TMI Blog2014 (9) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... of execution of the contract from the quarry from which it is taken out. In doing so, the petitioner incurred transportation charges as he had to transport the gravel by hiring lorries. These amounts were also collected by the petitioner from the contractee, i.e., the A.P. State Police Housing Corporation. This element of transportation charges becomes part of the value of gravel when it is incorporated in the works as held in Seven Hills Constructions case [2014 (9) TMI 110 - ANDHRA PRADESH HIGH COURT]. The contention of the petitioner that the transportation expenses for transport of gravel come in the category of "other similar expenses relatable to supply of labour and services" in clause (g) of rule 6(2) of the Rules framed under the Act is also not valid because gravel supply charges or transportation charges are not similar to supply of "labour" or "services", although they may be similar to supply of "goods". Transportation charges are not deductible as they are not specifically mentioned in rule 6(2) of the Rules. - Decided against assessee. - TREVC Nos. 101, 112 of 2012 & W.P. Nos. 23984, 24015 of 2012 - - - Dated:- 6-12-2012 - GODA RAGHURAM AND RAMACHANDRA RAO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CTO/assessing officer. In the said returns, it included a sum of ₹ 40,30,754 under the category earth filling charges and claimed it as an exemption. It contended that this portion of the turnover represents the charges for lifting and transporting of gravel to the worksite and that this amount is exempted from levy of sales tax under section 5F of the Andhra Pradesh General Sales Tax Act, 1957 (for short, the Act ) read with rule 6(2) of the Rules framed under the Act. The assessing officer/CTO, by proceedings dated May 5, 2000 completed final assessment and held that under section 5F of the Act, the Government levies tax on transfer of property in the goods involved in the execution of works contract, that the goods enumerated in the Schedules to the Act are subject to tax, that under rule 6(2) of the Rules framed under the Act, certain deductions are permissible in determining the taxable turnover of the contractor, that the petitioner's claim for exemption of ₹ 40,30,754 representing the value of gravel used in the above works contract from levy of sales tax is valid as per G.O. Ms. No. 1091 Revenue, dated June 10, 1957 (wherein earth work and gravel qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dules to the Act are subject to tax, that under rule 6(2) of the Rules framed under the Act, certain deductions are permissible in determining the taxable turnover of the contractor, that the petitioner's claim for exemption of ₹ 40,30,754 representing the value of gravel used in the above works contract from levy of sales tax is valid as per G.O. Ms. No. 1091 Revenue, dated June 10, 1957 (wherein earth work and gravel quarrying contracts are exempted from levy of sales tax vide item No. 11 of the said G.O.) and therefore the petitioner is entitled to deduct the said amount from his taxable turnover. He therefore excluded the said amount from the taxable turnover of the petitioner, arrived at the net turnover and calculated tax at the rate of six per cent thereon. Similarly, for the assessment year 2000-01, the petitioner filed return claiming an exemption of ₹ 9,49,220 contending that this portion of the turnover represents the charges for lifting and transporting of gravel to the worksite and that this amount is exempted from levy of sales tax under section 5F of the Act read with rule 6(2) of the Rules framed under the Act. By order dated September 17, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l earth works and gravel quarrying contracts are eligible for exemption. Copies of the agreement with the A.P. State Police Housing Corporation Limited, Hyderabad, were filed before the revisional authority. The revisional authority by order dated January 30, 2002 and September 21, 2004 held that for the assessment years 1998-99 and 2000-01, the petitioner is not entitled to seek deduction of the above amounts from his turnover, and the said amounts are liable for levy of sales tax under section 5F of the Act. He held that clause 4.18 of the agreement between the petitioner and the said Corporation provided that the petitioner shall make his own arrangements for supply of all materials including cement and steel unless otherwise specified, that the petitioner shall be responsible for all transportation and storage of materials at the site and shall bear all related costs; that as per clause 4.4.1 of the said agreement, every tenderer was expected before quoting his rates to inspect the site of the proposed work, that he should also inspect the quarries and satisfy himself about the quality and availability of materials; that the petitioner collected amounts from the contractee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss otherwise specified, that the petitioner shall be responsible for all transportation and storage of materials at the site and shall bear all related costs; that as per clause 4.4.1 of the said agreement, every tenderer was expected before quoting his rates to inspect the site of the proposed work, that he should also inspect the quarries and satisfy himself about the quality and availability of materials; that the petitioner collected amounts from the contractee for supply of gravel and for using it in the works; that he cannot claim exemption on the ground that he incurred expenditure on transport, etc.; that the contract is for construction of civil works specified therein and earth filling is only a part of it and as labour charges are already deducted from the total amount received, no further deduction/exemption is permissible on the value of the gravel supplied during the execution of the works contract. He also held that the audited trading account filed by the dealer for the assessment year 2000-01 at the time of final assessment indicated the amount of ₹ 9,49,220 under the caption gravel supply charges , that it represents the value of gravel used by the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of