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2015 (7) TMI 230 - ANDHRA PRADESH HIGH COURT

2015 (7) TMI 230 - ANDHRA PRADESH HIGH COURT - [2015] 83 VST 51 (T&AP) - Denial of the benefit of composition under Section 4(7)(d) of the A.P. VAT Act - completed apartment - consideration & independent works contract - post-sale completion of works contract - semi-finished apartment - work contract executed prior to execution of sale deed - Held that:- Section 4(7)(d) uses the words residential apartments, houses, buildings or commercial complexes. Rule 17(4) relates to treatment of Apartment .....

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enefit of composition under Section 4(7)(d) of the Act.

The purchaser of the residential apartment, house/building etc, is the same person with whom the developer enters into the initial agreement, executes a registered deed for the sale of a semi-finished structure, and thereafter enters into a finishing agreement for completion of the semi-finished structure into a residential apartment, house, building etc. The artificial severance of the identity of the person who purchases the r .....

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e sale of a semi-finished structure, and the finishing/completion agreement entered into thereafter to make the semi-finished structure a fully built residential apartment fit for occupation, are both integrally connected with the initial agreement entered into between the developer and the prospective buyer, and is not independent thereof. The scope of the work specified in the initial agreement is split into two. While the land component and a portion of the executed work are, ordinarily, refl .....

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reement.

The liability of the dealer, to pay tax by way of composition under Section 4(7)(d) of the Act, is on the total consideration received, towards the composite value of the land and building, from the commencement of construction of the residential apartment, house, building etc., till its completion, and not merely on the consideration received for the construction of a semi-finished structure. - A construction which would make the provisions more effective and workable must .....

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bed to mean prescribed by Rules made under the Act. Rule 17(4)(b) of the Rules requires the dealer, exercising option under Section 4(7)(d), to notify the prescribed authority, on Form VAT 250, of his intention to avail composition for all works specified in Rule 17(4)(a). The requirement of notifying the authority in Form VAT 250 is stipulated in Rule 17(4)(b), to which the option under Section 4(7)(d) is subject to. Form VAT 250 requires, among others, the value of the contract to be mentioned .....

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ble. Just like separate records being maintained as aforementioned, the consideration received/receivable for the construction and sale of the apartment would also have to be divided into three distinct parts for it is only the consideration received/receivable from a prospective buyer, for the construction made between the initial agreement and execution of a registered sale deed, which, according to the revenue, would alone fall within the ambit of Section 4(7)(d). The benefit which accrues to .....

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tion prior to the sale of the building, and not thereafter. The person who enters into the initial agreement with the developer for the purchase of the apartment/building proposed to be constructed (otherwise called the prospective buyer) is the same person in whose favour a registered sale deed is executed for conveyance of a semi-finished structure, and is also the very same person with whom the completion/finishing agreement is entered into by the developer thereafter. As the option for compo .....

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yer, would fall within the ambit of Section 4(7)(d), and not merely that part of the construction undertaken prior to execution of a registered sale deed for a semi-finished structure. The residential apartments, houses, buildings and commercial complexes, referred to in Section 4(7)(d), can only mean fully constructed apartments, houses, buildings or commercial complexes, and not a semi-finished structure.

As stipulated in Rule 17(4)(e), the liability to pay tax under Section 4(7)(d .....

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of 25% of the consideration received or receivable. As tax is required to be paid even on the consideration not yet received, it is evident that the liability to pay tax, on composition under Section 4(7)(d), is also on the consideration receivable on the construction to be continued and completed, in terms of the initial agreement, after conclusion and registration of the sale of the semi-finished structure.

The VAT, at the rate prescribed in Section 4(7)(d), must be paid on the ent .....

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ould include the consideration which the developer has not yet received for the post-sale construction to be undertaken by him. The consideration still due, as referred to in the finishing/completion agreement, is the consideration stipulated in the initial agreement minus the consideration already received and reflected in the registered sale deed. It matters little, therefore, whether the right of the purchaser to sue for any defect in construction, post-execution of the sale deed, is referabl .....

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benefits of the composition scheme under Section 4(7)(d) to such dealers, for the post-sale construction made in terms of the initial agreement, is illegal and is contrary to the provisions of the AP VAT Act and the Rules made thereunder. The impugned assessment orders must therefore be, and are accordingly, set aside. - matter remanded back - Decided in favour of assessee. - Writ Petition Nos. 11528 of 2014 - Dated:- 24-4-2015 - Ramesh Ranganathan And M. Satyanarayana Murthy,JJ. For the Appe .....

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aggrieved by the denial of the benefit of composition under Section 4(7)(d) of the A.P. VAT Act (hereinafter called the Act) for the construction made by them after execution of a registered sale deed whereby a semi- constructed apartment/flat was sold to the purchaser. The petitioners, who are developers of apartment buildings, villas, houses, commercial complexes etc, identify and purchase land suitable for construction. After preparation of lay outs, and after making provision for necessary a .....

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ses only plots are initially sold, and in some others semi- constructed structures are also sold along with the plot or the undivided share of land. Approval is obtained from the concerned authorities before commencement of construction, and prior to the sale of land. The petitioners execute a conveyance in favour of the purchaser, either in respect of the plot of land on which a residential house is to be constructed, or the plot of land with the semi-finished structure. Initially an agreement .....

