Telangana High Court
M/S. S.B.P.L. Infrastructure Limited, vs The Commercial Tax Officer, on 28 May, 2025
Author: T. Vinod Kumar
Bench: T.Vinod Kumar, P.Sree Sudha
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
And
THE HON'BLE SMT. JUSTICE P.SREE SUDHA
WRIT PETITION Nos.22510 and 22615 of 2006
COMMON ORDER:(Per Hon'ble Sri Justice T.Vinod Kumar) W.P.No.22510 of 2006 is filed with the following prayers:
(a) Declaring the action of the 2nd respondent in passing the impugned/revised assessment order dated 4-2-2006 in proceedings Rc.No.1/3071/2003-04/APGST as illegal, arbitrary, high handed and without authority of law and contrary to the provisions of the Act and set aside the same and declare that the petitioner is not exigible to tax on the disputed turnover under Works Contract since the petitioner has not transferred any property in goods in favour of any third party.
(b) Declare the action of the 3rd respondent in rejecting the petitioner's appeal for the assessment year 2003-2004 under the APGST Act by the impugned order dated 01-07-
2006 in proceedings AR Sl.No.P/261/2005 on the ground that no proof of payment was produced before him as illegal, arbitrary and without authority of law and contrary to the provisions of the Act and set aside the same and declare that the petitioner need not deposit the 12.5% of the disputed since the petitioner was granted exemption for payment of Sales Tax being the recognized Special Tourism Project under the A.P. State Tourism Policy, 1998 and pass such other order or orders ...."
2. W.P.No.22615 of 2006 is filed with the following prayers: 2
(a) Declaring the action of the 1st respondent in passing the impugned/revised assessment order dated 4-2-2006 in proceedings Rc.No.1/3071/2004-05/APGST as illegal, arbitrary, high handed and without authority of law and contrary to the provisions of the Act and set aside the same and declare that the petitioner is not exigible to tax on the disputed turnover under Works Contract since the petitioner has not transferred any property in goods in favour of any third party.
(b) Declare the action of the 2nd respondent in rejecting the petitioner's appeal for the assessment year 2004-2005 under the APGST Act by the impugned order dated 01-07-2006 in proceedings AR Sl.No.P/262/2005 on the ground that no proof of payment was produced before him as illegal, arbitrary and without authority of law and contrary to the provisions of the Act and set aside the same and declare that the petitioner need not deposit the 12.5% of the disputed since the petitioner was granted exemption for payment of Sales Tax being the recognized Special Tourism Project under the A.P. State Tourism Policy, 1998 and pass such other order or orders ...."
3. Since, the parties are one and the issue involved is same, these Writ Petitions are being disposed of by this common order.
4. The facts set out in W.P.No.22510 of 2006 are taken for consideration of these Writ Petitions.
3
5. Heard learned counsel for the petitioner and learned Special Standing Counsel for Commercial Taxes appearing on behalf of respondents, and perused the record.
6. The petitioner has filed the present Writ Petitions assailing the action of the 2nd respondent in passing the revised assessment order date 04-02-2006 for the assessment year 2003-04 and 2004-05 under the provisions of the Andhra Pradesh General Sales Tax Act, 1957 ( for short 'the Act') by treating the petitioner has having executed works contract of construction and subjecting the purchases made by it by adding 15% profit as being illegal, arbitrary and without authority of law and contrary to the provisions of the Act.
7. It is the case of the petitioner that aggrieved by the aforesaid order of assessment, it had availed the remedy provided under Section 19 of the Act by approaching the 3rd respondent authority, and the 3rd respondent by order dated 01-07-2006 had rejected the appeal on the ground that the petitioner had failed to make payment of 12.5% of the disputed tax as pre-condition for admission of the appeal as provided under Section 19(1) of the Act.
4
8. Petitioner contends that originally, a Development Agreement dated 27-06-2001 was entered into by one Sri Gowrishanker Gupta and Smt.Sarita Gupta with the owners of a piece of land to an extent of 7214 sq. yards situated at Panjagutta, Hyderabad, for developing the aforesaid land for construction of a multi-storied commercial complex, which was followed by supplementary agreement dated 05-07-2002.
