Telangana High Court
The State Of Ap. Stat,Hyd. vs M/S Moktali Engineering Co. Ltd. ... on 29 November, 2022
Author: T.Vinod Kumar
Bench: T. Vinod Kumar
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
AND
THE HON'BLE SRI JUSTICE PULLA KARTHIK
Tax Revision Case No. 165 of 2003
ORDER:(per the Hon'ble Sri Justice T.Vinod Kumar) This Tax Revision Case, at the behest of the Revenue, is filed being aggrieved by the order of the Sales Tax Appellate Tribunal (for short 'Tribunal'), in T.A. No. 669 of 1997, dt.22.05.2002.
2. The issue that falls for consideration in this revision is, as to whether galleries and trestles fabricated and erected at site, can be subjected to tax as sale of such goods by using tax paid M.S.Sheets, M.S.Rounds, Angles, etc. The assessment year involved is 1991-92 under the APGST Act, 1957(for short 'the Act').
3. Heard Sri L.Venkateshwar Rao, learned Special Standing Counsel appearing for the petitioner, Sri P.Karthik Ramana, learned counsel appearing for the respondent-assessee, and perused the record.
4. It is the contention of the Revenue that the respondent-assessee had purchased M.S.Sheets, M.S.Rounds, Angles, etc., from local registered dealers and used the same in the making of galleries, trestles, etc., and sold the same by raising invoices and since the goods purchased by it having undergone a change from the form in which they are purchased, new and different goods distinct from the goods purchased have come into existence, the respondent-assessee is liable to pay tax.
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5. It is further contended on behalf of the petitioner-Revenue that the Tribunal erred in not appreciating that the sale of engineering goods by the respondent-assessee as galleries, trestles, etc., are not in the same form as M.S.Sheets, M.S.Rounds, etc., purchased by it, and the said goods have been used as raw-material in the manufacture of galleries and trestles, the goods sold by the respondent-assessee being different from raw-material, like M.S.Sheets, M.S.Rounds, etc., are liable to tax. Further, the respondent-assessee himself had treated these goods sold by him as being different goods from that of the raw- material purchased by it, and the respondent-assessee had collected tax on the sale of the same from its customers, the Tribunal erred in setting aside the order of both the Appellate Authority as well as the Assessing Authority whereby the turnover relating to the sale of galleries and trestles have been subjected to tax, inasmuch as there is no sale of same goods as chattel-qua-chattel.
6. Learned counsel appearing for the respondent-assessee, on the other hand, submits that the order of the Tribunal does not suffer from any error inasmuch as the Tribunal had recorded a finding of fact that the goods that have been purchased by the respondent-assessee are pursuant to a work order placed by its customer for fabrication, supply and erection of structural work for conveyor system at the customer location and that the goods purchased by it have been incorporated in the execution of said work of fabrication undertaken by it at the customer location and therefore cannot be subjected to tax. 3
7. Learned counsel for the respondent-assessee further submits that at the relevant point of time there was no charging section by which the receipts of works contract would be subjected to tax and it is for the said reason, the Revenue-authorities have sought to levy tax by treating the goods as sale of different goods from that of the raw- material purchased by it, without considering the fact of usage of the same in the execution of fabrication work at customer location amouns to works contract.
8. We have noted the respective contentions urged.
9. A reading of the impugned order indicates that the Tribunal having gone through the work order, dt.28.03.1991, found that the respondent-assessee was awarded with a contract for erection of galleries and trestles by undertaking fabrication at the customer's site itself. The Tribunal also noted that the use of raw-material, like M.S.Sheets, M.S.Rounds and Angles, etc., by the respondent-assessee in the manufacture of new products is intended for erection of galleries and trestles at the customer location pursuant to the order placed, and observed that "from the work order placed by the customer, it is evident that galleries and trestles are only the structures which are to be built on the site by the contractor by using M.S.Sheets, M.S.Round and angels, etc., and they are not goods or chattel which can be sold and physically delivered to the customer". By observing so, the Tribunal also found that both the lower authorities erred in basing their conclusions on the invoices and overlooked the fact that in the column relating to the mode 4 of dispatch, what is mentioned is 'site fabrication item' and held that "the erection of galleries and trestles cannot by any stretch of imagination be considered as manufacture of goods and production of commercial commodity.". The Tribunal also found that the structures erected on the site, in other words, build and constructed on the site, become attached to the site and cannot be shifted from place to place.
10. The Tribunal while holding that the fabrication undertaken by the respondent-assessee using the raw-material purchased by it, like - M.S.Sheets, M.S.Rounds and Angles, etc., cannot be treated as sale of such material, has placed reliance on the decision of the Tribunal in M/s Lakshmi Kisan Industries and others v. State of A.P.1 whereby it has been held that the goods manufactured at site have formed part of the land, which is immovable property and cannot be treated as sale of such material. The Tribunal, by noting as above, held that the lower Authorities failed to decide the nature of the transaction correctly on the basis of the facts of the case and erroneously subjected the turnover relating to erection of galleries and trestles as sale of said goods. The Tribunal further held that the nature of work executed by the respondent-assessee being a works contract, use of raw material in the execution of works contract is only a deemed sale and as the appellant pleads that such deemed sale is second sale in their hands as they purchased this material from registered dealers within the State 1 19 APSTJ 163 5 which is not disputed by both the lower authorities, the disputed turnovers relating to the reduction of galleries and trestles cannot be subjected to tax as the material like M.S.Sheets and Angles, etc., used in the same become second sales, not exigible to tax in the hands of the appellant.
11. The Tribunal also further observed that though the provisions of APGST Act, 1957 have been amended consequent to the 46th constitutional amendment, to include in the definition of 'Sale', the 'deemed sale' by way of Explanation-VI, and also by defining as to what constitutes a 'works contract', however, no charging section has been incorporated to levy tax on such transactions of works contract.
12. Inasmuch as the transaction involved in the present Revision, in the view of the Tribunal, being works contract involving deemed sale, which view in the considered opinion of this Court is a conclusion rightly arrived at by the Tribunal, particularly, in the absence of charging section, no tax can be levied on works contract. Further, in absence of charging section to levy tax on a works contract would not by itself authorize levy of tax on the goods involved in the execution of such works contract by treating the same as sale of goods simplicitor.
13. In view of the above conclusion arrived at by us, we see no question of law arising from the order of the Tribunal for being considered by this Court and this TRC is without any merit. 6
14. Accordingly, this Tax Revision Case is dismissed. No order as to costs.
15. Consequently, miscellaneous petitions pending, if any, shall stand closed.
___________________ T. VINOD KUMAR, J ___________________ PULLA KARTHIK, J 29th November, 2022.
gra 7 THE HON'BLE SRI JUSTICE T. VINOD KUMAR AND THE HON'BLE SRI JUSTICE PULLA KARTHIK TRC. No.165 of 2003 (per the Hon'ble Sri Justice T.Vinod Kumar) 29th November, 2022.
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