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residential house is predesigned, and is a part of the group housing scheme developed by the developer, and the buyer has no say in the matter. The initial agreement of sale, which the developers enter into with prospective buyers for the sale of apartments, includes the consideration receivable on the sale of a semi-finished apartment, and the cost of construction thereafter. The petitioners have all opted to pay tax by way of composition under Section 4(7)(d) and have been paying VAT at 4%/5% .....

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of 2014), the Assistant Commissioner, CT-III, Hyderabad held that the main contractors had entered into a tri-partite agreement with the land owners and the prospective buyer (customer) for construction of a residential apartment; they had then register the semi-finished apartment in favour of the customer; they had opted for composition under Section 4(7)(d) of the Act; any works contract, executed after registration of a semi-constructed apartment in the name of the customer, is a separate wo .....

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re, liable to be assessed under Section 4(7)(a); they had only paid 4% of 25% of the entire sale consideration; they had, thereby, under-declared VAT; and the value of the construction agreement was required to be assessed under the regular scheme of taxation i.e the non-composition scheme. The assessing authority further held that the dealers themselves had admitted that they had executed three types of documents i.e, (1) the agreement of sale, (2) the sale deed for the semi-finished apartment, .....

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50 before the assessing authority; as the dealer had failed to submit Form-VAT 250 opting to pay tax under Section 4(7)(b), and they had not submitted the details to arrive at the value of the goods at the time of incorporation, tax had been rightly proposed under the proviso to Section 4(7)(a) read with Rule 17(1)(g); in the light of the decision of the advance ruling authority in M/s. Madhu Collections, the transactions relating to incorporation of goods in the works, in the course of executio .....

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, (the validity of which is put in issue in W.P. No.37528 of 2014), was passed by the Commercial Tax Officer, Punjagutta. In the said order, the assessing authority held that the words construction and selling, as used in Section 4(7)(d), made it clear that the said provision was applicable only to transactions where construction and sale takes place; any construction, that takes place subsequent to sale, does not fall within the ambit of Section 4(7)(d); it would, necessarily, fall under Sectio .....

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be taxed under Section 4(7)(d), was liable to be rejected; as the dealer had entered into an agreement of sale, the amounts received/receivable till execution of the sale deed is liable to tax under Section 4(7)(d); and the contract receipts, after execution of the sale deed, i.e., on the construction agreements, were liable to tax under Section 4(7)(a) of the Act. Elaborate oral submissions were put forth by Dr. S.R.R. Viswanath, Sri V. Bhaskar Reddy, Sri A.V.A. Siva Kartikeya and Sri B.Naraya .....

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vance Ruling Authority, in Maytas Hill Country Pvt. Ltd. and Sai Sree Developers (P) Ltd., are directly applicable to the present facts scenario; it is not even the case of the assessing authority that they were revoked or cancelled; as long as the said advance rulings subsist, they are bound to be followed by the department in view of Section 67(4) of the Act; the assessing authorities have mis- conducted themselves in not following these rulings, and in not even referring to them; the Advance .....

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cting Advance Rulings on this issue, this Court should give a quietus to this vexed issue on interpreting the provisions of Section 4(7)(d) of the Act and the Rules made thereunder. Section 67 of the Act relates to clarification and advance rulings. Sub-section (1) thereof 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 .....

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ling Authority create confusion and result in uncertainty in tax administration. One possible reason for these conflicting rulings is the absence of a mechanism to bring the earlier rulings to the notice of the Advance Ruling Authority when its clarification is again sought on the very same issue. That, however, is a matter which the rule making authority and the Commissioner of Commercial Taxes should ponder over. Suffice it to observe that the interpretation placed, on Section 4(7)(d) of the A .....

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ssessment, nor in the counter affidavits filed before this Court; and submissions cannot be made on hypothetical situations or those which are hyper- technical in nature. It is wholly unnecessary for us to examine whether the submission made before this Court, on behalf of the Revenue, go beyond the scope of the several assessment orders under challenge in these Writ Petitions as the interpretation to be placed on Section 4(7)(d) of the Act, and the Rules made thereunder, are pure questions of l .....

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tioners, that Section 4(7)(d) of the Act does not even remotely suggest that on the sale of a semi- finished flat, with a specific condition that the construction would be completed by the very same contractor under a completion agreement, the composition facility ceases; the "sale deed" and the "completion agreement" are integral parts of the initial-parent agreement; the petitioners have discharged the entire tax liability (even on the completion agreement) immediately upon .....

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osite value of land and building (which should not be less than the market value for the purpose of stamp duty); identification of the prospective buyer, and execution of the work for such a prospective buyer, is sufficient to make it a "works contract" even though there is no transfer of ownership; even an agreement, entered into with a prospective buyer, itself creates the liability; in most of the cases, there are three parties - the owner of the land, the builder and the buyer; whi .....

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the construction agreement, are integral to each other; and the petitioners are released from their contractual obligations only when the flat is complete in every respect. On the other hand Sri K.Vivek Reddy, Learned Counsel for the respondents, would submit that the assessees have, in most cases, entered into three contracts (1) agreement to sell with the prospective buyer. Pursuant to this agreement, the builder commences construction for the prospective buyer. This is the first works contra .....

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owner, and not the prospective buyer. This is the second works contract, and the consideration for this work is, ordinarily, stipulated in the finishing agreement; the post-sale construction, by the assessee for a buyer, cannot be subjected to composition under Section 4(7)(d) of the Act; composition, under Section 4(7)(d), is applicable only if the works contract contemplates construction followed by sale of the constructed work; the assessee has to strictly satisfy the requirements of Section .....