9. Petitioner further contends that while the above mentioned agreement between the above mentioned parties was in force, it had entered into an Agreement of Sale and Irrevocable Power of Attorney dated 23-09-2004 with the original owners and Gowrishanker Gupta and Smt.Sarita Gupta by superseeding the earlier agreements/documents entered into between the original land owners and the Developers to purchase all the piece of land to an extent of 7214 sq. yards situated at Panjagutta, Hyderabad for valuable consideration and took up construction of commercial complex therein on its own.
10. It is the further case of the petitioner that by virtue of the agreement of sale and irrevocable PoA entered into with the owners and earlier developers, the petitioner took up 5 construction of commercial complex on its own and for undertaking the said construction, it had purchased various material during the year 2003-04 and as such, it cannot be treated as execution of works contract.
11. It is the further case of the petitioner that since, it did not undertake any execution of works contract and since, no sales were made, it had filed Nil returns with the 2nd respondent authority, on whose rolls the petitioner is registered under the provisions of the Act.
12. Petitioner contends that initially, Nil returns filed by it were accepted by the 1st respondent by issuing formal proceeding dated 26-05-2004.
13. Petitioner further contends that notwithstanding the fact that formal proceeding has been issued by the 1st respondent, the 2nd respondent in purported exercise of power under Section 14(4) of the Act, had proposed to set aside the aforesaid formal assessment proceeding and to assess the petitioner to tax under the provisions of Section 5-F of the Act on the ground that the value of the goods purchased and incorporated into the works contract by the petitioner to the tune of Rs.9,07,96,188/- by 6 adding the profit element of 15%, amounting to Rs.10,44,15,616/- would have to consider as the value of goods incorporated in execution of works contract and liable to tax as per Section 5-F of the Act.
14. Petitioner further contends that on the 2nd respondent proposing to revise the assessment in purported exercise of power under Section 14(4) of the Act, it was issued with show cause notice dated 02-12-2005, upon which the petitioner had submitted its explanation on 19-12-2005.
15. Petitioner contends that by the aforesaid explanation/reply submitted by it to the show cause notice issued by the 2nd respondent, it had contended that there is no taxable turnover as per the profit and loss Account; that the assessment made on the basis of AA9 return with Nil turnover is correct; that as the construction is not meant for sale, the estimation of turnover based on purchases is not correct; that the project is approved by the Tourism Department as eligible for incentives; that if any, construction is for resale, the Tourism Department will not approve the project for incentives as the end use will vary depending upon the buyer's wish; and that as there is no sale 7 receipts, requested to drop the proposal to levy tax under Section 5-F of the Act by treating the activity of the petitioner as works contract.
16. Petitioner also contended that the 2nd respondent, did not agree with the explanation submitted by it and by observing that the petitioner though had claimed of it is being Tourism Unit and is eligible for the incentives as are in vogue and the certificate dated 29-05-2004 issued to the petitioner for Multiplex-cum- Shopping Mall at Panjagutta, Hyderabad by treating the same as a tourism unit entitled for incentives, however, did not place any material on record of it being granted special incentives and as such, not liable to tax on the turnover, had assessed the petitioner to tax at 8% on the purchase value of the goods incorporated in execution of works contract by adding 15% profit margin under Section 5-F of the Act resulting in demand of tax in a sum of Rs.83,53,250/-.
17. Petitioner contends that on the aforesaid assessment order being passed by the 2nd respondent, the petitioner had availed the remedy of appeal in terms of Section 19 of the Act before the 3rd respondent by filing appeal on 04-03-2006.
8
18. Petitioner further contends that since, it has been issued with certificate dated 29-05-2004 by the Youth Advancement, Tourism & Culture Development, Government of Andhra Pradesh extending various concessions, which inter alia included 100% sales tax exemption for 5 years for new units, the petitioner did not make the payment of 12.5% of the disputed tax as prescribed under proviso to Section 19 of the Act for maintaining the appeal.
