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TMI Blog2021 (5) TMI 668X X X X Extracts X X X X X X X X Extracts X X X X ..... he reason that even if the user of spare parts and lubricants in the works contract amounts to sale, still the statute restricts the ITC to 75%. Petition dismissed. - Writ Petition No. 5387 of 2020 - - - Dated:- 29-12-2020 - HON'BLE SRI JUSTICE U. DURGA PRASAD RAO AND HON BLE SMT. JUSTICE KONGARA VIJAYALAKSHMI Petitioner and Advocate : G. Narendra Chetty Respondent and Advocate : GP For Commercial Tax (AP) ORDER: (Per Hon ble Sri Justice U.Durga Prasad Rao) Writ petitioner challenges the appellate order No.4803 dated 07.12.2019 in Appeal No.12/2018-19 (KNL) passed by 1st respondent dismissing the appeal confirming the assessment order No.142077/2018 dated 31.12.2018 passed by 2nd respondent granting Input Tax Credit (for short ITC ) on spare parts and lubricants at 75% on the value as against the claim of the petitioner at 100% and demanding the petitioner to pay the difference amount of ₹ 3,24,713/- along with interest for the period of delay, as illegal, arbitrary and contrary to the provisions of the A.P.VAT Act, 2005 and consequently to set aside both the impugned orders. 2. The petitioner s case succinctly is thus: i) The petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner and his customers was an outright sale but not user of the spare parts and lubricants in the course of execution of works contract. Hence, the writ petition. 3. Learned Government Pleader for Commercial Taxes-II filed counter and opposed the writ petition inter alia contending thus: The petitioner does business in purchasing and sale of two wheeler motor vehicles (Hero Company) and also automobile spares and accessories and lubricating oils. Apart from them, the petitioner also maintains a workshop in his business premises attending service and repairs to two wheeler vehicles. On authorization by the 2nd respondent, the Deputy Commissioner Tax Officer-I, Adoni conducted audit of accounts of the petitioner which revealed that the petitioner conducted following three types of transactions: 1. Sale of automobiles/two wheelers (Hero Company). 2. Sale of automobile spare parts of two wheelers and lubricating oils across the counter. 3. Use of automobile spare parts and lubricating oils in servicing and repairs of two wheelers (for workshop transactions). The dealer paid output tax at appropriate rate on the goods sold in all three types of transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icants sold in his centre were used during the course of repairs to two wheeler vehicles, still such transaction assumes the character of sale only but does not form part of works contract . He placed reliance on Eastern Typewriter Service Vs. State of Andhra Pradesh 1976 SCC Online AP 262 = (1978) 42 STC 18 and The Deputy Commissioner (C.T.), Coimbatore Division Vs. Karthikeya Press MANU/TN/0220/1981 = (1982) 51 STC 28 (Mad) to contend that user of materials in works contract would amount to independent sale. He would emphasise that it is a composite contract consisting of contract for sale of goods on one hand and providing repairing services on the other. He placed reliance on The State of Madras Vs. Gannon Dunkerley Co., (Madras) Ltd. MANU/SC/0512/1958=AIR 1958 SC 560 to buttress his argument that two separate agreements may be entered in a single instrument. Explaining the procedure followed in his service centre, learned counsel would submit that when a customer brings a vehicle to petitioner s workshop and narrates its problem, the mechanic at his shop on inspection of the vehicle advises the customer basing on requirement to replace certain parts/oils with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of goods used in the repair and service of two wheelers in the workshop. The Assessing authority further noticed that the dealer did not opt for payment of tax under composite scheme i.e., payment of tax at flat rate on the sum total of the service charges and spare parts and oils used. Therefore, he embarked upon assessing the tax under non-composition method as per Section 4(7)(a) of the VAT Act, 2005. Ultimately he held that in view of the provision under Section 13(7) r/w Rule 17(1), the assessee is entitled to ITC on the VAT/local purchases @ 75% but not 100% as claimed by him. Since the petitioner did not maintain separate accounts for the sale of spare parts and lubricating oils at the sales counter and the sale of spare parts and lubricants in the works contract, the Assessing authority has taken the entire sales turnover of accessories and oils and treated them as workshop sales and restricted the ITC on corresponding VAT purchase of goods used in the repairs and services at 75%. The above assessment order was confirmed in the appeal. 9. We gave our anxious consideration to the arguments put forth by either side. The relevant provisions of the A.P. VAT Act, 2005 need t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or on any system of payment by instalments, or carries on or executes any works contract involving supply or use of material directly or otherwise, whether for cash or for deferred payment, or for commission, remuneration or other valuable consideration. (a) In the instant case, since the petitioner is selling two wheeler vehicles, spare parts and lubricants and also undertakes the works contract of servicing and repair of the two wheeler vehicles, he comes within the definition of Dealer . (b) Section 2(45) defines the term works contract as thus: Works Contract includes any agreement for carrying out for cash or for deferred payment or for any other valuable consideration, the building construction, manufacture, processing, fabrication, erection, installation, laying, fitting out, improvement, modification, repair or commissioning of any movable or immovable property 11. Now the taxing provision needs to be looked into. Section 4 deals with the same. Section 4(7)(a) deals with the payment of tax by a dealer executing the works contract. It reads thus: a) Every dealer executing works contracts shall pay tax on the value of goods at the time of incorpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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