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and commodities including the goods, as goods or in some other form, involved in the execution of a works contract or those goods used or to be used in the construction, fitting out, improvement or repair of movable or immovable property, and also includes all growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. Section 2(45) defines works contract to include any agreement for carrying out, for cash or f .....

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or construction activity for cash, deferred payment or other valuable consideration. The definition does not make a distinction based on who carries on the construction activity. Thus even an owner of the property may be said to be carrying on a works contract if he enters into an agreement to construct, for cash, deferred payment or other valuable consideration, and he would be liable to pay tax on the turnover relating to the transfer of property in the goods involved in such a works contract. .....

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der Section 2(16), and no tax can be levied under the Act for the consideration received in a contract merely for labour and services. Similarly land, being immovable property and not falling within the definition of goods under Section 2(16), is not liable to tax under the Act. Section 4(7) of the VAT Act is the charging provision whereby tax is levied on the goods involved in the execution of works contracts. Tax, under Section 4(7)(a) of the Act, is payable by a dealer if he chooses not to ex .....

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alue of the goods, at the time the goods are incorporated in the work, at the rates applicable to the goods. Rule 17(1)(b) provides that such a VAT dealer shall be eligible to claim input-tax credit on 75% of the tax paid on the goods purchased, other than those specified in Rule 20(2), and he is eligible to issue a tax invoice. Rule 17(1)(d) provides that the value of the goods, declared by the contractor, to have been used in the execution of a works contract, shall not be less than the purcha .....

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contract; (iv) cost of consumables such as water, electricity, fuel, etc., used in the execution of the works contract, the property in which is not transferred in the course of execution of a 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 (vii .....

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t the time of incorporation, the dealer is liable to pay tax at the rates specified in Schedule-V on the total consideration received or receivable subject to such deductions as may be prescribed. The deductions, prescribed in terms of the proviso to Section 4(7)(a), are those referred to in Rule 17(1)(g) and, thereunder, the standard deduction prescribed for works contracts, involving construction of buildings, is 30%; and the tax payable is 14% on the total consideration received minus the sta .....

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of accounts his liability to pay tax, under Section 4(7)(a) and its proviso, is on the total consideration received or receivable less the standard deduction prescribed under Rule 17(1)(g). The standard deduction is prescribed to avoid subjecting to tax the labour and services component of the works executed by a contractor, as tax can only be levied on the deemed sale of goods incorporated in the works. As the net consideration, received or receivable, for execution of the works contract, (tot .....

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der which, in lieu of the tax payable under the provisions of the Act, a registered dealer can pay, what is described as the composition amount, in the discharge of his tax liability. In framing a scheme for composition the legislature has to balance numerous considerations including the interest of the revenue, the need to encourage compliance, and the burden on tax administration which is obviated by the introduction of a composition option. The composition scheme is not in the nature of an am .....

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s an option to an assessee, and he is not compelled to opt for the said scheme. (Builders Association of India v. State of Maharashtra (2012) 55 VST 504 (Bom.). Composition of tax liability under the two schemes referred to in clause (b) and (d) of Section 4(7) are an alternative to the regular mode of discharge of tax liability under clause (a) of Section 4(7). The assessee gets the benefit of paying a lower rate of tax under Section 4(7)(b) or (d) as opposed to a higher tax rate under Section .....

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n. Both the schemes of composition, under clause (b) and (d) of Section 4(7), are statutorily prescribed by the legislature, among other reasons, to reduce the administrative burden of tax assessment and collection. A composition scheme in a taxing statute represents a legislative settlement of tax liability as prescribed in the Act. Neither does the dealer have the option to modify or enlarge the terms of the composition scheme nor can the Government deny the benefits of the said scheme to deal .....

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may, in lieu of the tax payable by him under Section 4(7)(a), opt to pay tax by way of composition at the rate of 4%/5% of the total amount received or receivable by him towards execution of the works contract subject to such conditions as may be prescribed. Unlike Section 4(7)(a), which provides for levy of tax only on the value of goods at the time of its incorporation in the works executed by the dealer, Section 4(7)(b) requires the dealer, who has exercised the option to pay tax by way of c .....

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quires the VAT dealer, who opts for composition, to notify the prescribed authority on Form VAT 250, before commencing execution of the work, the details including the value of the contract on which the option has been exercised. Under the proviso thereto, a consolidated Form VAT 250 can also be filed by the contractor who undertakes multiple works contracts of a similar nature. (M/s.Mark Infrastructure Pvt. Ltd.3). Instead of paying tax at 14% under Section 4(7)(a), on the value of the goods in .....

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Section 4(7)(d), is available at the option of only those class of dealers mentioned therein. The ingredients of Section 4(7)(d) of the Act, and Rule 17(4) of the Rules as applicable in relation thereto, are (i) the dealer must be engaged both in the construction and in the sale of residential apartments, houses, buildings, commercial complexes etc. A dealer engaged merely in the construction of the aforesaid buildings, or only in the sale of such completely constructed buildings, and not in bot .....

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receivable towards the composite value of land and building, or (b) the market value fixed therefor for the purposes of stamp duty; (v) in cases where the market value fixed for land and buildings, for the purpose of stamp duty, is higher than the consideration received or receivable towards the composite value of both land and building, it is the market value fixed for the purpose of stamp duty which is required to be taken as the composite value of land and building for determining the tax li .....

