TMI Blog2015 (2) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... y this Court in [2015 (2) TMI 472 - ANDHRA PRADESH HIGH COURT]. CAN THE POWER OF REVISION BE EXERCISED WHEN THE ORDER OF THE STAT HAS ATTAINED FINALITY? - Held that:- Even in the absence of a provision, similar to the proviso to Section 32, the decision of the STAT, on a question of law, would bind the assessing authority. However, as noted hereinabove, the order of the STAT was passed in ignorance of the relevant statutory provisions, and is contrary to the law declared by the Supreme Court in Gannon Dunkerly [1992 (11) TMI 254 - SUPREME COURT OF INDIA] and the Full bench of this Court in Seven Hills Constructions [2014 (9) TMI 110 - ANDHRA PRADESH HIGH COURT], and is not a decision on a question of law which alone would bind the revisional and assessing authorities. As the orders of the revisional and assessing authorities are in accordance with the statutory provisions both plenary and subordinate, and the law declared in the aforesaid judgments, the impugned revisional and assessment orders do not necessitate interference on this score. Clarification the Advance Ruling Authority - whether Binding - Held that:- Under Section 67(4)(iii) of the A.P. VAT Act, the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of the doctrine of promissory estoppel, must therefore fail. Conclusion - Held that:- While NECL is liable to pay tax on the turnover relating to execution of the works contract for KPCL, the provisions of the Act and the Rules obligate KPCL to deduct tax at source from the running account bills of NECL. However both NECL and KPCL cannot be subjected to tax on the very same transactions. The respondents shall grant NECL reasonable time to produce TDS certificates from KPCL. In case NECL fails to submit the TDS certificates within such stipulated period, it is open to the respondents thereafter to recover the said amount, along with other tax dues, from them in accordance with law. The impugned orders of the revisional and assessing authorities subjecting NECL to tax under Rule 17(1)(e) of the Rules, on completion of the financial year, is upheld. With regards payment of tax, for the works executed by them for KPCL, the respondents shall consider the claim of NECL for composition, provided they have complied with the requirements of Rule 17(2) of the AP VAT Rules. It is made clear that this order shall not preclude the respondents from instituting penal proceedings, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sub-contractors; they were informed that the turnover, regarding the port contract, was exempt from tax ; they did not, therefore, disclose the turnover relating to port construction in their returns; the assessing authority issued show-cause notice dated 26.05.2014 proposing to levy tax on the turnover for the assessment year 2012-13, alleging that correct amounts had not been declared in the VAT returns; for the financial year 2012-13, they were due ₹ 10.24,87,886/- as arrears of tax for the turnover relating to the execution of works contracts, out of which ₹ 8,37,97,100/- related exclusively to the construction of the Krishnapatnam port for KPCL; they had, subsequently disclosed the turnover relating to the execution of works at Krishnapatnam; they were also asked to show-cause why the works under progress should not be assessed under Rule 17(1)(e) of the A.P. Vat Rules, 2005 (Rules for short); they had filed their objections to the show-cause notice, whereby tax was proposed to be levied on the turnover relating to the works undertaken for KPCL; they had contended that, as per the terms of the agreement dated 17.09.2004, GoAP had agreed to forego revenue receipts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the time of finalization of accounts; the additional turnover, if any, should be reported in the month in which the accounts are finalized; and the differential tax payable should be paid; they had filed a review petition, before the Authority for Advance Ruling, on 12.06.2013 under Section 67(2) of the Act; they had also requested the authorities to defer the revision/reassessment proceedings till disposal of the review petition pending before the Advanced Ruling authority; they had also filed a rectification petition before the authority; they are entitled for the benefit of composition under Rule 17(2) of the Rules for the works executed for KPCL, and cannot be subjected to tax under Rule 17(1)(g); and, in the light of the order of the STAT in T.A. No.110 of 2012 dated 23.04.2012, exercise of the power of revision under Section 32(2) of the Act is barred. In the counter-affidavit filed by the Deputy Commissioner (CT), Visakhapatnam, it is stated that, as the agreement dated 17.09.2004 was entered into between the State of A.P. and KPCL, the Writ Petition is liable to be dismissed for non-joinder of the State of A.P. or the Secretary, Transport, Roads and