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TMI Blog2012 (3) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. During the assessment years 1998-99 and 1999-2000, the petitioner executed electrical contracts with the Andhra Pradesh State Electricity Board (APSEB). The CTO-III completed the assessment on January 22, 2001 duly allowing composition and levied the tax accordingly. The petitioner was granted certificate in form L1 on December 26, 1998 issued under rule 6B of the Andhra Pradesh General Sales Tax Rules, 1957 ("the Rules") which was extended from time to time. The CTO however on December 14, 2001 cancelled the certificate in form L1 on the ground that the petitioner is not eligible to opt for composition in relation to electrical works contracts. Consequently, the CTO revised the assessment on December 29, 2001, holding that the petitioner is not eligible for composition scheme. On appeal before the Appellate Deputy Commissioner (ADC) the petitioner was successful. The appellate order dated March 21, 2002, however, was revised under section 20(1) of the Act by the Joint Commissioner (Legal) on August 19, 2004 and held that the L1 certificate issued to the petitioner was void ab initio in view of section 5G of the Act. Feeling aggrieved, the petitioner filed T.A. No. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtificate with retrospective effect. Probably for the reason that ADC allowed their appeals, the petitioner did not challenge the order of the ADC before the STAT on other grounds. Therefore, our consideration is and ought to be restricted to the validity of the revisional order as confirmed by the STAT. To appreciate the controversy, it is necessary to read section 5G of the Act and rule 6B of the Rules, which we quote hereunder: "S. 5G. Composition of tax payable under section 5F.-(1) Subject to such conditions and in such circumstances as may be prescribed, if a dealer, who executes any works contract other than the category of contracts notified by the Government under sub-section (2), so opts, the assessing authority of the area may accept, in lieu of the amount of tax payable by him under the Act during the year, by way of composition, an amount at the rate of four paise on every rupee of the total amount paid or payable to the dealer towards execution of the works contracts: Provided that no tax shall be payable under this section on the turnover relating to the amounts paid to a sub-contractor as consideration for the execution of the works contract whether wholly or par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which such permission is granted, an amount by way of composition as provided in section 5G. (ii) Such permission for composition shall be granted within thirty days from the date of receipt of the application during the year for which the composition is applied for. The permission shall be in form L1 and shall be valid for the entire year to which it relates. (iii) The assessing authority may cancel such permission in the following cases: (a) if the dealer fails to pay tax in any month within the time specified and, or; (b) if it appears to the assessing authority that the dealer has suppressed the whole or part of turnover in the return filed by him or; the return filed by the dealer appears to be incomplete or incorrect; (c) if the dealer contravenes any provisions of the Act or the Rules made thereunder." As per section 5 (charging section) of the Act every dealer shall pay tax for each year on every rupee of his turnover at the rates of tax and at the points of levy specified in Schedules I to VII. Section 5F of the Act specifically deals with levy of tax on transfer of property in goods involved in the execution of works contract. For the two assessment years with wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 (Act No. VI of 1957), the Governor of Andhra Pradesh hereby directs that any dealer who undertakes the following categories of works contracts shall not be eligible to elect to pay tax by way of composition as provided under sub-section (1) of section 5G of the said Act. 1. Installation of air-conditioning 2. Erection of lifts. 3. Refrigeration work 4. All other types of electrical contracts." The petitioner was granted permission in form L1 on December 26, 1998. As per G.O. Ms. No. 787, a dealer engaged in electrical works contracts is not eligible for the scheme of payment of tax by way of composition. Therefore the permission granted by the CTO is ex facie without authority and ultra vires. When initially the CTO completed the assessment for the years 1998-99 and 1999-2000, the permission in form L1 was taken into consideration. Subsequently having realized that being an electrical works contractor, the petitioner is not eligible to the scheme of composition, the CTO cancelled the certificate on December 14, 2001. The cancellation as such is not disputed nor impeached before any of the Departmental authorities or the STAT. The question therefore is whether the permission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... settings on which the provision has been placed in the statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have to be complied with. The mandatory requirements of those conditions must be obeyed or fulfilled exactly, though at times, some latitude can be shown, if there is a failure to comply with some requirements which are directory in nature, the non-compliance of which would not affect the essence or substance of the notification granting exemption." Further dealing with the question of the doctrine of substantial compliance, the apex court held as follows (page 383 in 6 GSTR): ". . . A fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance with an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied with notwithstanding the non-compliance of directory requ ..... 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