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sition for all the works, relating to the construction and sale of the specified buildings, undertaken by him. (Rule 17(4)(b)). Form VAT 250 is the application to be submitted by the dealer opting for payment of tax by way of composition. The said Form requires the name and address of the dealer to be furnished; for the dealer to state that they were applying to pay by way of composition, contract wise or for a period as the case may be; and to furnish details of contract for which composition w .....

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quired to be signed by the dealer who is also required to affix his stamp and seal. The Authority for Clarification and Advance Ruling has, under Section 67 of the Act in the case of M/s.Archinova Design Pvt. Ltd, clarified by order dated 01.07.2005 that, for more than one contract also, a single Form VAT 250 can be filed by the works contractor opting to pay tax under Section 4(7)(d); (x) the dealer is required to pay tax at the specified rate on the higher of (a) the total consideration receiv .....

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4)(e); (xii) the dealer, exercising option under Section 4(7)(d), is neither eligible for input- tax credit nor to issue tax invoices. (Section 13(5)(a) and Rule 17(4)(f)). While a dealer executing works contracts, and paying tax under Section 4(7)(a), is entitled to claim input-tax credit, he loses the said benefit on his exercising the option to pay tax, by way of composition, either under clause (b) or (d) of Section 4(7) of the Act. A tax statute should clearly and unambiguously convey three .....

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ces would ensue if this Court were to accept the submissions urged on behalf of the revenue that (1) there is a change in the identity of the purchaser of the apartment on a sale deed being executed in his favour; (2) the construction made by the developer, after an agreement of sale is entered into but prior to execution of the sale deed, is the construction made for a prospective buyer; (3) any construction made by the developer, after execution of the sale deed, is a construction undertaken b .....

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ption for composition, under Section 4(7)(d) of the Act, before commencement of construction. At that stage the developer may have entered into agreements with prospective buyers of some of, and not all, the flats/units. The developer would, ordinarily, still proceed with construction as he could identify and enter into agreements with prospective buyers, of the remaining units/flats, later. In such an event would the construction, made prior to any agreement being entered into with a prospectiv .....

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ch a construction is not a works contract as it has not been undertaken either for a prospective buyer or the owner? In cases where an agreement is entered into with a prospective buyer after commencement of construction, the consideration payable by the prospective buyer would also include the consideration for pre- agreement construction. Would it then mean that the consideration received, for the pre-agreement construction, is not liable to tax under the Act? A registered deed may be executed .....

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before commencement of construction, the developer would not know, when he submits Form-VAT 250, of the stage when he would be required to execute and register a sale deed. If the interpretation placed on Section 4(7)(d), on behalf of the revenue, is accepted, the developer would not know whether or not it is beneficial for him to exercise the option for composition as his liability to pay tax under Section 4(7)(d) would be contingent on the uncertain future event of execution and registration o .....

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er clause of Section 4(7). Classification of dealers executing works contracts, under clauses (b) and (d) of Section 4(7), is based on the nature of business the dealer is engaged in, and does not change merely because a conveyance deed is executed and registered for the sale of a semi-finished structure. As long as it is the same contractor who executes the works for the same purchaser, from commencement till completion, the option available to him, to pay tax under clauses (b) and (d) of Secti .....

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sideration received or receivable, whichever is higher; this includes the cost of the land (either divided or undivided); on the other hand a person, who opts to pay tax under Section 4(7)(b), is required to pay tax only on the value of the goods involved in the execution of the works contract; the petitioners, while exercising option to pay tax under Section 4(7)(d) and even before commencement of construction, have disclosed the entire value of the project proposed to be constructed; they cont .....

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initial agreement, has been remitted to the state exchequer, in terms of Rule 17(4)(e), at the time of execution of the registered deed itself whereby a semi-finished structure was sold; the petitioners are liable to pay tax, in terms of Section 4(7)(d), even on the turnover covered by the completion agreements/finishing agreements; and levy of tax under Section 4(7)(a) or under Section 4(7)(b), treating the finishing works (ie works executed after execution of the sale deed) as independent wor .....

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4(7)(d) of the Act. There are two works contracts which are being executed by the parties. In the first works contract, the construction work is undertaken by the assessee for the prospective buyer. This work contract is executed prior to registration of the sale deed. In the second works contract, the assessee executes the finishing work for the buyer. Unlike the first works contract, the construction work in the second works contract is undertaken not for the prospective buyer, but for the buy .....

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or to the sale, amounts to a works contract; and in Iravanshi Builders & Developers v. CCT, Uttarakhand (2014) 25 STJ 474 (Uttra) the Division Bench of the Uttarakhand High Court held that the construction, preceding the sale of immoveable property, constitutes a works contract. Where the owner of land purchases goods (construction material such as cement, steel, bricks etc) and constructs a building himself engaging labour, the value of the goods purchased by him includes the VAT charged by .....

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, it is the contractor who purchases the goods and utilises it in the construction of the building. The contractor is liable to pay VAT on the deemed sale of goods incorporated in the works (building). As the contractor is entitled for input-tax credit, for the tax paid by him on the purchase of goods, it is only on the incremental value of the goods, incorporated in the works, is VAT paid by him. A building contract may be defined as an agreement under which a person (called builder or contract .....

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tract, it must be described as such. (Maharashtra Chamber of Housing Industry v. State of Maharashtra (2012) 51 VST 168 (Bom). When the agreement between the promoter/developer and the flat purchaser is to construct a flat, and to eventually sell the flat with a fraction of the land, such a transaction involves the activity of construction in as much as it is, ordinarily, only when the flat is constructed is it then conveyed. A works contract is a contract in which one of the parties is obliged .....