19. Petitioner contends that since, it is granted exemption by treating the petitioner as a Tourism Unit, the said exemption would be applicable in relation to filing and maintaining of the appeal. The 3rd respondent authority however, without considering the same, had rejected the appeal by its order dated 01-07-2006, observing that the petitioner failed to produce proof of payment of 12.5% of the disputed tax and since the Second proviso appended to Section 19(1) of the Act explicitly provides for payment of 12.5% of the disputed as a pre-condition for admission of the appeal, and in the absence of fulfillment of condition of payment of 12.5% of the disputed tax, the appeal filed by the petitioner against the revised assessment order of the 2nd respondent for the year 2003-04 under the Act stands as 'not 9 entertainable' for failure of payment of 12.5% of the disputed tax.
20. Petitioner contends that since the petitioner has been granted incentives in the form of exemption by the Youth Advancement, Tourism and Culture Development, Government of Andhra Pradesh, the 3rd respondent ought not to have rejected the appeal on the aforementioned ground.
21. It is also contended by the petitioner that though, a further appeal is provided under the Act to the Tribunal under Section 21 of the Act, since, the Tribunal being an instrumentality created under the Act cannot over ride the statutory provision, and thus, the said remedy would not be an efficacious remedy and as such, the petitioner is entitled to maintain the present Writ Petition by assailing the Revised assessment order as well as appellate order.
22. Respondent Nos.1 and 4 filed counter-affidavit.
23. By the counter-affidavit filed on behalf of 1st respondent, learned Special Standing Counsel would contend that the petitioner in fact had obtained G-Form on two occasions for purchasing goods at concessional rate of tax, which benefit is 10 only available if the petitioner is executing works contract and not purchasing the goods for being used for its own construction.
24. Learned Special Standing Counsel appearing on behalf of respondents would further submit that since the petitioner at the first instance having chosen to avail the remedy of appeal, cannot abandon the said course of action midway and assail the order of assessment as well as rejection order in a Writ Petition, after about 8 months from the date of passing of the order.
25. Learned Special Standing Counsel would further submit that insofar as the claim of the petitioner of it having granted exemption from payment of sales tax and as such, the 3rd respondent ought to have entertained the appeal filed by the petitioner without insisting for payment of pre-deposit of 12.5% of the disputed tax, it is contended that from a perusal of the order of the 3rd respondent rejecting the appeal, it would be clear that the petitioner had failed to produce any exemption certificate granted by the Commercial Tax authorities in respect of petitioner's project from levy of sales tax to justify the claim of it not being liable to make pre-deposit in terms of second proviso to Section 19 of the Act.
11
26. Learned Special Standing Counsel would further contend that though the Youth Advancement, Tourism and Culture Development, Government of Andhra Pradesh had issued certificate dated 29-05-2004 recognizing the petitioner's Multiplex-cum-Shopping Mall as a tourism unit under the Andhra Pradesh Tourism Policy, 1998, the petitioner was required to obtain necessary approvals from the concerned local bodies and other agencies in order to avail such benefit and inasmuch as no exemption certificate has been issued by the Commercial Tax Department, the petitioner cannot claim of it being exempted from payment of sales tax.
27. Learned Special Standing Counsel appearing on behalf of respondents would further contend that as the petitioner never approached the Commercial Tax Authorities for granting exemption from payment of Sales Tax in terms of the certificate issued by the Youth Advancement, Tourism and Culture Development, Government of Andhra Pradesh recognizing the petitioner as a Tourism Unit, the petitioner cannot claim of it not being liable to pay sales tax on execution of works contract. 12
28. Learned Special Sanding Counsel would also contend that the exemption provided under the Andhra Pradesh Tourism Policy is to be extended by the concerned agencies as would be evident from the certificate issued by the Tourism Authorities and the said exemption is also in respect of output tax payable on the tourism unit commencing its activity and not in relation to construction undertaken by the petitioner as a builder.