Buildings; the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Government regarding execution of various contract works in the State; at this juncture, and on the apprehension that non- disclosure of a huge turnover may result in action being taken against them, NECL had on 18.10.2013 reported the turnover of ₹ 2120.44 crores as the escaped turnover which is exempt from tax under the Act; the petitioner had willfully suppressed this turnover; Rule 17(1)(d) is applicable only when the accounts are not finalized at the time of provisional assessment; in the present case as accounts have been finalized, NECL is liable to pay tax only in terms of Rule 17(1)(e); the review application filed by NECL before the Advance Ruling Authority is not maintainable; the petitioner is guilty of suppression of material facts, and have attempted to mislead the Court; and they have failed to avail the alternative remedy of appeal under the Act. In the affidavit filed in reply thereto, it is stated that, though the petitioner is not a party to the agreement, it would have a debilitating affect on their finances; the petitioner is a mere works contractor and KPCL is its employer; whatever benefit is made available to KPCL is automatically passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elated issues; if this Court were to hold that, after the introduction of the A.P. VAT Act, there cannot be any tax exemption, but only refund of tax, then the following consequences would ensue; in para 6 of its memorandum of written submissions, KPCL has stated that the following amounts have been remitted to the Government as TDS, after having been deducted from the payments due to the petitioner:- Period: Amount remitted towards TDS Sept 07 March 08 Rs.16,63,79,337/- Sept 08- March 09 Rs.11,06,25,978/- Sep 09- March 10 Rs.8,30,63,846/- these amounts would have to be given credit to, against the tax demands on the petitioner for the respective years, and these amounts would have to be refunded to the petitioner in accordance with G.O.Ms. No.609 dated 29.05.2006; subject to the decision of this Court, on the question of taxability or otherwise of the port construction activities, the petitioner would be eligible to claim refund, on the taxes withheld by KPCL, for the assessment year 2010-11 of ₹ 7,39,03,600/-, and ₹ 6,72,95,180/- for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or concession, must establish that he is entitled thereto; if any exemption is available on compliance of certain conditions, these conditions must be complied with; no concession would be available on failure to comply with those conditions; regulatory or statutory requirements are prescribed to ensure orderly conduct of the business, and must be complied with; mere attempt at compliance will not suffice, and actual compliance is mandatory; the petitioner has neither complied with the statutory requirements nor with the procedural requirements of G.O.Ms. No.609; they are not entitled to any relief from payment of tax as mandated under Section 4(7)(a) of the AP VAT Act; Clause 2.3, 13.2 and 13.3 of the revised concession agreement make Clause 3.16 thereof subservient to the provisions of the new tax law i.e. the AP VAT Act; NECL, having invoked G.O.Ms. No.609 dated 29.05.2006 and obtaining benefits thereunder, cannot now turn around and contend that the benefits they are entitled to is in terms of Clause 3.16 of the revised concession agreement, and not G.O.Ms. No.609; the doctrine of promissory estoppel cannot be invoked by them against the GoAP; and NECL had obtained ₹ 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 29.05.2006; NECL was also given refund, as per the said G.O, on the inputs purchased by them; NECL had availed the benefit, and had obtained refund, making an application therefor; the doctrine of promissory estoppel would apply only if there is a specific promise made by one party based on which action is taken by the other; the said doctrine cannot be pressed in aid to compel the Government or the public authority to carry out a representation or promise which is contrary to law; a clear and positive foundation must be laid by the assessee, that they had altered their position relying on the assurances given by the Government; no promise was given by the State regarding their liability to pay tax on the transfer of property involved in the execution of the works contract; NECL had also not stated that, acting upon the promise, they had altered their position to their detriment; a bald plea cannot form the foundation for invoking the doctrine of promissory estoppel; the turnover, reported by the assessee, was the turnover which escaped in the earlier assessment; this was brought to tax during the revision; and there was a clear intention, on the part of the assessee, to avoid th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a payment of tax on behalf of the dealer executing the works contract, and credit