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owner of the land, the developer and the flat purchaser. Effectively, and de facto, it is the developer who constructs the building, for the flat purchaser, for monetary consideration. The label of payment is not decisive but the factum of the payment is. The construction is undertaken on payment of the price agreed upon between the developer and the flat purchaser. The construction work is undertaken by the developer not for himself or the owner but is carried for, and on behalf of, the purchas .....

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works contracts. (Larsen & Toubro Ltd.). Pursuant to the development agreement, a plan is sanctioned in the name of the owner of the property who would then execute a conveyance directly to the purchaser. The developer has a possessory interest, and a right to construct which does not make him the owner of the property. The developer undertakes to build for the prospective purchaser. Such construction/development is on payment of the price, in instalments, as set out in the agreement. As the .....

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under the Act. Any agreement, entered into before the construction is complete, would be a works contract. If, however, the agreement is entered into after the flat or the unit is already constructed, it would not be a works contract. (K. Raheja Development Corpn.; Larsen & Toubro Ltd.). If at the time of construction, and until the construction is completed, there is no contract for construction of the building with the flat purchaser, the goods used in the construction cannot be deemed to .....

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input-tax credit on the tax paid by him on the goods purchased and utilised in the construction of the building, as input-tax credit can only be claimed on the tax paid on the sale/deemed sale of goods by a VAT dealer, and not on the sale of immoveable property. A dealer, who opts for composition under Section 4(7)(d), is liable to pay tax on the composite value of the apartment/building which includes the consideration received or receivable for transfer of land, the goods incorporated in the .....

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, 11th Ed.). By the use of conjunctive word and, between construction and selling, Section 4(7)(d) restricts the benefit of composition only to those dealers who are engaged both in the construction and in the sale of residential apartments, houses, buildings, commercial complexes etc, and not merely to those engaged only in construction, and not in the sale, of such buildings or vice-versa. (M/s.Mark Infrastructure Pvt. Ltd.). Those dealers who are engaged only in construction, and not also in .....

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ection 2(10) thereof. Section 4(7)(d) uses the words residential apartments, houses, buildings or commercial complexes. Rule 17(4) relates to treatment of Apartment Builders and Developers under composition. An apartment builder can only be a person who builds a completed apartment and not a semi-finished structure. The words residential apartment, house or commercial complex can only mean a completed building, and not a semi-finished structure. Only those dealers engaged in the construction of .....

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o devote attention and effort; to employ ones self; and to conduct. The word engaged, in the context of Section 4(7)(d), can only mean involved in or carrying of business in. The words residential apartments, houses, buildings or commercial complexes as used in Section 4(7)(d), is in the plural and not in the singular. These words, when read in conjunction with the word engaged, can only refer to a developer who carries on business in the construction and sale of a plurality of units. (residenti .....

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tic perspective, and must be examined holistically. (Vodafone International Holdings BV v. Union of India (2012) 6 SCC 613). The purchaser of the residential apartment, house/building etc, is the same person with whom the developer enters into the initial agreement, executes a registered deed for the sale of a semi-finished structure, and thereafter enters into a finishing agreement for completion of the semi-finished structure into a residential apartment, house, building etc. The artificial se .....

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legislature. (R. v. Oakes). It is wholly impermissible, while construing any provision much less a taxing provision, to read into the Section more words than it contains. (CIT v. Vadilal Lallubhai). When one is construing a penal statute, the first thing is to construe it according to the ordinary rules of grammar, and if a construction which satisfies those rules makes the enactment intelligible, and especially if it carries out the obvious intention of the legislature as gathered from a gener .....

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to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. (Mathuram Agarwal). The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the Legislature .....

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do not require the developer to be treated as a dealer falling within the ambit of Section 4(7)(d) prior to execution of a sale deed, and as a contractor falling within the ambit of Section 4(7)(a) or Section 4(7)(b) for the construction made thereafter. (ii) CAN THE POST-SALE WORKS CONTRACT BE TREATED AS AN INDEPENDENT CONTRACT FOR EXECUTION OF WORKS WITHOUT SALE? It is contended, on behalf of the petitioners, that the option exercised by the petitioners, before commencement of the work, is on .....

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of the initial agreement, and were required to hand over possession only after obtaining occupancy certificate from the respective Municipality/ Municipal Corporation in terms of the Building Regulations; they hand over possession only after obtaining an occupancy certificate from the respective municipality/municipal corporation in terms of the Building Regulations; the petitioners, who have opted to pay tax under Section 4 (7) (d) on the entire value mentioned in the initial agreement, which i .....

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would emphasise on the absence of sale in the finishing agreement. Learned Counsel would submit that, under Section 4(7)(d), only a dealer who is engaged in construction and selling can opt for composition; this is further elaborated in Rule 17(4) which talks of a dealer who executes a contract for construction and selling; a plain reading of Section 4(7)(d) read with Rule 17(4) shows that composition is available only if the dealer executes a contract for construction and selling; the works co .....

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ection 4(7)(d) r/w. Rule 17(4) as there is no element of sale; the petitioners have contended that, since they have filled the Form (Form No.VAT-250) with the entire consideration for the pre-sale and post-sale construction, the same should also form part of the subject matter of composition under Section 4(7)(d); this contention is not tenable as the Form cannot govern the provisions of the Act; and, in any case, there is no scope for rejection of the Form. In State of Karnataka v. Precision Te .....

