Works contract tax attaches on incorporation of goods in execution, not on contractee appropriation or project completion.

Tax under section 4(7)(a) of the Andhra Pradesh Value Added Tax Act, 2005 was held leviable on the value of goods used in executing a works contract once the goods were supplied or incorporated in the works. The taxable event depended on incorporation or use of goods in the contract, not on whether the contractee later appropriated the goods. Applying article 366(29A)(b) and the works contract charging scheme, the Court treated the measure of tax as the value of goods at the time of incorporation. Abandonment or keeping the project on hold did not undo the levy once the taxable event had occurred.

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Issues: Whether tax under section 4(7)(a) of the Andhra Pradesh Value Added Tax Act, 2005 was leviable on the value of goods used in the execution of a works contract when the contractee had not appropriated the goods and the project was stated to have been kept on hold or abandoned.

Analysis: The charging scheme under the Act treats a person executing a works contract as a dealer and deems a transfer of property in goods when goods are supplied or used in the execution of the contract. The definition of sale, the deeming provision in the explanation, and the charging provision make the taxable event depend on incorporation or use of goods in the works, not on appropriation by the contractee. The constitutional scheme under article 366(29A)(b) and the governing decisions on works contracts were applied to hold that the measure of tax is the value of the goods at the time of incorporation in the works. The Court also held that abandonment of the project does not efface the taxable event once goods have been used in execution of the works contract.

Conclusion: Tax under section 4(7)(a) was rightly attracted on the value of goods incorporated in the works contract, and the challenge to the levy failed.

Ratio Decidendi: In a works contract, the taxable event arises when goods are supplied or used in execution of the contract and incorporated in the works, and tax is not dependent on subsequent appropriation by the contractee or completion of the project.

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