shall be given to the said dealer, for the period for which the amount was so deducted, on production of the certificate furnished by the contractee under Rule 18. It is evident from Rule 18(2) that the TDS amount, deducted by KPCL and paid to the Government, is required to be treated as payment of tax made on behalf of NECL; and NECL is entitled to be given credit, for the tax deducted at source from their bills, on production by them of a certificate furnished by KPCL in this regard. While KPCL has, for certain tax periods, deducted tax at source and has paid the deducted tax in its entirety to the Government, for certain other periods it has only paid a part of the tax deducted at source to the Government, and for certain other periods it has not paid a single rupee to the Government, though it had deducted TDS from the running account bills of NECL. During the course of hearing Sri S. Ravi, Learned Senior Counsel appearing on behalf of NECL, stated across the bar that NECL had sought for, and was granted, refund of the tax deducted at source by KPCL and paid to the Government during the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 17(1)(d) of the Rules; this is eminently a justifiable view; the revenue was called upon to state whether any revision was preferred against the order of the STAT in T.A. No.110 of 2012 dated 23.04.2012; at any rate the revenue has not contended that the said order of the STAT is upset; suffice it to state that there is a material difference between Rule 6(3) of the APGST Rules, and Rules 17(1)(d) and (e); what is the correct interpretation to be placed on these rules is not the subject matter of enquiry in these Writ Petitions; and the petitioners limited submission is that, under the proviso to Section 32(2) of the Act, the power of the revisionary authority is excluded, and there is a bar for the exercise of the revisionary jurisdiction. On the other hand Sri P. Balaji Verma, Learned Special Standing Counsel, would submit that the assessment order, adding a profit element for arriving at the value of the goods, at the time of its incorporation, is in accordance with the law; in Gannon Dunkerly Co. v. State of Rajasthan (1993) 88 STC 204, the Supreme Court held that it is the incorporation value that constitutes the measure for levy of tax; the incorporation value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et aside such order or proceeding and to pass such order in reference thereto as he thinks fit. Under Section 32(2) the powers, of the nature referred to in sub-section (1), can also be exercised by the Additional Commissioner, the Joint Commissioner, the Deputy Commissioner and the Assistant Commissioner, in the case of orders passed or proceedings recorded by the authorities, officers or persons subordinate to them. The proviso to Section 32 of the A.P. VAT Act is similar to Section 20(2-A) of the APGST Act, the scope of which fell for consideration in several judgments of this Court. It is useful to read Section 20(2A) of the APGST Act in juxta-position with the proviso to Section 32 of the AP VAT Act as it originally stood, and the proviso to Section 32 of the AP VAT Act after it was substituted by Act 21 of 2011 with effect from 15.09.2011. Section 20 (2-A) of the APGST Act Proviso to Section 32 of the AP VAT Act prior to its amendment Proviso to Section 32 of the AP VAT Act after its amendment by Act 21 of 2011 with effect from 15.09.2011 The power under sub-section (1) or sub-section (2) shall not be exercised by the authority specified therein in respect of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Act before its amendment by Act 21 of 2011 with effect from 15.09.2011 and, except for a part thereof, is identical to the proviso to Section 32 of the A.P. VAT Act after its amendment, the law declared by the Full bench of this Court in Indo National Ltd4, on the interpretation placed on Section 20(2-A) of the APGST Act, would also apply to the proviso to Section 32 of the Act, both before and after its amendment by Act 21 of 2011. B. EXERCISE OF APPELLATE JURISDICTION BY THE STAT: ITS DECISION ON A QUESTION OF LAW IS BINDING ON THE OFFICERS OF THE COMMERCIAL TAX DEPARTMENT: The order passed by the Appellate Deputy Commissioner or the revisional authority can be subjected to appeal before the STAT under Section 33 of the Act. An appeal is the removal of a cause from an inferior to a superior judge or court for re-examination or review. (Tirupati Balaji Developers (P) Ltd. v. State of Bihar (2004) 5 SCC 1 ; Chappan v. Moldin Kutti 1899 (22) ILR (Mad) 68). The removal of a cause is for the purpose of testing the soundness of the decision of the inferior court. The words appellate jurisdiction mean the power of a superior court to review the decision of an inferior court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in our country, to accept loyally the decisions of the higher tiers. The better wisdom of the court below must yield to the higher wisdom of the court above. (Tirupati Balaji Developers (P) Ltd.; CCE v. Dunlop India Ltd.