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t the erection of the crest gates should be completed urgently so as to facilitate impounding of water at the Alamatti Dam in the same year. Additional finance was calculated for the year 2000 -01 for deploying additional equipment, the manpower required for compressing the erection process, and for hiring two high powered cranes and additional erection equipment. The assessee had opted for composition, and for payment of tax on the consideration received for execution of the works contract at t .....

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t for erection of radial crest gates; and, therefore, the said payment could not have been left out of the tax net. The revisional authority ordered that the left out consideration should also be brought to tax. On the order of the revisional authority being subjected to challenge , the Division Bench of the Karnataka High Court held:- ..If the second contract is viewed as an independent contract, it is a contract for obtaining two numbers of high powered cranes and additional equipments, there .....

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ught of taking assistance of these cranes. When the project is to be completed within six months, they had to take the assistance of these cranes, for which hire charges is to be paid, for which the State agreed to pay. Therefore the total consideration paid for execution of the work is the consideration paid under both the contracts. When once the assessee opted for composition under section 17(6), the tax is payable on the total turnover and the total turnover includes consideration under both .....

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l agreement entered into between the developer and the prospective buyer, and is not independent thereof. The scope of the work specified in the initial agreement is split into two. While the land component and a portion of the executed work are, ordinarily, reflected in the registered sale deed, the construction still remaining to be completed, in terms of the initial agreement, is specified in the finishing/completion agreement. The finishing agreement forms an integral part of the initial agr .....

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expressing the intention of the legislature on the dates these Acts were passed, but the later Acts should also be regarded as legislative interpretations of the prior ones. (Hariprasad Shivshanker Shukla v. A.D. Divelkar). In construing a statute the Court may, with propriety, refer to the history of the times when it was passed. (Hariprasad Shivshanker Shukla16; Great Northern Railway Co. v. United States of America). It is a settled canon of construction that the meaning of words and terms u .....

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lopment) Act, 1975, by the Government of Andhra Pradesh. Rule 21 relates to occupancy certificate and, under sub-rule (i) thereof, an occupancy certificate is mandatory for all buildings. No person shall occupy or allow any other person to occupy any building or part of a building for any purpose unless such building has been granted an occupancy certificate by the sanctioning authority. Partial occupancy certificate may be considered by the sanctioning authority on merits i.e. flats/units or ar .....

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wing aspects: (a) number of floors; (b) external setbacks; (c) parking space provision; (d) abutting road width. He shall, then, communicate the approval or refusal of the occupancy certificate within 15 days or may issue the same. In view of the aforesaid provisions of the building regulations, the obligation of a developer is to complete construction of the building in all respects, and obtain an occupancy certificate thereafter to enable the purchaser to occupy the building. A semi-finished s .....

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on received, towards the composite value of the land and building, from the commencement of construction of the residential apartment, house, building etc., till its completion, and not merely on the consideration received for the construction of a semi-finished structure. Accepting the interpretation placed, by Sri K. Vivek Reddy, Learned Counsel for the respondents, on Section 4(7)(d) would exclude the construction made by the developer prior to an agreement of sale being entered into with a p .....

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ion). The pre-requisite, for being extended the benefit of composition under Section 4(7)(d), is for an application to be submitted in Form VAT 250 before commencement of construction. Section 4(7)(d) makes the benefit of composition thereunder subject to such conditions as may be prescribed. Section 2(24) of the Act defines prescribed to mean prescribed by Rules made under the Act. Rule 17(4)(b) of the Rules requires the dealer, exercising option under Section 4(7)(d), to notify the prescribed .....

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t of Rule 17(4)(b), to which Section 4(7)(d) is explicitly made subject to, the submission urged on behalf of the revenue, that the Form cannot govern the provisions of the Act, does not merit acceptance. As option is to be exercised, before commencement of construction, the dealer (who constructs and sells residential apartments, houses etc) would be unaware at that stage whether and when he would be able to identity a prospective buyer, and enter into an agreement with him for the construction .....

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ecution of a registered sale deed for the sale of a semi- finished structure; and after execution of a registered sale deed till the construction of the apartment/building is complete in all respects and is fit for occupation by the purchaser. Consequently one of the benefits of composition, of not being required to maintain records, would no longer be available. Just like separate records being maintained as aforementioned, the consideration received/receivable for the construction and sale of .....

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h a convoluted construction of Section 4(7)(d) does not merit acceptance. (iii) DOES THE WORKS CONTRACT, EXECUTED PRIOR TO SALE, ALONE FALL WITHIN THE AMBIT OF SECTION 4(7)(d)? It is contended, on behalf of the petitioners, that registering a semi finished construction, prior to handing over the completed flat/house to the prospective buyers in terms of the initial agreement, is not fatal; the assessing authorities have erred in holding that the liability of the dealers to pay VAT is on the tran .....

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rket value fixed for the purpose of stamp duty; and it represents the composite value of land and buildings. On the other hand Sri K.Vivek Reddy, Learned Counsel for the respondent, would submit that construction must precede sale; on a plain and natural reading, Section 4(7)(d) permits composition only with respect to an activity which requires the dealer to construct and sell; the subject matter of sale has to be the constructed work; the dealer should have engaged himself in the activity of c .....