29. Learned Special Standing Counsel would further contend that the claim of the petitioner of it having undertaken construction for itself is also belied by the fact that the Agreement of Sale and Irrevocable PoA entered into by it with the owners and earlier Developers is dated 23-09-2004, till such time, the petitioner is only considered as a contractor on behalf of the owners and the developers, who had entered into agreement initially on 27-06-2001 with a supplementary agreement again on 05-07-2002.
30. Learned Special Standing Counsel thus, contends that the petitioner during the period 2003-04 was acting as builder / contractor for which it had purchased various goods to the tune of Rs.9,07,96,188/- and incorporated the same in works contract 13 executed by it, and for the said reason, the 2nd respondent by its revised assessment order, had brought the aforesaid turnover to tax under the provisions of Section 5-F of the Act by adding 15% as profit margin to the value of goods purchased as the petitioner did not disclose the details of its purchases and sales and had filed only 'Nil' return.
31. Learned Special Standing Counsel would further contend that since in respect of the same construction, the petitioner having been assessed to tax under the provisions of 5-F of the Act for the year 2002-03, it is not open for the petitioner to claim that during the year 2003-04, it had not undertaken execution of works contract by incorporating the material into the construction and that the said construction is being undertaking for self purposes.
32. Learned Special Standing Counsel would further contend that the 3rd respondent before rejecting the appeal filed by the petitioner as not maintainable on 01-07-2006, had issued first notice dated 21-03-2006 termed as 'Check Memo' calling upon the petitioner to produce proof of payment of 12.5% of the disputed tax, upon which the petitioner had filed letter dated 14 23-02-2006 claiming that it had filed a representation before the Principal Secretary, Revenue Department, Government of Andhra Pradesh requesting to exempt from payment of 12.5% of the disputed tax and pleaded for an opportunity of personal hearing.
33. Learned Special Standing Counsel further submits that on petitioner submitting the aforesaid letter, the 3rd respondent has issued another notice dated 29-04-2006 directing the petitioner to furnish proof of payment of 12.5% of the disputed tax within 7 days from the date of receipt of said notice, and thereafter the 3rd respondent also afforded an opportunity of hearing to the petitioner.
34. Learned Special Standing Counsel further submits that in response to the aforesaid notice issued by the 3rd respondent, the authorized representative of the petitioner appeared before the 3rd respondent, but however, did not produce any proof of payment of 12.5% of the disputed tax or it having been granted any exemption from the Government from payment of 12.5% of the disputed tax.
15
35. Learned Special Standing Counsel would thus, contend that since, the petitioner had neither made payment of mandatory deposit of 12.5% of the disputed tax for maintaining the appeal nor filed any certificate granting it exemption from payment of tax, the 3rd respondent authority issued the order dated 01-07- 2006 rejecting the appeal filed by the petitioner as 'not maintainable'.
36. Learned Special Standing Counsel would contend that since, the construction undertaken by the petitioner during the year 2003-04 is intended for the land owner and developers under the Development Agreement dated 27-06-2001, the petitioner would be liable to tax on the value of goods incorporated in the execution of works contract at the relevant point of time and it is for the said reason, the 2nd respondent had assessed the turnover tax under Section 5F of the Act @ 8% provided under the Act.
37. By stating as above, learned Special Standing Counsel seeks for dismissal of the Writ Petitions.
38. The 4th respondent by the counter-affidavit filed contended that petitioner is not registered with the Director of Tourism and 16 therefore not entitled for exemption under the Andhra Pradesh Tourism Policy, 1998.
