TMI Blog2011 (1) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... not able to accept the submission of the petitioners, writ petitions fail and are accordingly dismissed - Writ Petition Nos. 9683 and 9701 of 2010 - - - Dated:- 19-1-2011 - V. V. S. Rao, Ramesh Ranganathan, JJ. S. Sasidhar Reddy for the Petitioner A.V. Krishna Kaundinya, Special Counsel for Commercial Tax for the Respondent ORDER V. V. S. Rao, J:- These two writ petitions are filed by M/s. A. P. Aksh Broad Band Limited against two assessment orders passed on March 29, 2010 for the assessment years 2005-06 and 2006-07 under the Andhra Pradesh Value Added Tax Act, 2005 ("the VAT Act", for brevity). The factual background and the respondents are the same. Therefore, a common order would be proper. The petitioner-company is a VAT dealer on the rolls of the first respondent. It is engaged in the business of undertaking laying of fibre cables required for the telecom industry. The second respondent, namely, Andhra Pradesh Telecom Department (also referred to as A. P. Technologies Services) entrusted to the petitioner the job for laying of cables in Andhra Pradesh for a consideration of Rs. 370 crores. The petitioner entrusted the work on sub-contract t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to avoid payment of 12.5 per cent of the disputed tax for maintaining the appeal before the appellate authority. It is further stated that though the petitioner objected to the show-cause notice of assessment under section 4(7)(a) of the VAT Act stating that they did not execute any works contract, they had failed to discharge the burden of proving that the sale or purchase effected by the dealer was not liable to tax. Absence of such proof disproved the contention that material worth about Rs. 19,94,79,886 was used for captive consumption, and not in the business of telecom. In the reply affidavit, the following averments and allegations are made by the petitioner. As the work was put "on hold" by the principal employer, the cables laid in the meanwhile by the petitioner could not have been treated as "appropriated" in pursuance of the works contract, and the petitioner had no other option except to capitalise the value of the cables laid by the petitioner on the premise that it was used for self-consumption duly making an entry in the balance sheet. The first respondent failed to requisition the balance sheet. Non-submission of the same is bona fide on account of lack of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtially. The works included purchase of cables from the third respondent which attract either four per cent or 12.5 per cent VAT. For the period from December, 2005 to March, 2006, the petitioner filed return showing non-creditable purchase value of Rs. 53,11,00,392, and purchases taxable at four per cent of Rs. 1,49,31,451 as well as purchases taxable at 12.5 per cent of Rs. 9,19,244. In their VAT return for 2006-07, they revealed non-creditable purchases, purchases taxable at four per cent and purchases taxable at 12.5 per cent at Rs. 14,78,13,061, Rs. 5,13,76,585 and Rs. 2,87,240 respectively. The petitioner, however, did not declare the resultant output tax in the VAT returns. In reply to the show-cause notice the petitioner stated that, during 2005-06, the works contract for laying fibre cable was not commenced due to unavoidable reasons, they did not submit the bills and, therefore, levy of tax on works contract does not arise ; since they did not execute works contract, during December, 2005 to March, 2006, there is no output tax payable and no RA bills were raised against A. P. Technologies Services Limited ; levy of tax at four per cent by adding the incorporation value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Explanation VI:- Whenever any goods are supplied or used in the execution of a works contract, there shall be deemed to be a transfer of property in such goods, whether or not the value of the goods so supplied or used in the course of execution of such works contract is shown separately and whether or not the value of such goods or material can be separated from the contract for the service and the work done. (Explanations VII and VIII:- Omitted as not relevant) 2. (29) 'Sale price' means,- (a) the total amount set out in the tax invoice or bill of sale; or (b) the total amount of consideration for the sale or purchase of goods as may be determined by the assessing authority, if the tax invoice or bill of sale does not set out correctly the amount for which the goods are sold; or (c) if there is no tax invoice or bill of sale, the total amount charged as the consideration for the sale or purchase of goods by a VAT dealer or TOT dealer either directly or through another, on his own account or on account of others, whether such consideration be cash, deferred payment or any other thing of value and shall include,- (i) the value of any goods as determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be appropriated by the contractee or the employer to bring the transaction within the ambit of taxable sale of goods. When once the goods are supplied or used in the execution of a works contract for consideration, the taxable event exists for the purpose of the VAT Act. If only the Legislature intended that a sale or deemed sale, in relation to a works contract, would be excisable to tax only when the goods supplied or used are appropriated by the employer, the Legislature would have indicated it to be so. Even remotely, there is no such indication nor is any such interpretation possible in view of the law laid down by the Supreme Court. In Builders Association of India v. Union of India [1989] 73 STC 370 (SC) ; [1989] 2 SCC 645, the validity of the Constitution (Forty-sixth) Amendment Act was upheld. The Constitution Bench of the Supreme Court observed as follows (page 396 in 73 STC):- " ...It refers to a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract. The emphasis is on the transfer of property in goods (whether as goods or in some other form). The latter part of clause (29A) of article 366 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the levy of the tax has to be the value of the goods at the time of incorporation of the goods in the works and not the cost of acquisition of the goods by the contractor. We are also unable to accept the contention urged on behalf of the States that in addition to the value of the goods involved in the execution of the works contract the cost of incorporation of the goods in the works can be included in the measure for levy of tax. Incorporation of the goods in the works forms part of the contract relating to work and labour which is distinct from the contract for transfer of property in goods and, therefore, the cost of incorporation of the goods in the works cannot be made a part of the measure for levy of tax contemplated by article 366(29A)(b)." In 20th Century Finance Corpn. Ltd. v. State of Maharashtra [2000] 119 STC 182 (SC) ; [2006] 6 SCC 12, interpreting the latter portion of article 366(29A), the Supreme Court held (pages 201 and 202 in 119 STC):- " . . .The various sub-clauses of clause (29A) of article 366 permit the imposition of tax thus : sub-clause (a) on transfer of property in goods; sub-clause (b) on transfer of property in goods ; sub-clause (c) on del ..... X X X X Extracts X X X X X X X X Extracts X X X X
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