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ction, under the finishing agreement, is subsequent to execution of a sale deed. While the dealer is given, and is not obligated to exercise, the option of composition either under clauses (b) or (d) of Section 4(7), the legislature has chosen not to confer any discretion on the government to refuse to extend the benefit of composition to a dealer on his exercising the option and fulfilling the conditions prescribed under clauses (b) and (d) of Section 4(7) and the Rules made thereunder. While t .....

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terial etc, the benefit of composition under Section 4(7)(d) is available only to those class of dealers who are engaged both in the construction and in the sale of residential apartments, houses, buildings and commercial complexes, and is not subject to the vagaries of the stage of construction when a registered deed is executed for the sale of a semi-finished structure relating to one of the units (be it a flat in a residential apartment building or a shop in a commercial complex). The require .....

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er) is the same person in whose favour a registered sale deed is executed for conveyance of a semi-finished structure, and is also the very same person with whom the completion/finishing agreement is entered into by the developer thereafter. As the option for composition under Section 4(7)(d) can be exercised only by those dealers who construct and sell residential apartments, houses, commercial complexes, buildings, and not semi-finished structures, the option can neither be curtailed only till .....

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7(4)(d), is on the total consideration received or receivable towards the value of land as well as construction. The words construction and selling in Section 4(7)(d) merely refer to a dealer who is engaged in both the activities of construction and in selling residential apartments, and not to a dealer who constructs and sells a semi-finished structure. The words construction and selling in Section 4(7)(d) only mean the activities of both construction and sale, and cannot be read as constructio .....

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l complexes, and not a semi-finished structure. The submission urged on behalf of the revenue that the benefit of composition, under Section 4(7)(d), is confined only to those dealers who first construct and then sell residential apartments, and not to those who commence construction, execute a registered deed for the sale of a semi-finished structure, and thereafter complete construction of the residential apartment, is not tenable. (iv) IS THE CONSIDERATION FOR THE FINISHING WORKS NOT REFERABL .....

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e works, executed subsequent to registration of a sale deed for a semi-constructed flat, separately does not arise; the Petitioners-dealers, having exercised their option to pay tax by way of composition under Section 4(7)(d), have been discharging their tax liability on the entire consideration received by them, which includes the cost of land, construction and other amenities; the contention of the Revenue, that as the petitioners had executed sale deeds in favour of the prospective buyers of .....

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by the petitioners before commencement of the work, and the initial or parent agreement included the entire cost of land, the semi finished flat / villa together with the value covered under the completion / finishing agreement; the petitioners are not entitled to the benefit of composition under Section 4(7)(d) to the extent the works executed by them are not covered by the initial or parent agreement; the petitioners have executed sale deeds in favour of prospective buyers merely for operation .....

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the composite rate, in terms of Section 4(7)(d), would apply for the entire consideration received by them, from the commencement of the initial agreement till they hand over the constructed flat/building to the prospective buyers in terms of the initial agreement; as the petitioners herein have opted to pay tax under Section 4 (7) (d) by disclosing the entire value of the project proposed to be constructed even before commencement of construction, and have been paying tax at 4%/5% on 25% of th .....

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the consideration receivable for the work executed under the finishing agreement to submit that the subject matter of composition under Section 4(7)(d) can only be the amount received or receivable towards the composite value of both the land and the building; what can be composed is only the amount received or receivable; in the present case, the petitioners are seeking composition by asserting that the amount payable for the finishing work is received or receivable under the agreement of sale; .....

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tion for the post-sale finishing work can only be attributed to the finishing agreement, and not to the agreement to sell, because the liability to execute the finishing work, and the consideration for the said work, is stipulated in the finishing agreement; any amount received by the assessee-contractor for the finishing agreement, prior to execution of the said agreement, is only a case of past consideration; the finishing agreement does not also make any reference to the agreement to sell; an .....

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to by the petitioner with the purchaser, contained details of the sale price in clause (1) thereof. Clause 1.1 of the said agreement required the vendor to sell, and the purchaser to purchase, schedule B and C properties for the consideration stipulated in Schedule G including the cost of the proportionate undivided share in the land, the cost of construction of the apartment, car park, cost of providing amenities and facilities, as also development and legal expenses. Schedule G of the said agr .....

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red to sell the semi-finished residential flat for a total sale consideration of ₹ 14,40,000/-, of which ₹ 6,38,400/- was paid initially, and the remaining ₹ 8,01,600/- had also been paid thereafter. Clause 32 of the registered sale deed required the purchaser to entrust the work relating to the flat, for converting the semi-finished structure into a finished-structure, to the vendor (petitioner) only; and the said works were required to be executed as per the terms and conditi .....

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greement of ₹ 18,02,000/-, is equivalent to the consideration referred to in the initial agreement of sale i.e ₹ 32,42,000/-. Sri K.Vivek Reddy, Learned Counsel for the respondents, would submit that the agreement for completion of the semi-finished flat (subject matter of W.P.No.37528 of 2014) which refers to the registered sale deed, whereby the purchaser or the vendee had purchased the semi-finished flat, only refers to completion of certain works such as electrical works, sanitar .....

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for the sale of a semi-finished flat, records the sale consideration as ₹ 22,56,000/- and the agreement for completion of the semi- finished flat, also dated 27.01.2014, records the consideration payable as ₹ 50,000/-. It is evident, therefore, that the consideration referred to in the registered sale deed dated 27.01.2014 for ₹ 22,56,000/-, plus the consideration referred to in the agreement for completion of the semi-finished flat also dated 27.01.2014 for ₹ 50,000/-, e .....

