2018 (12) TMI 1356 - HC - VAT and Sales Tax

Composition Scheme - APGST Act - whether the assessing authority could have levied tax on the tax component of the works executed by the petitioner? - Held that - It is no doubt true that the amended Section 4(7)(b) of the Act enables every dealer executing works contract, in lieu of the amount of tax payable by him under Section 4(7)(a) of the Act, to opt to pay by way of composition at the rate of 5% of the total amount received or receivable by him. If the legislature had stopped there, the revenue may have been justified in contending that, since the total amount received or receivable by a dealer would include the tax levied on the total consideration, they were justified in levying tax on the total amount received or receivable which includes the tax component also. Since the tax which can be levied under Section 4(7)(b) of the Act is on the total amount received or receivable by the dealer towards execution of the works contract, it is only on the total value of the works contract executed by the dealer, could tax have been levied. The matter is remanded to the assessing authority who shall, after giving the petitioner a reasonable opportunity of being heard, examine whether VAT was levied on the VAT component of the total amount received or receivable by the petitioner in the execution of the works contract - petition allowed by way of remand.

Issues involved:
Challenge to order of Appellate Deputy Commissioner dismissing appeal against assessment order under Andhra Pradesh Value Added Tax Act; Validity of tax rate increase from 4% to 5% and retrospective application; Interpretation of Section 4(7)(b) regarding tax component in total amount received or receivable; Dealer's right to resile from composition scheme; Examination of assessing authority's levy of tax on tax component.

Analysis:

1. Challenge to Appellate Deputy Commissioner's Order:
The petitioner challenged the order of the Appellate Deputy Commissioner dismissing the appeal against the assessment order dated 29.03.2014. The petitioner contended that the tax rate was increased from 4% to 5% after they had opted for the composition scheme, and therefore, they should be liable to pay tax at 4% for the entire duration. The respondents justified the levy at 5% based on the amended Act. The Court found that the assessing authority was correct in levying tax at 5% as per the amended Section 4(7)(b) of the Act.

2. Validity of Tax Rate Increase and Retrospective Application:
The petitioner argued against the retrospective application of the increased tax rate from 4% to 5%. The Court noted that the amended Act increased the tax rate to 5% from 14.09.2011, and since there was no challenge to the validity of the retrospective effect, the petitioner's contention failed. The Court upheld the validity of the retrospective application of the amended provisions.

3. Interpretation of Section 4(7)(b) - Tax Component in Total Amount:
The dispute arose regarding whether the assessing authority could levy tax on the tax component of the total amount received or receivable by the dealer. The Court clarified that tax under Section 4(7)(b) should be on the total value of the works contract executed by the dealer, not on the tax component of the consideration. The matter was remanded to the assessing authority to examine if VAT was levied on the tax component of the total amount received by the petitioner.

4. Dealer's Right to Resile from Composition Scheme:
The Court discussed the dealer's right to resile from the composition scheme once opted. Referring to previous judgments, the Court held that once a dealer opts for composition, they cannot resile during the assessment period. The Court emphasized that there is no provision allowing a dealer to resile from the composition scheme under the A.P. VAT Act.

5. Assessing Authority's Levy of Tax on Tax Component:
The Court set aside the impugned order and remanded the matter to the assessing authority to determine if VAT was levied on the tax component of the total amount received by the petitioner. The Court emphasized that tax under Section 4(7)(b) should be on the total value of the works contract executed by the dealer, excluding the tax component.

In conclusion, the Writ Petition was disposed of with no order as to costs, and any pending miscellaneous petitions were closed. The judgment provided a detailed analysis of the issues raised by the petitioner and the respondents, clarifying the application of the amended provisions and the interpretation of Section 4(7)(b) under the Andhra Pradesh Value Added Tax Act.

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