TaxTMI 
TaxTMI 
2014 (9) TMI 420
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....a Reddy District. For execution of this contract, the Department of Jails under the control of the Home Department of the State Government allegedly supplied gravel free of cost to the petitioner. The petitioner transported the gravel from the place where it was found to the place where it was required in the execution of the aforesaid works. ORDER:- The order of the court was made by M.S. RAMACHANDRA RAO J.-The petitioner in all these cases is M/s. Duggirala Ramakotaiah, a firm which is engaged in civil contract works. It is registered as a dealer on the rolls of the Commercial Tax Officer, Seetharamapuram Circle, Vijayawada (for short, "the CTO"). The petitioner commenced business with effect from June 1, 1998. It entered into an agreement with M/s. A.P. State Police Housing Corporation Limited (a State Government Undertaking) on January 16, 1998 for construction of part of external compound wall, administrative building, court buildings, Special Cells, Watch towers, etc., for a rehabilitation centre for social offenders at Moula-Ali, in Ranga Reddy District. For execution of this contract, the Department of Jails under the control of the Home Department of the State Governme....
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....esents expenses incurred purely towards lifting and transport of gravel by the dealer and such transport charges are liable to be deducted under rule 6(2) of the Rules framed under the Act. The Deputy Commissioner (CT), No. II Division, Vijayawada in exercise of his powers under section 20(2) of the Act, issued show-cause notices dated October 20, 2001 and February 18, 2003, proposing to revise the said assessment orders as he felt that the assessment orders dated May 5, 2000 and September 17, 2001 for the assessment years 1998-99 and 2000-01 passed by the CTO were prejudicial to the interests of Revenue. In the said For the assessment year 1998-99, the petitioner filed monthly returns (APGST) before the CTO/assessing officer. In the said returns, it included a sum of Rs. 40,30,754 under the category "earth filling charges" and claimed it as an exemption. It contended that this portion of the turnover represents the charges for lifting and transporting of gravel to the worksite and that this amount is exempted from levy of sales tax under section 5F of the Andhra Pradesh General Sales Tax Act, 1957 (for short, "the Act") read with rule 6(2) of the Rules framed under the Act. The ....
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....ts from sales tax levy is only to exempt dealers exclusively doing earth work and gravel quarrying contracts and not persons such as the petitioner who are dealing in civil contract works, that the said G. O is inapplicable to the petitioner and therefore the value of the gravel supplied includes the transportation charges and is not exempted under section 5F of the Act or rule 6(2) of the Rules. He proposed to withdraw the exemption granted by the assessing officer on the said portion of the turnover for the assessment years 1998-99 and 2000-01 and subject the said turnover to levy of tax at six per cent under the Act. The petitioner filed objections to the above show-cause notices on December 20, 2001 and May 17, 2003. In the said objections, the petitioner contended that the portion of turnover of Rs. 40,30,750 for the assessment year 1998-99 and Rs. 9,49,220 for the assessment year 2000-01 do not represent the value of the gravel but only expenditure incurred under the head "earth filling charges"/transportation charges, that it represents the labour charges paid to the labourers for loading the gravel at the quarry allotted by the A.P. State Police Housing Corporation Limited....
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....id objections, the petitioner contended that the portion of turnover of Rs. 40,30,750 for the assessment year 1998-99 and Rs. 9,49,220 for the assessment year 2000-01 do not represent the value of the gravel but only expenditure incurred under the head "earth filling charges"/transportation charges, that it represents the labour charges paid to the labourers for loading the gravel at the quarry allotted by the A.P. State Police Housing Corporation Limited, Hyderabad and unloading the same at the work spot for levelling purpose and also transport charges incurred for transport of the gravel from the quarry to the work spot. It contended that as per the above G.O. 1091 Revenue dated June 10, 1957 all earth works and gravel quarrying contracts are eligible for exemption. Copies of the agreement with the A.P. State Police Housing Corporation Limited, Hyderabad, were filed before the revisional authority. The revisional authority by order dated January 30, 2002 and September 21, 2004 held that for the assessment years 1998-99 and 2000-01, the petitioner is not entitled to seek deduction of the above amounts from his turnover, and the said amounts are liable for levy of sales tax under ....