(1985) 1 SCC 260 ; Cassell Co. Ltd. v. Broome(1972) 1 ALLER 801). While the declaration of law by the Supreme Court and the jurisdictional High Court would bind the STAT, the decision of the STAT would bind all the authorities of the Commercial Tax Department, who are lower in the hierarchical structure, including the revisional authority, the first appellate authority and the assessing authority. (Tirupati Chemicals, Vijayawada v. Deputy Commercial Tax Officer (2011) Vol. 52 APSTJ 48 (APHC: DB) ). A lower authority is obligated to follow the decisions of a higher Court/Tribunal even in the absence of a specific statutory provision in this regard. The proviso to Section 32 for the A.P. VAT Act only emphasises this requirement. C. WHAT IS A DECISION ON A QUESTION OF LAW? The word decided, used in the proviso to Section 32 of the A.P. VAT Act, is significant. In view of the law declared by the Full Bench of this Court, in Indo-National Ltd4, it is only a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of U.P. v. Synthetics and Chemicals Ltd. (1991) 4 SCC 139 ; B. Shama Rao v. Union Territory of Pondicherry AIR 1967 SC 1480 ). D. DECISION OF THE STAT ON A QUESTION OF LAW, RENDERED EITHER IN IGNORANCE OF THE STATUTORY PROVISIONS OR CONTRARY TO THE LAW DECLARED BY THE SUPREME COURT OR THE JURISDICTIONAL HIGH COURT, WOULD NEITHER BIND THE REVISIONAL AUTHORITY NOR BAR EXERCISE OF THE POWERS OF REVISION: Against the order of the STAT, in T.A. No.110 of 2012 dated 23.04.2012, the State Government has, for reasons best known, not carried the matter in revision to this Court under Section 34 of the A.P. VAT Act. The order of the STAT has, therefore, attained finality. Would that mean that, even if the decision of the STAT is erroneous, is in ignorance of the relevant statutory provisions and is contrary to the law declared by the Supreme Court and this Court, it would still bind the lower authorities for all times to come? As the order of the STAT, in T.A. No.110 of 2012 dated 23.04.2012, has attained finality, the assessment for 2008-2009, to which period the said order related to, cannot be reopened. Merely because the order of the STAT has attained finality would not justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the turnover, and that the correct interpretation to be placed on Rule 17(1)(d) (e) of the A.P. VAT Rules is not the subject matter of enquiry in this writ petition, this Court has, necessarily, to examine whether the STAT, in its order in T.A. No.110 of 2012 dated 23.04.2012, has noticed the relevant statutory provisions and has considered the binding precedents of the Supreme Court and this Court, for it is only then would the order of the STAT constitute a decision which would bar exercise of the revisional jurisdiction under the proviso to Section 32 of the Act. Against the assessment order passed by the Assistant Commissioner dated 30.03.2011, for the period 01.04.2008 to 31.03.2009, NECL carried the matter in appeal to the Appellate Deputy Commissioner who, while remanding the matter, directed the assessing authority to make a de-novo assessment duly following Section 4(7)(a) of the Act, after allowing the deductions prescribed under Rule 17(1)(e) of the Rules; and to levy tax at the standard rate of 12.5% under the V Schedule to the Act. Aggrieved thereby, NECL carried the matter in appeal to the STAT. In its order, in T.A. No.110 of 2012 dated 23.04.2012, the STAT note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rriving at the correct value of the goods when they were incorporated or used in the execution of a works contract; in order to safe guard the revenue of the Government, Rules were framed under the Act, and a comprehensive procedure was prescribed; these Rules indicated that, in computing the turnover of a works contractor, the purchase price was not the true value; the purchase price of the goods, used in the execution of the works contract, must include incidental charges such as seigniorage charges, blasting and breaking charges, transport charges etc; Rule 17(1)(d) was specifically framed, under the Rules, only to safeguard the interests of the revenue; the second proviso, adumbrated under Rule 17(1)(e), showed that when a contract has been executed by a dealer, and if he files his returns after completion of the works contract, he must declare in that return, after the finalisation of the accounts in respect of that completed works contract, the tax payable by them; the additional tax payable, for the work completed by them, must be declared in the returns of that month; the Act provides for self-assessment; a dealer is required to file his returns every month which is the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax accordingly; taking into consideration these aspects, the Government had framed