Inter-State works contract turnover excluded from State sales tax where movement of goods was contract-driven and relief could be granted on record.

A composite works contract involving supply, installation and commissioning was treated as an inter-State transaction where the goods were manufactured to the contractee's specifications in Maharashtra, inspected and cleared there, and then moved to Andhra Pradesh pursuant to the contract. Because the movement was occasioned by the contract itself and central sales tax had already been paid in Maharashtra, the turnover was outside the levy of Andhra Pradesh sales tax. The Court also stated that, in an appeal under the relevant sales tax appeal provision, it could grant appropriate relief on the basis of the record and the statutory text did not curtail that power.

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Issues: (i) whether the turnover arising from the composite works contract was liable to be treated as an inter-State transaction and therefore outside the levy of Andhra Pradesh sales tax; (ii) whether the High Court, in an appeal under section 23 of the Andhra Pradesh General Sales Tax Act, 1957, could grant the relief sought on the basis of the record.

Issue (i): whether the turnover arising from the composite works contract was liable to be treated as an inter-State transaction and therefore outside the levy of Andhra Pradesh sales tax.

Analysis: The contract required not merely supply of goods but also installation and commissioning, and the goods were manufactured to the contractee's specifications at the appellant's factory in Maharashtra, inspected and cleared there, and then moved to Andhra Pradesh pursuant to the contract. The Court held that the movement of goods was occasioned by the contract itself, that central sales tax had been paid in Maharashtra, and that the turnover could not be treated as an intra-State deemed sale within Andhra Pradesh. In the light of the governing principles governing inter-State movement in execution of works contracts, the State could not bring such turnover under the Andhra Pradesh General Sales Tax Act.

Conclusion: The transaction was held to be an inter-State transaction and the levy under the Andhra Pradesh General Sales Tax Act was held inapplicable.

Issue (ii): whether the High Court, in an appeal under section 23 of the Andhra Pradesh General Sales Tax Act, 1957, could grant the relief sought on the basis of the record.

Analysis: The appellate provision empowered the High Court to pass such order as it thought fit after hearing both sides. The Court held that the statutory text did not curtail its power to grant appropriate relief on the material before it, and the plea that such relief could not be granted was rejected.

Conclusion: The High Court held that it was competent to grant the relief and act on the record while disposing of the appeal.

Final Conclusion: The appeals by the assessee succeeded because the disputed turnover was held not taxable under the State enactment, while the departmental challenge failed.

Ratio Decidendi: In a composite works contract, where the movement of goods is occasioned by the contract and the goods are supplied to the contractee's specifications across State boundaries, the turnover is an inter-State transaction beyond levy under the State sales tax law; the appellate court may grant appropriate relief under the statutory appeal provision on the basis of the record.

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