2024 (1) TMI 712 - HC - VAT and Sales Tax

Levy of penalty under Section 5B read with Section 7-A(2) of the APGST Act, 1957 - utilization of cement in the execution of the works contract - violation of declaration under the proviso to sub-section 1 - demand on the ground that, since the cement pipes manufactured by the Revenue was predominantly used for execution of the works contract awarded to the assessee themselves, he was not entitled for the purchase of cement at a reduced price - HELD THAT - The finding of facts by the Tribunal cannot under any stretch of imagination be held to be contrary to law or contrary to the materials which have been taken into consideration for the purpose of reaching to the said conclusion. A similar view was taken by this Bench while deciding Tax Revision Case No.8 of 2008 and batch on 09.10.2023 2023 (10) TMI 723 - TELANGANA HIGH COURT , wherein in paragraph No.19, this Bench had taken a similar stand while dismissing the Tax Revision Cases filed by the assessee where it was held that A plain reading of the aforesaid proviso would clearly give an indication that when a purchase of cement is made by a manufacturer of a finished good like asbestos sheets, pipes, paint manufacturers, hallow bricks, it would be eligible for purchase of cement at a concessional rate. The petitioner was not a manufacturer of any finished goods like the ones mentioned in the preceding paragraph. Thus, no strong case has been made by the Revenue calling for interference with the order passed by the Tribunal - The view of the Tribunal is also based upon the finding of the High Court of Andhra Pradesh in the case of B. SEENAIAH AND CO. VERSUS COMMERCIAL TAX OFFICER, KHAIRATABAD CIRCLE, HYDERABAD AND OTHERS 2001 (6) TMI 794 - ANDHRA PRADESH HIGH COURT wherein the High Court of Andhra Pradesh dealing with the phrase deemed sale has held While completing the execution of the works contract the property in the goods passed to the contractee from the contractor, the petitioner, at the time they were incorporated in the laying of the road. Therefore, there was a clear transfer of property in goods, while completing the works contract which would result in sale or deemed sale of goods, liable to tax. There are no merits in the contentions and submissions made by the Revenue while assailing the order of the Tribunal which is under challenge in the present three Tax Revision Cases - The three Tax Revision Cases therefore stands dismissed.

Issues Involved:
1. Legality of the order passed by the Sales Tax Appellate Tribunal.
2. Entitlement of the assessee to purchase cement at a concessional rate.
3. Applicability of penalty under Section 5B read with Section 7-A(2) of the APGST Act, 1957.
4. Validity of applying a circular retrospectively.

Summary:

1. Legality of the Order Passed by the Sales Tax Appellate Tribunal:
The Tribunal allowed the appeals by the assessee, setting aside the order of the Additional Commissioner (CT) and restoring the order of the Appellate Deputy Commissioner (CT). Consequently, the penalty imposed by the Commercial Tax Officer was set aside. The Tribunal's decision was based on the finding that the assessee was entitled to purchase cement for manufacturing finished goods at a concessional rate.

2. Entitlement of the Assessee to Purchase Cement at a Concessional Rate:
The assessee, engaged in manufacturing cement pipes and executing works contracts, purchased cement against 'G' Forms at a concessional rate. The Commissioner (CT) issued a circular on 08.01.2005, stating that contractors executing works contracts were not entitled to purchase cement at a concessional rate. However, the Tribunal found that the assessee was eligible for the concessional rate as they were manufacturers of finished goods like cement pipes, which were used in the execution of works contracts and interstate trade.

3. Applicability of Penalty Under Section 5B Read with Section 7-A(2) of the APGST Act, 1957:
The Revenue contended that the assessee violated the declaration by utilizing cement in works contracts, thus liable for penalty. The Tribunal, however, held that no penalty could be levied as the assessee did not sell cement contrary to the declaration. The Tribunal emphasized that the assessee had manufacturing units for cement pipes, and the use of these pipes in works contracts amounted to a deemed sale, which did not violate the conditions of the G2 Certificate.

4. Validity of Applying a Circular Retrospectively:
The Tribunal noted that applying the circular dated 08.01.2005 to previous assessment years without a clause for retrospective effect was unjustified. It concluded that prior to the issuance of G.O.Ms.No.496 on 17.07.2001, contractors were eligible to purchase cement at a concessional rate by issuing 'G' Forms. The Tribunal restored the order of the Appellate Deputy Commissioner, setting aside the penalty imposed by the Commercial Tax Officer.

Conclusion:
The High Court upheld the Tribunal's decision, finding no merit in the Revenue's contentions. The Tribunal's view was supported by the High Court of Andhra Pradesh's judgment in B. Seenaiah & Co. Vs. Commercial Tax Officer, which clarified the concept of 'deemed sale'. Consequently, the three Tax Revision Cases were dismissed, and no costs were ordered. Pending miscellaneous petitions, if any, were also closed.

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