Rule 17(1)(d) and (e) which are consistent with the nature of the works being executed by works contractors; the Government correctly arrived at the decision that a works contractor may not be in a position to complete the work in a month to declare the incorporation value including profit; the second proviso to Rule 17(1)(e) specifically stipulates that the dealer should declare and pay the additional tax payable, soon after completion of execution of the works contract, by impliedly adding the actual profit derived while computing the incorporation value of the goods involved in the execution of the works contract; the Deputy Commissioner was wrong in holding that Rule 17(1)(d) (e) were inconsistent with Section 4(7)(a) of the Act; the Deputy Commissioner had also erred in directing the assessing authority to levy tax at 12.5% holding that the accounts were not clear; the assessing authority should delete the gross profit, while computing the turnover under Section 4(7)(a), for the uncompleted works; tax should be levied after ascertaining the true value of the goods, in accordance with Rule 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined taking into account the value of the entire works contract and deducting therefrom the charges towards labour and services. On the question whether or not the order of the STAT is contrary to the law declared by the Full Bench of this Court in Seven Hills Constructions3, it is necessary at the outset to note the relevant provisions of the APGST Act, and the Rules made thereunder, which fell for consideration in Seven Hills Constructions3, and examine whether they are similar to the provisions of the A.P. VAT Act which arose for consideration before the STAT in T.A. No.110 of 2012 dated 23.04.2012, and those under consideration in the present batch of cases. Section 5-F of the APGST Act related to levy of tax on the transfer of property of goods involved in the execution of a works contract and stipulated that every dealer should pay a tax under the Act, for each year, on his turnover on the transfer of property of goods involved in the execution of a works contract. Rule 6(2) of the APGST Rules, which required the tax under Section 5-F of the Act to be levied on the turnover of a dealer who transferred property in goods involved in the execution of a works contract, stipula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able, for arriving at the value of the goods at the time of incorporation ie (i) labour charges for execution of the works; (ii) charges for planning, designing and architects fees; (iii) charges for obtaining, on hire or otherwise, machinery and tools used for the execution of the works contract; (iv) cost of consumables such as water, electricity, fuel, etc., used in the execution of the works contract; (v) cost of establishment of the contractor to the extent it is relatable to supply of labour and services; (vi) other similar expenses relatable to supply of labour and services; (vii) profit earned by the contractor to the extent it is relatable to supply of labour and services; and (viii) amounts paid to the sub-contractor as consideration for the execution of works contract. Under the first proviso to Rule 17(1)(e), the contractor-VAT dealer is required to arrive at the value of the goods at the time of incorporation, tax rate wise, from out of the taxable turnover arrived at as per Rule 17(1)(e) on a pro-rata basis, taking the ratio of the value of goods liable to tax at different rates, against the total value of purchases relating to such contract. Under the second proviso, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts paid or payable to the dealer for executing such works contracts; Rule 6(3)(i) merely provides another method, a direct manner, of determining the turnover on the basis of the value of the goods purchased and supplied or used in the execution of works contracts in that year, instead of arriving at the turnover under Rule 6(2) by deducting certain items of expenditure from the gross receipts paid or payable to the contractor-dealer; as Rule 6(3)(i) must be read harmoniously with Section 5-F of the Act, and as the charge to tax under the Act is on the transfer of property in the goods involved in the execution of works contract, the law laid down by the Supreme Court in Gannon Dunkerley2 would equally apply to the provisions of the APGST Act, and the Rules made thereunder; where books of accounts are separately maintained each year, for the works contracts, ascertaining profits arising therefrom would present no difficulty; unlike other components, the profit element in the value of the goods may necessitate estimation in cases where the books of accounts are not maintained annually, but project-wise; estimation of profit would then be a matter for determination by the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructions3 is that the point of levy of tax is on the