2007 (7) TMI 587 - HC - VAT and Sales Tax

Whether the fabricated structures made from iron and steel, which had suffered tax, were to be assessed under section 5F of the Andhra Pradesh General Sales Tax Act, 1957 or they have to be excluded from application of section 5F under the first proviso? Held that - Even if it is accepted that the fabricated structures were different products, than iron and steel, even then they were covered by proviso to section 5F in view of the law laid down in the case of Media Communications 1996 (12) TMI 365 - ANDHRA PRADESH HIGH COURT . That judgment has become final, and therefore, the same is binding on the Deputy Commissioner as well as the Tribunal. To that extent, the judgment of the Tribunal and the order of the Deputy Commissioner is set aside. Since the earlier authorities and the Tribunal treated the goods to be different than iron and steel, they might not have gone into the question whether the goods were taxed at four per cent or eight per cent. Besides coming to the correct conclusion on this question, some factual aspects of the matter might have also to be considered. Therefore, on this question as to whether the goods had to be taxed at four per cent or eight per cent and whether the goods in reality have been taxed at four per cent or eight per cent, we remit the case back to the Tribunal, who may decide the matter, after hearing the parties.The tax revision case is accordingly allowed in part

Summary

Issues:
Assessment of turnover for a works contractor under the Andhra Pradesh General Sales Tax Act, 1957.
Interpretation of section 5F regarding taxation of fabricated structures made from iron and steel.
Correct application of the proviso to section 5F as per legal precedent.
Rate of tax applicable to the goods - whether taxed at four percent or eight percent.

Assessment of Turnover:
The revision petitioner, a works contractor, was assessed for the assessment year 2000-2001 by the Commercial Tax Officer. The Deputy Commissioner observed an error in allowing exemption on the turnover of second purchase of iron and steel and M.S. plates. The Deputy Commissioner initiated a revision and issued a show cause notice. The petitioner appealed to the Sales Tax Appellate Tribunal, which dismissed the appeal, leading to the current tax revision case.

Interpretation of Section 5F:
The key issue was whether fabricated structures made from iron and steel, which had already suffered tax, should be assessed under section 5F of the Andhra Pradesh General Sales Tax Act, 1957. The Tribunal and Deputy Commissioner concluded that the products were different based on various judgments. However, the High Court found an error in their interpretation due to the removal of certain words from the proviso to section 5F as per the case of Media Communications v. Government of Andhra Pradesh. The High Court clarified that the fabricated structures were covered by the proviso to section 5F, regardless of being considered different products.

Correct Application of Proviso to Section 5F:
The High Court held that the proviso to section 5F should be read without the words "in the same form in which they were purchased by the contractor," as per the judgment in Media Communications. The judgment clarified that the fabricated structures made from iron and steel should not be treated differently for tax assessment purposes. The High Court set aside the orders of the Tribunal and Deputy Commissioner based on this interpretation.

Rate of Tax Applicability:
The High Court noted discrepancies in the rate of tax applied to the goods, which were taxed at eight percent instead of the correct rate of four percent as per the first proviso of section 5F. The case was remitted back to the Tribunal for a decision on whether the goods were taxed at the correct rate and to consider any factual aspects related to the matter.

In conclusion, the tax revision case was partially allowed by the High Court, emphasizing the correct interpretation of the proviso to section 5F and remitting the case back to the Tribunal for further consideration on the rate of tax applicable to the goods.