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....lue of the gravel, that the gravel is incorporated while executing the works contract, the incorporation value of the gravel is the value which has to be taken into consideration while computing the turnover under section 5F of the Act in view of the decision of the Supreme Court in Gannon Dunkerley & Co. v. State of Rajasthan [1993] 88 STC 204 (SC) and therefore the value of the gravel would be Rs. 40,30,754 for the assessment year 1998-99 and Rs. 9,24,220 for the assessment year 2000-01. Challenging the same, TREVC No. 112 of 2012 is filed against the order in TA No. 979 of 2002 for the assessment year 1998-99 and TREVC No. 101 of 2012 is filed against the order in TA No. 939 of 2005 for the assessment year 2000-01. The petitioner also filed WP No. 23984 of 2012 and W.P. No. 24015 of 2012 to direct the Revenue not to take any coercive steps for recovery of the sales tax for the assessment years 1998-99 and 2000-2001 pursuant to the orders of the Sales Tax Appellate Tribunal, Visakhapatnam in TA No. 979 of 2002 and TA No. 939 of 2005, each dated October 19, 2011. Heard Sri Suri Babu, learned counsel for the petitioner and Sri P. Balaji Varma, learned Special Standing Counsel fo....
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....ioner also filed WP No. 23984 of 2012 and W.P. No. 24015 of 2012 to direct the Revenue not to take any coercive steps for recovery of the sales tax for the assessment years 1998-99 and 2000-2001 pursuant to the orders of the Sales Tax Appellate Tribunal, Visakhapatnam in TA No. 979 of 2002 and TA No. 939 of 2005, each dated October 19, 2011. Heard Sri Suri Babu, learned counsel for the petitioner and Sri P. Balaji Varma, learned Special Standing Counsel for Commercial Taxes. Sri Suri Babu, counsel for the petitioner contended that: (a) The petitioner is not the owner of the gravel and there cannot be a transfer of property in such gravel in favour of the contractee; (b) The measure for the levy of taxes under section 5F of the Act is value of the goods involved in the execution of the works contract as the taxable event is the transfer of the property in such goods involved in execution of the works contract; (c) The gravel belongs to the Department of Jails and all that the petitioner did was to bring the said material to the work spot by employing a fleet of lorries belonging to various transporters and made payments to them, and such transport charges cannot be considered a....
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....the property in such goods involved in execution of the works contract; (c) The gravel belongs to the Department of Jails and all that the petitioner did was to bring the said material to the work spot by employing a fleet of lorries belonging to various transporters and made payments to them, and such transport charges cannot be considered as increasing the value of the material at the time of incorporation; (d) As per G.O. Ms. No. 1091 Revenue, dated June 10, 1957 "earth work and gravel quarrying contracts" are exempted from levy of sales tax vide the item No. 11 of the said G.O. and transportation charges/earth supplying charges come within this G.O. and hence are exempted from levy of tax; (e) Even otherwise, clause (g) of rule 6(2) of the Rules provides for a deduction of "other similar expenses relatable to supply of labour and services" from the total turnover of a dealer executing a works contract, that the transportation charges/gravel supply charges would fall within this clause and therefore they cannot be subjected to levy of sales tax. The Special Government Pleader for Commercial Taxes on the other hand submits that- (a) the petitioner is not doing earth work whi....
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....ner. No other material is produced before us by the petitioner to prove that the gravel is supplied to it free of cost. Therefore, it is not possible to accept the contention of the petitioner that the gravel was supplied to it free of cost. Be that as it may, in Gannon Dunkerley's case [1993] 88 STC 204 (SC), the Supreme Court held that the measure for the levy of tax contemplated by article 366(29A)(b) is the value of the goods involved in the execution of a works contract, that the value of such goods for levying tax cannot only be assessed on the basis of the costs of acquisition of the goods by the contractor, but also the value of goods at the time of incorporation of the goods in the works; and that the costs of incorporation of the goods in the works such as labour charges cannot be made a part of the measure for levy of tax contemplated by the said article. In Seven Hills Constructions case [2012] 54 VST 66 (AP) [FB], a Full Bench of this court held that the deductions under clauses (a) to (l) of rule 6(2) of the Rules framed under the Act are similar to the deductions referred to in Gannon Dunkerley's case [1993] 88 STC 204 (SC); that rule 6(3)(i) of the Rules is....
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.... goods in the works such as labour charges cannot be made a part of the measure for levy of tax contemplated by the said article. In Seven Hills Constructions case [2012] 54 VST 66 (AP) [FB], a Full Bench of this court held that the deductions under clauses (a) to (l) of rule 6(2) of the Rules framed under the Act are similar to the deductions referred to in Gannon Dunkerley's case [1993] 88 STC 204 (SC); that rule 6(3)(i) of the Rules is applicable where execution of a works contract extends beyond a period of one year and creates a legal fiction whereby the total turnover of the dealer is deemed to be the value of the goods purchased and supplied or used in the execution of such contracts in that year; that it provides another method for arriving at the turnover of the dealer and the value of the goods under rule 6(3)(i) would not only include: -the costs of acquisition of goods by the contractor dealer -the transportation charges incurred by him to deliver the goods to the situs of the works wherein they are incorporated -costs of establishment relatable to supply of material involved in the execution of the works contract -other charges borne by the contractor dealer in....