transfer of property in the goods involved in the execution of the works contract. In view of the non-obstante clause, in the charging Section 4(7)(a) of the Act, the liability to pay tax is on the value of the goods at the time of incorporation of such goods in the works executed. As Section 5-F of the APGST Act, like Section 4(7)(a) of the A.P. VAT Act, subjects the value of the goods involved in the execution of the works contract to tax, the law declared by the Full bench of this Court, in Seven Hills Constructions3, would also apply to the provisions of the A.P. VAT Act and the rules made thereunder, and would require Rules 17(1)(d), 17(1)(e) of the Rules and its two provisos, to be read harmoniously with Section 4(7)(a) of the Act, and not to be in conflict therewith; if these rules comes into conflict with Section 4(7)(a) of the Act, the latter would prevail; the Rules should be interpreted in a manner so as to be in conformity with the provisions of the Act, and not the other way round; and, if Rule 17(1)(e) and its two provisos go beyond or are contrary to what Section 4(7)(a) of the Act contemplates, the Rules must yiel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the proviso must be understood with reference to a particular financial year, and not at the end of the project after several years; this is because works contractors are required to finalise their accounts every year for each work, and report revenue profit as per the standards prescribed under the Companies Act; the meaning of the proviso is that if the dealer files returns, adopting the method of additions to the purchase price of material as prescribed in Rule 17(1)(d), he has to report the correct taxable turnover, and pay the balance tax after finalisation of accounts at the end of the financial year; in the exercise of the powers conferred under Section 211(3C) of the Companies Act, the Central Government had notified the Companies Accounting Rules, 2006; these accounting standards are mandatory for all companies; accounting standards under AS7 deal with construction contracts; as per the revised standard AS7, the percentage of completion method, on a year to year basis, is the only method adopted in contracts extending for more than a year to arrive at the revenue; as per these standards, companies are required to maintain records showing all types of costs and expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the value determined in terms of Rule 17(1)(d), then the value of the goods, as determined under Rule 17(1)(d), shall be the value of the goods liable to tax under Section 4(7)(a) of the Act. The second proviso qualifies Rule 17(1)(e) of the Rules. A proviso qualifies the generality of the main enactment by providing an exception and taking out from the main provision a portion which, but for the proviso, would be a part of the main provision. A proviso must, therefore, be considered in relation to the principal matter to which it stands as a proviso. A proviso should not be read as if providing something by way of addition to the main provision which is foreign to the main provision itself. (J.K. Industries Ltd. v. Chief Inspector of Factories Boilers ; CIT v. Indo Mercantile Bank Ltd. ). A proviso cannot be torn apart from the main provision nor can it be used to nullify or set at naught the real object of the main provision. (S. Sundaram Pillai v. V.R. Pattabiraman ; Craies: Statute Law 7th Edn.). A proviso must be construed harmoniously with the main enactment. (Abdul Jabar Butt v. State of Jammu Kashmir ; Indo Mercantile Bank Ltd.37; Ram Narain Sons Ltd. v. Assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid twin requirements, a VAT dealer is required to pay the balance amount of tax arrived at by following Rule 17(1)(e), (i.e., the difference between the tax as computed under Rule 17(1)(e), and the tax computed under Rule 17(1)(d)), at the time of finalization of accounts relating to the particular work, and not after its completion. This is evident from the second limb, of the second proviso, which stipulates that such additional taxable turnover and the taxes payable, (i.e., the difference between the tax computed under Rule 17(1)(d) and Rule 17(1)(e)), shall be declared in the return for the month in which accounts are finalized. The requirement of the second proviso is for the payment of the balance amount of tax at the time of finalization of the accounts, and not after the work is completed in its entirety. Clause 3.3.1 of the revised concessional agreement entered into between GoAP and KPCL defines concession period to mean the period commencing from the date of execution of the agreement, for development of the Krishnapatnam Port, dated 04.01.1997 and ending on the expiry of thirty years from the commercial operations date. The said clause also entitles KPCL to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (which is at the stage of incorporation of the