy Commissioner . (CT)- As a consequence, the order passed by the Commercial Tax Ofhcer imposing penalty stood set aside.
The assessee herein is a registered body under the Andhra Pradesh Goods and Services Tax Act, 1957 (for short, APGST Act, 1957J as also under the Central Sales Tax Act, 1956 (ior short, 'CST Act, 1956J engaged in t1.e business of works contrac[s apart from being manufacturing, supply, design, erection and testing and commissioning of water supply systems and manulacture and sale of cement pipes. The activities are carried out in addition to the state of Andhra Pradesh to other states as well. They have tu,o manufacturing units of cement pipes. The cemenr pipes manufactured by the assessee are used in the execution o[ works contract that they get and they also sell the cement pipes in the course of interstate trade and commerce.
The assessee had got himself registered for issuance o[ G2 Certihcate which stood issued on 21.01. 1989. Under rhc G2 Certificate, the assessee could make local purchase of cement bv issuing 'G' Forms and the said purchase would be at concessional rate ol tax on such purchases. The Commissioner (CT) had issued a circular on O8.O1.2005 uide Ref.No.A 1 (4lt437 l2OO4, r.r,hcrein, ir
3 l' It i I i I II i was held that contractors executing works contract would not be entitled to purchase cement by issuing 'G' Forms and they would not be permitted to purchase cement at concessional rate of tax under Section 5E} of the APGST Act, 1957. The assessee was in the business of execution of works contract and also had manufacturing units wherein the cement pipes were manufactured. In the course of execution of the works contract, they used the cement pipes manufactured from their manufacturing unit.
It was the contention of the Revenue that the assessee had utitized the cement in the execution of the works contract and thus they have violated the declaration and hence liable to pay penalty under Section 5E} read with Section 7 -A(2) of the APGST Act, 1957 A show cause notice was issued in this regard, to whrch the assessee submitted their contentions and objections
According to the assessee, they had purchased thc cemcnt agarnst'G'Forms on the strength of the cement being incorporatcd in the G2 Certificate and that the works contractors were pcrmitted to purchase goods against 'G' Forms as per circular dated 23.10.1998. It was also the contention of the assessee that thcy are they are manufacturers of cement pipes tt'hich are utilizcd in thc execution of works contract. Further, by fiction of law' thcrc
4 was a transfer of goods. Meanwhile, urde G.O.Ms.No.496, dated 17.O7.2OOl, the Government had withdrawn concessional ratc of tax on the purchase of cement. Further, holding that since the cement pipes manufactured by the Revenue was predominantly used for execution of the works contract awarded to the assessee themselves, he was not entitled for the purchase of cement at a reduced price. The Assessing Officer imposed penalty upon the petitioner.
The assessee preferrcd an appeal before the Revisional Authority. 'lhe Revisional Authority while allowing the appeal, decided the case in favour of the assessee setting asicle the order of the Assessing Authority specifically holding that the assessee was entitled to purchase cement for production of finished goods at a concessional rate and that the cetnent pipes manufactured at the assessee's manufacturing unit used in the execution of works corltract u,as a decmed sale of cement pipes. It is this order of the Revisional Authority which the Revenue had challenged before the Appellate Deputy Commissioner (CT) where the order passed by the Commercial Tax Officer was set aside holding that Section 58 of thc APGST Acr, 1957, envisages finished goods to be used for gencral commcrcial merchandise and must be marketable as 'chattcl-qua-chattel'.
5 { t I I I 1(). [t was the opinion of the Revisional Authoriry that even though cement pipes manufactured by the assessee was being used in the execution of the works contract and the same amounts to a deemed sale, but in raw, it cannot be treated as a sare for the reason that there is no transfer of property in goods. Therefore, ordered that the assessee should pay tax at the rate of l2olo under Section 5F of the APGST Act, 1957 on the sale of cemenr pipes instead of 4o/o that was paid by the assessee under Section SG of the APGST Act, 1957. It is this order which has been reversed by the Tribunal leading to filing of the present Tax Revision Cases. 11' Having heard the contentions put forth on either side and on perusal of records, it would be relevant at this juncture, to take note of the admitted frnding of facts arrived at by the Tribunal u,hich for ready reference is reproduced herein under: ll '
Now, it has to be seen whether the appellant is trable to pay penalty U/s.5B(2) read with Sec.7_a121 o[ rhe Acr. If 1.1"^-1oo:,,i:l is liable to. pay p€narry u7s.ia1z1 then onty r)e( rron /-A(2) carl be read with Sec.SB(2) ot the Acl.