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Section 20 shall be on Form VAT 200, and it shall be filed within 20 days after the end of the tax period. The return shall be completed in duplicate, and one copy with proof of receipt shall be retained by the VAT dealer. Rule 17(4)(e) requires the VAT dealer, executing the contract mentioned in Rule 17(4)(a), to calculate the tax due at the rate of 4%/5% of 25% of the total consideration, or the market value fixed for the purpose of stamp duty, whichever is higher, and to enter such details in .....

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istration of the property, to the Sub- Registrar who is registering the property, duly furnishing the TIN No. of the dealer and the full address of the Commercial Tax Officer/Assistant Commissioner concerned, on the reverse of the challan. The Sub-Registrar is required to send the challans, received in a particular week, to the Commercial Tax Officer/Assistant Commissioner concerned before the end of the immediately succeeding week. Rule 17(4)(f) stipulates that the contractor VAT dealer shall n .....

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hich the sale of the property is concluded and registered, is the month in which the entire tax due is required to be paid which, as noted hereinabove, is at 4%/5% of 25% of the consideration received or receivable. As tax is required to be paid even on the consideration not yet received, it is evident that the liability to pay tax, on composition under Section 4(7)(d), is also on the consideration receivable on the construction to be continued and completed, in terms of the initial agreement, a .....

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h the monthly return, before the assessing authority, in the month in which the sale deed is executed and registered. The taxable turnover, for levy of tax under Section 4(7)(d), is, ordinarily, the consideration stipulated in the initial agreement. If the consideration reflected in the initial agreement is lesser than the market value of both land and buildings, as fixed for the purpose of stamp duty, the taxable turnover would be the market value of the land and buildings fixed for the purpose .....

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the dealer has not received the entire consideration, and a part thereof is still due, he is nonetheless required to pay tax on the total consideration, (in terms of the initial agreement between the developer and the prospective buyer), at the time of registration of the sale of the semi-finished structure. The taxable turnover, under Section 4(7)(d), is the entire consideration, agreed upon between the developer and the prospective buyer in the initial agreement, for the value of the land and .....

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fully complete residential apartment/house. The VAT, at the rate prescribed in Section 4(7)(d), must be paid on the entire consideration, and not merely on the consideration reflected in the registered sale deed, to the Sub-Registrar at the time of registration or, in the very same month, along with the tax return, to the assessing authority. The entire tax liability is required to be discharged in the month in which the sale of a semi-finished structure is concluded and registered, and tax shou .....

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whether the right of the purchaser to sue for any defect in construction, post-execution of the sale deed, is referable to the completion agreement or to the initial agreement. Any construction made beyond the scope of the initial agreement would, however, be an independent works contract not falling within the ambit of Section 4(7)(d) of the Act. Learned counsel, appearing on behalf of the petitioners, would fairly state that the works executed beyond or independent of the initial agreement, e .....

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tat Policy, 1998 requires the Central and the State Governments to promote housing in the country; consistent with this policy, the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act for short) was amended by Act No.21 of 1998, and the 2nd proviso was added to Section 5-G thereof; composition, under Section 4(7)(d), is merely an extension of the earlier facility intended to promote the object of housing for all; the State Government has also been pursuing the policy of promoting housing; it h .....

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onsidering the scope of Section 4(7)(d), and whether it would bring within its ambit only land and the semi-finished structure, and not the construction made after executing a registered sale deed for the sale of the semi-finished structure, reference can usefully be made to the APGST Act enacted by the same legislature, and the rules made thereunder which were in force till the A.P. VAT Act was enacted. The fairest and most rational method to interpret the will of the legislator is by exploring .....

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ces, permissible to have regard to the state of things existing at the time the statute was passed. (D.N. Banerji v. P.R. Mukherjee AIR 1953 SC 58 : 1953 SCR 302; Keates v. Lewis Merthyr Consolidated Collieries (1911) A.C. 641). In ascertaining the meaning of words, the context is also relevant to know what exactly was meant to be conveyed by the terminology employed. (D.N. Banerji). Section 5-G of the APGST Act related to composition of tax and, under sub-section (1) thereof, subject to such co .....

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pts, the assessing authority of the area may accept, by way of composition, an amount calculated at the rate of ₹ 4/- (Rupees four only) per square foot of the constructed area. While the benefit of composition, under Section 5-G(1) of the APGST Act, was available to a dealer executing any works contract, the benefit of composition under the second proviso thereto was confined only to dealers who executed works contracts of construction of apartments or residential buildings. The liability .....

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cribed for dealers executing other categories of works contracts. Rule 17(4)(h) of the A.P. VAT Rules stipulates that, where a dealer mentioned in Rule 17(4)(a) (i.e., a dealer executing a contract for construction and selling of residential apartments, houses, buildings or commercial complexes) had opted for composition, and had paid tax under the provisions of the APGST Act before 30.04.2005, there would be no further liability in respect of the built- up area, for which tax has already been p .....

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point unmistakably to that conclusion. (National Assistance Board v. Wilkinson (1952) 2 ALL ER 255 ; Byram Pestonji Gariwala v. Union Bank of India (1992) 1 SCC 31; Central Bank of India v. State of Kerala (2009) 4 SCC 94). In the absence of any context indicating a contrary intention, it may be presumed that the Legislature intended to attach the same meaning to the same words when used in a subsequent statute in a similar connection. (Lennon v. Gibson & Howes Ltd. (1919) A.C. 709). The dis .....

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