goods in the works), to a period several years thereafter on completion of the works which, in the present case, would be atleast after thirty years if not longer. We find considerable force in the submission of Sri P. Balaji Varma, Learned Special Standing Counsel for Commercial Taxes, that the construction placed on the second proviso to Rule 17(1)(e) by the STAT, in its order in T.A. No.110 of 2012 dated 23.04.2012, if accepted, would result in a part of the tax being levied only on completion of the project, in which event the value of the goods would not be its value at the time of incorporation, but would be the profit shown as a separate element later; it would also result in the second proviso to Rule 17(1)(e) being elevated to a charging section prescribing the point of levy of tax, on the deemed sale of goods, at the stage of completion of the entire work, and not at the stage of its incorporation in the works; and the tax so levied would then not be a tax on the sale of goods, but a tax on income which taxing power is beyond the legislative competence of the State Legislature. Rule 31 of the Rules which was taken into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncorporation. The statutory requirement under Rule 31(3), more particularly under clause (d) thereof, to maintain these records is only to enable the balance amount of tax, payable in terms of clause (e) of Rule 17(1), to be arrived at the time of finalisation of accounts which is, ordinarily, at the end of a financial year. NECL, a company incorporated under the Companies Act, is required to adhere to the provisions of the Companies Act, and the rules made thereunder. Section 210(3)(b) of the Companies Act requires the profit and loss account of the company, to be placed before the annual general meeting, to relate to the period beginning with the date immediately after the period for which the account was last submitted, and ending with a date which shall not precede the date of the meeting by more than six months. Section 210(4) of the Act stipulates that the period, to which the accounts referred to in Section 210(3)(b) relates to, shall be referred to, in the Companies Act, as a financial year; and it may be less or more than a calendar year, but it shall not exceed fifteen months. Section 2(17) of the Companies Act defines financial year to mean, in relation to anybody cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases of goods in each year. Under Section 2(36) of the AP VAT Act, Tax period means a calendar month. Unlike the APGST Act, which provided for assessment of tax every year, a tax period, under Section 2(36) of the AP VAT Act, is a calendar month. As the requirement of Rule 17(1)(e), including computation of the deductions thereunder, can be complied with, and the value of the goods at the time of incorporation determined thereunder, only on the accounts of the subject work being finalised at the end of a financial year, the second proviso to Rule 17(1)(e) was made to provide for such an eventuality, unlike under the APGST Act where no such proviso was required. While a dealer is required to compute the value of the goods, at the time of incorporation, in terms of Rule 17(1)(d) and pay tax accordingly along with their monthly returns, they are required to pay the balance tax computed in terms of Rule 17(1)(e) in the month in which the accounts are finalised at the end of a financial year. The deductions to be made, under Rule 17(1)(e), is from the total consideration received or receivable for arriving at the value of the goods at the time of incorporation. The value of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions both plenary and subordinate, and the law declared in the aforesaid judgments, the impugned revisional and assessment orders do not necessitate interference on this score. III. CLARIFICATION OF THE ADVANCE RULING AUTHORITY IS BINDING, UNDER SECTION 67 OF THE A.P. VAT ACT, ON THE OFFICERS OF THE COMMERCIAL TAXES DEPARTMENT: Sri P. Balaji Verma, Learned Special Standing Counsel for Commercial Taxes, would submit that the revisional authority issued show-cause notice dated 25.5.2013, and the petitioner filed the review petition before the Advance Ruling authority on 12.6.2013, after initiation of revisional proceedings; and Rule 67(2) bars such an application. In his order dated 31.05.2014, the Assessing Authority held that, in terms of Section 67 of the Act, the ruling/clarification given by the Advance Ruling Authority, in the case of M/s. Jai Prakash Associates Ltd, Hyderabad53, is binding on the dealers, and also on all the officers of the Department, except the Commissioner of Commercial Taxes; Section 67 of the A.P. VAT Act was upheld by the High Court in Tirupati Chemicals16; and, in view of the decision of the Advance Ruling Authority, the contention of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es relatable to supply of labour, any similar