Admittedly, the appellant is having marufacturrng units of cement pipes. Therefore, ,o p"rJty car be levrcd under clause I of Sub-section 2 of Seition.SB. Norv, it has to be seen whether clause 2 of sub_Section 2 of Sec..iu attracted i.e., whether the appellant have purchased goods bv. furnishing declaration under the pro.,isJ to "uUl.."iro., r sold 'such goods' contrary to such declaration. Thc appellant has not sold cement, hence clause 2 of Sec 58 is also not attracted. 14 The declaration shall be in form G. As discussed abovc Form G contains the particulars. The appellant-"-" ,J"r"a rcgistratron certifrcate U/s.58 *...f.' Zt.f . f Sig rhc \
6 appellant effected local purchases of cement by issuing G piilr" ,rra availed the concessional rate of tax on such li."ir'.J"l ti. "pp.n.", is having lanufactu11s, units of cement pipes. They a-re manufacirring cement pipes. and ";..i';"il;; pip." ,t" sold in the course of execution of contract works and some of them are sold in the course of -i.i","t'. trade and commerce' The appellant is also a io.t"-.o.rt ""tor. They are executing the wo.1!; contracts --o." "p."ifr"uily in the nature of laying RCC/MS-}ry-: t"' ii'i"".rJ, - Ji"i"te that the cemenf pipes manufactured bv them are used in the execution of woiks contracts' Whether iirl-r". "f ."*ent pipes in works contracts amounts to sale ;;;;;"a and whether the appellant vigtatld conditions of R;il;;;;;C.rtitrcate making them liabte for the penaltv' 15. lt is not in dispute that the Commissioner of Cl--"..irt Taxes issued a certificate in CCT's i.i.il2ltga+ts8, dt.23.I0.1998 and clarifred that the "tJ.".i.." can use G Forms U/s 5F of the Act' and such ;;;;;;;i..t can also opt for composition U/s-SG ofthe Act' al'-riJrv, no condiiions are enumerated in the said "irrifr"^tior. Therefore, the appellant' being a works Io.i.".,.., could issue G Forms by virtue of the above ;;i;;; clarification tiu G o Ms 496' Revenue (CT'II) n.o"rt*".rt. daLed 17.7 '2OO1' The Government issued said 6,.5*""J .".,aln goods including cement are -made not Jiiiur. i.. conceslional rate of tax U/s'SG of the Act' il.?"t..,-,t " provrso to the G O clarifres that the purchase oi ."-.rr, by the manufacturers of frnished goods like asbestoes sheets. pipes' paint manufacturers.using white ".-..r,, ha.llow bricks arc eligible for concessional rate of iu* ul..sc, it those manufacturers use the cement ourchased bv them as raw material to produce finished ;;;; i;."i"'. lt has to be seen that there is no condition ih", ,h" fr.nished goods must be sold either in Section B or in the Rulcs. Thc onlv condition which Section 58 envisages is that the dealer rvho purchases raw materia-l or other gooa. -.,", manufacture goods i e ' they .rnust have anufacturing units. Admittedly, the apPeuant comes Git rn ,tt" ptin ic*' ot the sard proviso- and because the appellant has purchased the cement for manulactunng .![""ipip.. So using the cement purchased by.issuing G Forms for manulactunng cement pipes is not in dispute' Of .ol',..", ,n" proviso to the above ieGrred G O'' shows that ih.4.a"." who produce the hnished goods for sale are ..riiti.a fo. concessional rate of tax U/s 5E}' The appellant has manulacturcd cement pipes The turnover.pertaining to it . ."-.n, pipes used in ihi works contract is. in dispute' There cannot be anl' doubt that the cement pipes can be t.e"t"d .. hnished [oods, because it is a-lso not in dispute I I l ! l
7 1 d i : : .. .. ! purchased goods by issuing 'G' Forms, sells such goods contrary to such declaration made in G Form. Therefore Sec.5B(2)(ii) does not authorize the Revenue to levy penalty in the case of mistake of 'G' Porms. 20- It also appears that applying a Circular dated.8.1.2OO5 to the previous assessment years without arry clause for retrospective effect is not justified. A circular may be binding on authorities, but the same cannot be given effect to the previous assessment years unJess there is a specihc clause giving retrospective effect to it. In view of the above drscussion, we are of the view of that prior to issuing G.O.Ms.No.496, dated.l7.7.2OO 1, the contractors were eligible to purchase cement by issuing'G'Forms by virtue of the Circular in CCT's Ref .Al(21l98a /98, dt.23.10.1998. Hou,ever, after issuing G.O.Ms.No.496, dated. I 7.7.200 1, the dealers are eligible for concessional rate of tax under Sec.5El i[ they use the cement for t]re manufacturing of frnished goods for sale. Cement pipes manufactured by the appellant have to be treated as frnished goods. However, the sale of such goods i.e., cement pipes in this case has to be treated as the goods transferred in the works contract and such grxrds are deemed to have been sold U/s.SF of the Act. Thcrefore, the finished goods i.e., cement pipes are deemed to have been sold in the works contracts. Hence, there is no s:rlc ol cement purchased by the appellant for manufacturing cement pipes. In the light of the above discussion, we set-aside the impugned order passed by the revisional authority and restore the order o[ the Appellate Deputy Commissioner- Consequently, the order of the C.T.O., imposing penalty stands sct aside."