39. We have taken note of respective contentions urged.
40. Though, on behalf of the petitioner it has been vehemently contended that the petitioner being the owner of the subject property and having undertaken the construction for itself cannot be considered as works contractor, as if it is executing the contract for a third party for it to be liable to tax, as rightly contended by the learned Special Standing Counsel appearing on behalf of the respondents the Agreement of Sale and Irrevocable PoA under which the petitioner claims itself as purchaser has come into existence on 23-09-2004, which is subsequent to the assessment year involved i.e. 2003-04 w.e.f. 01-04-2003 to 31- 03-2004. It is also pertinent to note that though, the petitioner had claimed of it being a purchaser of the subject property and thus, the construction undertaken by it is for self, and thus not being liable to tax, a reading of the aforesaid Agreement of Sale and Irrevocable Power of Attorney, in particular Clause-5 thereof reads as under:
17
" The owners hereby confirm that they shall only be delivering possession of the schedule property to the purchaser on execution of the sale deed for the schedule property or on any mutually agreed terms/date between the owners and the purchaser, which will be evidenced by the owners and the purchaser which the purchaser has agreed to and confirms by affixing its seal along with the signature of its authorized signatory hereto and covenants with the owners that the purchaser having perused all the necessary documents and related papers in respect of the schedule property and having satisfied itself in all aspects that the owners have good and perfect right, title and authority to the schedule property and that the owners have not done or knowingly done any act, deed or thing whereby the schedule property is in any way materially encumbered or title of the owners affected."
41. A perusal of the aforesaid clause would clearly go to show that there is no transfer of title in favour of the petitioner either during the year 2003-04 or 2004-05 under the aforesaid document more so, when the same is titled as 'Agreement of Sale and Irrevocable Power of Attorney' granted in favour of the petitioner for undertaking the construction of Multiplex-cum- Shopping Mall. Thus, the said document cannot be considered as a sale deed conferring absolute right on the petitioner as sought to be urged.
42. Further, as noted above, the said agreement of sale entered into is only on 23-09-2004 and as such, cannot be made 18 applicable in relation to goods purchased by the petitioner for the earlier period.
43. It is trite law that under an agreement of sale, no rights for the property can be vested and by the said document, the parties only agree to do future act and it is only upon execution of sale deed, which is duly registered in terms of Section 17 of the Registration Act, one can claim absolute right and title to the property. (See: Sanjay Sharma Vs. Kotak Mahindra Bank Limited and others 1).
44. In the facts of the present case, as noted herein above, since Clause-5 of the agreement of sale clearly records the owners executing sale deed at a later date, the petitioner under the said agreement cannot claim having vested with any right or interest or title in the subject property, and the said agreement of sale cannot be considered as a sale deed. It is also not out of place to mention that the petitioner has not placed before this Court the details of the stamp duty paid on the Agreement of Sale and Irrevocable Power of Attorney for this Court to accept the 1 2024 SCC OnLine SC 4589 19 contention that under the said document, a right and interest in the property having been created in favour of the petitioner.
45. Since, the petitioner cannot claim itself to be the owner of the property, the construction/work executed by the petitioner by incorporating the material purchased by it during such period, would only have to be considered as for and on behalf of the owners and developers who had entered into the agreement for developing the subject property under agreement dated 27-06- 2001 notwithstanding the fact that the developers who had entered into the aforesaid agreement in their individual capacity are Directors of the petitioner, which is a private limited company at the relevant point of time.
46. Though, on behalf of the petitioner, it has been contended of it having been granted exemptions by treating it as a Tourism Unit by the Government of Andhra Pradesh under Certificate dated 29-05-2004, a reading of the aforesaid Certificate issued by the Principal Secretary to Government, Youth Advancement, Tourism and Culture Department, clearly indicates that the petitioner's construction i.e. Multiplex-cum-Shopping Mall has been recognized as Tourism Unit under the A.P. Tourism Policy, 20 1998 and is entitled for 'any incentives, concessions' as are in vogue subject to obtaining necessary approvals from the concerned local bodies and other agencies. The contents of the above certificate would go to show that the petitioner is required to approach the concerned authorities to claim/avail the incentives/concessions as are available to a Tourism Unit by enclosing the said certificate. The said fact would be further clear from the letter dated 20-10-20024 filed by the petitioner (filed partly i.e. only first page) detailing the incentives and concessions available under the A.P. Tourism Policy, 1998 which a Tourism Unit can avail.