expenses relatable to labour and profit, relatable to supply of labour etc; if the works contractors had difficulty in maintaining records showing these details, they could have sought composition which they did not do; the Central Government, in the exercise of their powers under Section 211(3C) of the Companies Act, 1956, had notified the Companies (Accounting Standards) Rules, 2006 in the official Gazette; and these Rules provided for Accounting standards 1 to 7 and 9 to 29 as recommended by the Institute of Chartered Accountants of India. Section 67(1) of the AP VAT Act enables the Commissioner to constitute a State level Authority for Clarification and Advance Rulings comprising of three officers not below the rank of Joint Commissioner to clarify, in the manner prescribed, any aspect of the implementation of the Act. Section 67(2)(1) stipulates that no application shall be entertained where the question raised in the application is already pending before any officer or authority of the Department or Appellate Tribunal or any Court. Section 67(3) stipulates that no officer, or any other authority of the department, shall proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispute, the turnovers relating to the KPCL Works Contract cannot be determined under Rule 17(1) of the A.P. VAT Rules, 2005. On the applicability of Rule 17(1)(g), the revisional authority held that, as payment of tax under composition, is a concession or privilege given by the statute, the assessee has to meet all the conditions prescribed therein; NECL had violated the conditions; they had neither reported the turnover nor had they brought these facts to the notice of the assessing authority while making assessment; there was a clear intention to avoid the burden of taxation by suppression of facts; at the revisional level, NECL could not claim the right of concession, or the facility under the statute, to pay tax under the composition scheme; their contention that the escaped turnover should be considered under composition was not tenable; and the escaped turnover would be assessed to tax under Rule 17(1)(g) as proposed in the revised revision show cause notice. Rule 17(1) of the AP VAT Rules relates to the treatment of works contract. Clause (a) thereof provides that, in the case of contracts not covered by Rules 17(2) and (4), the VAT dealer shall pay tax on the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax due at 4%/5% of the amount received and shall enter such details on Form 200; and the tax due shall be paid with the return in Form Vat 200. While Rule 17(2), before its amendment by G.O.Ms. No.33 dated 21.01.2013 with effect from 15.09.2011, related to treatment of works contract executed for the State Government or Local authority under composition, and Rule 17(3) related to treatment of works contracts (other than for the State Government or the Local Authority) under composition, the distinction between works contracts executed for the State Government or the Local authority and others has been obliterated after its amendment, and the treatment of all works contracts under composition has been brought under the ambit of Rule 17(2). As Rule 17(2)(b), (prior to its amendment - Rule 17(3)(b)), requires the VAT dealer, who has opted to pay tax under composition, to pay tax at the rate of 4%/5% on the total consideration received or receivable, such dealer cannot be subjected to tax under Rule 17(1)(g) even if he has not maintained accounts to determine the correct value of the goods. Once the dealer has exercised his option for composition, by notifying the prescribed au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revised concession agreement, they are not entitled to invoke the doctrine of promissory estoppel more so as no promise has been made to them by the GoAP. In any event, a similar claim by KPCL has been negatived by this Court in its order in W.P. No.34680 of 2013. The claim of NECL, for application of the doctrine of promissory estoppel, must therefore fail. VI. CONCLUSION: While NECL is liable to pay tax on the turnover relating to execution of the works contract for KPCL, the provisions of the Act and the Rules obligate KPCL to deduct tax at source from the running account bills of NECL. However both NECL and KPCL cannot be subjected to tax on the very same transactions. The respondents shall grant NECL reasonable time to produce TDS certificates from KPCL. In case NECL fails to submit the TDS certificates within such stipulated period, it is open to the respondents thereafter to recover the said amount, along with other tax dues, from them in accordance with law. The impugned orders of the revisional and assessing authorities subjecting NECL to tax under Rule 17(1)(e) of the Rules, on completion of the financial year, is upheld. With regards payment of tax, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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