In the afore given admitted factual backdrop, the aforesaid finding ol facts b1, the Tribunal cannot under any stretch ol \-\
a lmaglnation be held to law or contrary to the materials which have consideration for the purpose of reaching to the said conclusion
A similar view was taken by this Bench while deciding Tax Revision Case No.g of 2OOg and batch on Og.lO.2O23, wherein in paragraph No.19, this Bench had taken a similar stand while dismissing the Tax Revision Cases filed by the assessee which again for ready reference, is reproduced herein under: be contrary to been taken into _,r..?.. n lt-.." reading of the aforesaid proviso would clearly grve alt indication that whcn a purchase of cement is made by a manufacrurer of a finished g".d iik;^;;"i""'"rr*o, pipes, parnt manufacturers, hal'iow bncks, - """*."ia be eligible for purchase of cement at a concessional rate. The petitioner was not a malufz ih. o,"" ;; ;;;; ;;'i;'i;'J';:.::ilI*n T*;*:ff " ..T: covernment of India, Ministry tr ri.rrr?. j pJffiirr, o, \.r:-.y. itself urde rherr Circular. No.237 of iSSZ --*t il" clarifying as to wherher rh" pr;;";;-;;.;d;_ri'"l"Jr*, can be classitred as a finishea p..J".i;;;;; *iJ#,n". ,:111, T*..:"crete" is a materiat in . *., p.ol."" "ari" ,.rla rs not a finished product like b_lock ". p."_;;";.;;;;,;;", etc. and had thus. clarifiect that all;e;J;;'"tr",JI'""O assessments on the issue rn aforesaid guidelines.,, tay be settled in the light of the 14, In the light of the decision of this Bench in the aforesaid Tax Revision Cases leading of u,hich being Tax Revision Case No.g of 2OO8, arrd the categorical fincling of facts given by the Tribunal, we are of the considered opinion th:rt no strong casc has been made by the Revenue calling for interfercnce u,ith the order passed by the Tribunal. The vier.r. ol thc Tribunal is also based upon the I : I I ! I I I I ; J I I {
9 1 finding of the High Court of Andhra Pradesh in the case of B. Seenaiah & Co. Vs. Commercial Tax OfJicer, Kairatrzba . Circle, Hgderabad and others t wherein the High Court of Andhra Pradesh dealing with the phrase 'deemed sale, has held as under: "though at the point of time when the petitioner paid the seigniorage fee for extraction of t]re boulders t]rere might not have been a sale, a_fter extraction of ttre boulders, the boulders became the property of the petitioner. The boulders were converted into ttre required sizes of metal, the metal was transported and utilized by tJ:e petitioner for laying the road. The seigniorage fee paid and the expenditure incurred by the petitioner towards conversion of the boulders into metal, loading, unloading, transportation, etc., would be the cost of the metal to the petitioner, which was used in execution of the works contract i,e., laying the road. While completing the execution of the works contract the property in the goods passed to the contractee from the contracror. the petitioner, at the time they were incorporated in the laying of the road. Therefore, there was a clear transfer of property in goods, while completing the works contract which would result in sale or decmed sale of goods, liable to tax." The aforesaid judgmenr ot the High Court of Andhra pradesh in the case of B. Seenaiq.h & Co. (1 supra) strengthens the view of the Tribunal.
Thus, u'e do nor find any merits in the contentions and submissions rnadc by. the Revenue while assailing the order of the Tribunal n'hicir is under challenge in the present three Tax Revision Cascs. ) l I ( I It i-, i ' 1zoorl rz+ src uas
l0
The three Tax Revision Cases therefore stands dismissed No order as to costs. As a sequel, pending miscellaneous petitions if any, shall stand closed. To, D/. B.S.CHIRANJEEVI JOINT REGISTRAR //// lr--'- SECTloN OFFICER The Sales Tax Appellate Tribunal, Hyderabad (With record) The Additional Commissioner of Taxes (CT) Legal, Office of the Commissioner of Commercial Taxes, Hyderabad The Appellate Deputy Commissioner (CT) Hyderabad Rurel Divison, Hyderabad. The Commercial Taxes Officer, Malkajgiri Circle, Hyderabad. One CC to SRl. RAJESHWAR RAO, SPL SC FOR CT IOPUCI One CC to SRl. BHASKAR REDDY VEMIREDDY, Advocate [OPUC] Two CD Copies 1 2 3 4. 5. 6. 7. ak \st* Pr/j t
HIGH COURT DATED: 0310112024 COMMON ORDER TREVC.No.70, 65 AND 107 of 2008 5oo q I 1r\E ST4 cr< 0 1 riar 2t2l C 4 * D DISMISSING THESE TREVC 'S WITHOUT COSTS ?-\tl \-\' i I i l i I j |' l l l l . ,l j l l : i : . i I I I ; I I
Reproduced from the public record of the Telangana High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.