Works-contract VAT liability arises on incorporation of goods, while tax forfeiture requires notice and no double taxation.

Under the VAT regime, liability on works contracts attaches to the value of goods at the time of incorporation, and receipt of consideration does not postpone the charge; deductions under rule 17(1)(e) operate within that scheme, not as a shift in the charging point. Pure labour contracts remain outside VAT, but whether a contract is purely labour or includes material transfer is a factual question. Forfeiture of tax collected at source requires notice and a hearing before action is taken. The same transaction cannot be taxed twice, and protection may be needed where later-year tax payment could overlap with earlier incorporation-based assessments.

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Issues: (i) Whether the petitioner was to be relegated to the statutory appellate remedy; (ii) whether tax under the VAT regime on works contracts was payable on the value of goods at the stage of incorporation or only on receipt of consideration, and how rule 17(1)(e) and its provisos operated; (iii) whether the assessing authority was justified in bifurcating the turnover into supply and works contract components and in levying tax at 14.5 per cent on part of the turnover; (iv) whether purely labour contracts could be brought to VAT; (v) whether forfeiture of tax collected at source could be made without notice; and (vi) whether the impugned assessments resulted in double taxation and whether any adjustment could be claimed against tax paid to the State of Andhra Pradesh.

Issue (i): Whether the petitioner was to be relegated to the statutory appellate remedy.

Analysis: The availability of an alternative remedy is a relevant but not absolute bar to writ jurisdiction. Where the assessment is alleged to be without jurisdiction, or to violate natural justice, the High Court may entertain the petition. Here, the challenge included a complaint of alleged double taxation and forfeiture of tax collected at source without notice. Further, the statutory appeal period had already expired by the time the matter was finally heard.

Conclusion: The petitioner was not relegated to the alternative remedy.

Issue (ii): Whether tax under the VAT regime on works contracts was payable on the value of goods at the stage of incorporation or only on receipt of consideration, and how rule 17(1)(e) and its provisos operated.

Analysis: Section 4(7)(a) fastens liability on the value of goods at the time of incorporation in the works. The statutory scheme, including the definitions of sale, sale price, and total turnover, treats consideration receivable as part of the turnover, but does not postpone the point of levy till actual receipt. Rule 24 requires payment along with the monthly return, and this obligation cannot be deferred until payment is received from the contractee. Rule 17(1)(e) permits deductions from the total consideration received or receivable, but the second proviso only postpones the balancing exercise until finalisation of accounts for the relevant work, not until completion of the entire project. The proviso cannot be read as shifting the charging point from incorporation to receipt or completion.

Conclusion: Tax was rightly held payable on incorporation value and not only on receipt basis; the petitioner's broader challenge on this point failed.

Issue (iii): Whether the assessing authority was justified in bifurcating the turnover into supply and works contract components and in levying tax at 14.5 per cent on part of the turnover.

Analysis: The pleadings and materials showed that the petitioner itself had classified some transactions as material supply contracts apart from works contracts, and tax invoices also indicated independent sales of goods. The question whether particular goods fell within the concessional schedule entry or attracted the higher rate depended on factual scrutiny of the nature of the goods and contracts. On the record, the finding that the assessee had both supplied goods and executed works contracts could not be treated as perverse.

Conclusion: The bifurcation was not interfered with, and the levy at 14.5 per cent on the disputed part of the turnover was left undisturbed.

Issue (iv): Whether purely labour contracts could be brought to VAT.

Analysis: Pure labour contracts without any transfer of property in goods are not exigible to VAT. However, whether a given contract is purely labour or contains a material component is a question of fact. The assessment record showed substantial deductions for labour and related expenses, and the contracts were found to involve material incorporation along with labour. No perversity or jurisdictional error was shown in that factual finding.

Conclusion: The petitioner failed to establish that the impugned turnovers were pure labour contracts; the assessment on that aspect was upheld.

Issue (v): Whether forfeiture of tax collected at source could be made without notice.

Analysis: Forfeiture under rule 18(3)(b) is permissible only to the extent tax collected at source exceeds the contractor's liability. Even though forfeiture follows assessment, the assessee must be put on notice and given an opportunity to show that the amount collected was not in excess of liability. The impugned forfeiture had been made without such notice and without affording an opportunity of hearing.

Conclusion: The forfeiture was set aside for breach of natural justice, with liberty to issue notice and proceed afresh in accordance with law.

Issue (vi): Whether the impugned assessments resulted in double taxation and whether any adjustment could be claimed against tax paid to the State of Andhra Pradesh.

Analysis: Although res judicata does not apply in tax matters, the same transaction cannot be taxed twice. The Court accepted the factual possibility that, if the petitioner had already paid tax on receipt basis in later years, taxing the same turnover on incorporation basis for the earlier years could produce double taxation. To avoid that prejudice, the Court directed early assessment for the later years and restrained coercive recovery meanwhile. Any tax paid to the State of Andhra Pradesh could not be adjusted against Telangana VAT dues under the impugned assessments, though remedies against the former State were left open.

Conclusion: Protection against double taxation was granted to the limited extent of directing fresh assessments for the later years and staying coercive recovery in the meantime; no set-off against Andhra Pradesh tax was allowed.

Final Conclusion: The assessments were sustained on the core merits of levy on incorporation value and on the disputed rate classification, but the forfeiture component was quashed for want of notice. The Court also protected the assessee against possible double taxation by directing prompt assessment for the later years and by staying coercive recovery until that exercise was completed.

Ratio Decidendi: Under the VAT regime, a works-contract dealer is liable on the value of goods at the time of incorporation in the works, and receipt of consideration does not postpone the charge; however, forfeiture of tax collected at source cannot be made without notice and an opportunity of hearing, and tax cannot be collected twice on the same transaction.

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