47. Though, it is contended by the petitioner that the Certificate dated 29-05-2004 as issued by the Youth Advancement, Tourism and Culture Department, Government of Andhra Pradesh would entitle it to 100% sales tax exemption for a period of 5 years, inasmuch as no eligibility certificate as issued by the Government of Commissioner of Commercial Taxes has been placed before this Court or for that matter before the First Appellate Authority or the Assessing Authority at the time of assessment, the claim of the petitioner of it having been granted 21 exemption from payment of sales tax for a period of 5 years can only be a self-serving statement and cannot be accepted.
48. Further, it is also to be noted that even if the petitioner is granted exemption by recognizing it as a Tourism Unit, the said exemption would only be applicable in respect of output tax i.e. sales tax payable on its sale and from the date as mentioned in the eligibility certificate and cannot be applied in respect of works it had undertaken as works contractor for the year 2003-04 or 2004-05, when no such certificate of exemption had been granted in its favour.
49. Further, the 3rd respondent in W.P.No.22615 of 2006 by the counter-affidavit having made a categorical statement of petitioner not being registered as a recognized 'Tourism Unit' and as such not entitled for exemption under A.P.Tourisim Policy, 1998, further belies the claim of the petitioner.
50. Though, during the course of hearing of the Writ Petition, petitioner had filed additional documents enclosing therewith copy of the 7th Annual report for the year 2003-04, a perusal of the said balance sheet would also show that during the year 2003-04 in Schedule -V attached to the balance sheet under the 22 heading 'Fixed Asset', there is no mention of the land which the petitioner claims to have purchased under agreement of sale dated 23-09-2004 for it to claim the purchase of goods used in construction is for self. Further, as noted herein above, by Clause-5 of the Agreement of Sale and Irrevocable Power of Attorney, the owners having specifically mentioned to execute 'sale deed' at later point of time, all the purchases made by the petitioner would have to be construed as in relation to for being incorporated into the execution of works contract only.
51. Thus, this Court is of the considered view that the order of the 2nd respondent authority in subjecting the value of purchase of goods incorporated in execution of works contract by the petitioner during the year 2003-04 or 2004-05 by adding a profit margin of 15% and subjecting the same to tax under the provisions of Section 5-F of the Act cannot be held as either illegal or contrary or without authority of law.
52. Further, on the 2nd respondent authority having passed the order of assessment on 06-02-2006, the petitioner having availed the remedy of appeal provided under the Act on 04-03-2006, is required to make payment of 12.5% of the disputed tax assessed 23 by the Assessing Authority in order to maintain the aforesaid appeal.
53. Despite the petitioner being issued with check memo at the first instance on 21-03-2006 sent by 'Certificate of Posting' on 23-03-2006 and the petitioner in response to the same having claimed of it approaching the Government for issuing of exemption certificate, and not furnishing any such exemption certificate obtained from the Government, and the 3rd respondent thereafter issuing another notice calling upon the petitioner to produce proof of payment of mandatory tax of 12.5% of the disputed tax within 7 days, and even in response to the said notice, petitioner having failed either to produce the proof of payment or exemption certificate obtained from the Government, even after being afforded with the opportunity of personal hearing, the petitioner cannot claim that the order of the 3rd respondent in rejecting the appeal as 'not maintainable' as contrary to the Act.
54. If only the claim of the petitioner of it having been granted exemption from payment of sales tax, the Assessing Authority at 24 the first instance would not have assessed it to tax at all forcing the petitioner to avail the remedy of appeal.
55. Since, even after filing of the appeal, as the petitioner had failed to produce the exemption certificate granted by the concerned Commercial Tax authorities or Government specifying the period of 5 years during which the exemption certificate would be in vogue or even before this Court now, this Court is of the view that the said claim of the petitioner is only intended to avoid payment of tax assessed on it.
56. For the aforesaid reasons, this Court is of the considered view that the present Writ Petitions as filed are devoid of merit and are accordingly dismissed. No order as to costs.
57. As a sequel, miscellaneous petitions pending if any shall stand closed.
____________________ T. VINOD KUMAR, J _________________ P.SREE SUDHA, J Date: 28.05.2025 Vsv