Works contract turnover is measured by goods value at incorporation, not mere purchase cost, under the sales tax rules.

Rule 6(3)(i) of the Andhra Pradesh General Sales Tax Rules was treated as an alternative mode for computing turnover in works contracts extending beyond one year, not as an exception to rule 6(2). The taxable event under the charging provisions is transfer of property in goods on incorporation in the works, so tax is measured by the value of goods at that stage, not by mere purchase cost. The provision was held consistent with Gannon Dunkerley, and stare decisis did not bar reconsideration because earlier authority had not decided this precise point. Earlier Tribunal views also did not bar revision under section 20(2A).

---

---

Issues: (i) Whether rule 6(3)(i) of the Andhra Pradesh General Sales Tax Rules, 1957 is an exception to rule 6(2) and requires a different treatment for works contracts extending beyond one year; (ii) Whether the word "purchased" in rule 6(3)(i) confines levy to the cost of acquisition of goods and not their value at incorporation in the works; (iii) Whether rule 6(3)(i) represents a deviation from the principle in Gannon Dunkerley and the doctrine of stare decisis bars reconsideration; (iv) Whether the revisional power under section 20(2) is barred by section 20(2A) because of earlier Tribunal orders.

Issue (i): Whether rule 6(3)(i) of the Andhra Pradesh General Sales Tax Rules, 1957 is an exception to rule 6(2) and requires a different treatment for works contracts extending beyond one year.

Analysis: Rule 6(3)(i) was read as a deeming provision that supplies an alternative method of computing turnover for works contracts extending beyond one year. It was held to be an extension of rule 6(2), not an exception to it. On a harmonious construction with section 5F of the Andhra Pradesh General Sales Tax Act, 1957, the rule operates to identify the value of goods supplied or used in the works during the year. A literal reading that would include mere purchases or closing stock would make the rule ultra vires, so the rule had earlier been read down to preserve validity.

Conclusion: The rule is not an exception to rule 6(2) and must be read as an alternative mode of determining taxable turnover.

Issue (ii): Whether the word "purchased" in rule 6(3)(i) confines levy to the cost of acquisition of goods and not their value at incorporation in the works.

Analysis: The charge under section 5(1) read with Explanation VI to section 2(n), section 2(s)(iii)(a)(i), and section 5F is on transfer of property in goods involved in execution of works contracts. The taxable event occurs when goods are incorporated in the works, and the measure of tax is the value of goods at that stage. The word "purchased" only qualifies the goods and does not convert the rule into a levy on purchase price. Cost of acquisition alone was rejected as inconsistent with the charging provisions.

Conclusion: Tax is not confined to purchase cost; the relevant value is the value of goods at the stage of incorporation in the works.

Issue (iii): Whether rule 6(3)(i) represents a deviation from the principle in Gannon Dunkerley and the doctrine of stare decisis bars reconsideration.

Analysis: Gannon Dunkerley was treated as fully applicable because the charging scheme under the Andhra Pradesh Act is also a tax on transfer of property in goods in a works contract. The judgment held that the value of goods at incorporation, not the cost of acquisition, is the proper measure, while labour and service components are excluded. The earlier Media Communications decision was confined to the narrow question whether closing stock or goods not actually used could be taxed; it did not decide the question whether purchase cost, rather than incorporated value, is the measure of tax. Hence no settled contrary precedent existed, and stare decisis did not prevent answering the reference.

Conclusion: Rule 6(3)(i) is not a departure from the governing principle in Gannon Dunkerley, and stare decisis does not bar the present interpretation.

Issue (iv): Whether the revisional power under section 20(2) is barred by section 20(2A) because of earlier Tribunal orders.

Analysis: The earlier Tribunal orders taking a different view on rule 6(3)(i) were not treated as settled law. The judgment held that judicial declarations operate retrospectively and that the law declared by the court is presumed to be the law from inception. Since the correct construction of rule 6(3)(i) was now declared, the revisional exercise aligned with that construction. Therefore, the existence of earlier contrary Tribunal views did not create a jurisdictional bar under section 20(2A).

Conclusion: The revisional power was not barred by section 20(2A).

Final Conclusion: The reference was answered by holding that, for works contracts extending over more than one year, the taxable turnover under rule 6(3)(i) is the value of goods purchased and supplied or used in the works at the stage of incorporation, not the mere purchase cost, and that the revisional proceedings were not barred by section 20(2A).

Ratio Decidendi: In a works-contract levy, the measure of tax is the value of goods at the time they are incorporated in the works, and a rule may not be construed to tax mere purchase cost or closing stock inconsistent with the charging provision; a prior decision binds only on the point actually decided.

---