it and as labour charges are already deducted from the total amount received, no further deduction/exemption is permissible on the value of the gravel supplied during the execution of the works contract. He also held that the audited trading account filed by the dealer for the assessment year 2000-01 at the time of final assessment indicated the amount of ₹ 9,49,220 under the caption gravel supply charges , that it represents the value of gravel used by the contractor in the works and that even if the said amount includes the value of transportation, it adds up to the ultimate value for which the property in gravel is transferred to the contractee. He therefore rejected the objections of the petitioner and confirmed the levy of sales tax on the above turnovers. Aggrieved thereby, the petitioner filed before the Sales Tax Appellate Tribunal, Visakhapatnam, TA No. 979 of 2002 in respect of the order of the revisional authority dated January 30, 2002 for the assessment year 1998-99 and TA No. 939 of 2005 in respect of the order of the revisional authority dated September 21, 2004 for the assessment year 2000-01. The said appeals were rejected by the Tribunal by se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xempted from levy of sales tax vide the item No. 11 of the said G.O. and transportation charges/earth supplying charges come within this G.O. and hence are exempted from levy of tax; (e) Even otherwise, clause (g) of rule 6(2) of the Rules provides for a deduction of other similar expenses relatable to supply of labour and services from the total turnover of a dealer executing a works contract, that the transportation charges/gravel supply charges would fall within this clause and therefore they cannot be subjected to levy of sales tax. The Special Government Pleader for Commercial Taxes on the other hand submits that- (a) the petitioner is not doing earth work which is exempted under G.O. Ms. No. 1091 Revenue dated June 10, 1957 but is doing civil contract works of which only a small portion is earth filling work. (b) the gravel is admittedly supplied by the Department of Jails, Home Department, Government of Andhra Pradesh but the said Department is not a party to the contract between the petitioner and the A.P. State Police Housing Corporation Limited, that the latter is the contractee and therefore it has to be treated that the petitioner acquired the gravel at z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. (b) the gravel is admittedly supplied by the Department of Jails, Home Department, Government of Andhra Pradesh but the said Department is not a party to the contract between the petitioner and the A.P. State Police Housing Corporation Limited, that the latter is the contractee and therefore it has to be treated that the petitioner acquired the gravel at zero cost to which the transportation charges should also be added to arrive at the value of the gravel at the time of incorporation into the works. (c) In State of Andhra Pradesh v. Seven Hills Constructions [2012] 54 VST 66 (AP) [FB], a Full Bench of this court had held that the value of goods under rule 6(3)(i) would not only include the costs of acquisition of goods by the contractor-dealer but also the transportation charges incurred by him to deliver the goods to the situs of the works wherein they are incorporated. Therefore, the transportation charges of gravel are liable to be included in the taxable turnover and subjected to levy of tax. We have noted the respective contentions of the parties. In the present case, the petitioner had entered into an agreement dated January 16, 1998 with the A.P. State Poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dealer is deemed to be the value of the goods purchased and supplied or used in the execution of such contracts in that year; that it provides another method for arriving at the turnover of the dealer and the value of the goods under rule 6(3)(i) would not only include: We have noted the respective contentions of the parties. In the present case, the petitioner had entered into an agreement dated January 16, 1998 with the A.P. State Police Housing Corporation Limited (a State Government Undertaking) for construction of part of external compound wall, administrative building, court buildings, special cells, watch towers, etc., for rehabilitation centre for social offenders at MoulaAli, Ranga Reddy District. It is contended that the Department of Jails, Home Department, supplies gravel free of cost to the petitioner and the petitioner transports the gravel from the place where it is found to the place where it is required in the execution of the above works. The petitioner filed a certificate dated April 17, 2000 issued by the Deputy Executive Engineer, A.P. State Police Housing Corporation, certifying that earth utilized for filling the foundations and basement for the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assuming that gravel is obtained free of cost by the petitioner from the Department of Jails, it is to be taken that the petitioner acquired the gravel at zero cost but the said gravel has to be transported to the place of execution of the contract from the quarry from which it is taken out. In doing so, the petitioner incurred transportation charges as he had to transport the gravel by hiring lorries. These amounts were also collected by the petitioner from the contractee, i.e., the A.P. State Police Housing Corporation. This element of transportation charges becomes part of the value of gravel when it is incorporated in the works as held in Seven Hills Constructions case [2012] 54 VST 66 (AP) [FB]. As rightly held by the Tribunal, any expense incurred for bringing the material to work spot would go in accretion to the material value and the value of the material at the time of incorporation which is the basis for computing the taxable turnover under section 5F of the Act. G.O. Ms. No. 1091 Revenue dated June 10, 1957 no doubt exempted earth work and gravel quarrying contracts from levy of sales tax. But in the present case, the petitioner is not executing contracts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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