Telangana High Court
The Sales Tax Appellate Tribunal vs M/S.Bhooratnam And Company on 3 January, 2024
Author: P.Sam Koshy
Bench: P.Sam Koshy, N.Tukaramji
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE N.TUKARAMJI
TAX REVISION CASE Nos.70, 65 and 107 of 2008
COMMON ORDER:
(per Hon'ble Sri Justice P.SAM KOSHY)
These three Tax Revision Cases are filed by the
petitioner/Revenue challenging the common order dated
13.07.2007 passed by the Sales Tax Appellate Tribunal (for short,
'the Tribunal') in Tribunal Appeal Nos.334/06, 335/06 and 336/06
which are pertaining to the same respondent/assessee. The point
of contention and grounds raised to challenge the impugned orders
in all three Tax Revision Cases being common, they are heard
together and decided by this common order.
2. Heard Sri Rajeshwar Rao, learned Special Standing Counsel
for Commercial Taxes appearing for the Revenue and Sri Bhaskar
Reddy Vemireddy, learned counsel for the assessee.
3. For the sake of convenience, the facts in Tax Revision Case
No.70 of 2008 are taken up as the lead case.
4. Vide the said common order dated 13.07.2007, the Tribunal
had allowed the appeals preferred by the assessee by setting aside
the order passed by the Additional Commissioner (CT), Hyderabad, 2
(herein referred to as, the 'Revisional Authority') and restored the
order of the Appellate Deputy Commissioner (CT). As a
consequence, the order passed by the Commercial Tax Officer
imposing penalty stood set aside.
5. The assessee herein is a registered body under the Andhra
Pradesh Goods and Services Tax Act, 1957 (for short, 'APGST Act,
1957') as also under the Central Sales Tax Act, 1956 (for short,
'CST Act, 1956') engaged in the business of works contracts apart
from being manufacturing, supply, design, erection and testing
and commissioning of water supply systems and manufacture and
sale of cement pipes. The activities are carried out in addition to
the state of Andhra Pradesh to other states as well. They have two
manufacturing units of cement pipes. The cement pipes
manufactured by the assessee are used in the execution of works
contract that they get and they also sell the cement pipes in the
course of interstate trade and commerce.
6. The assessee had got himself registered for issuance of G2
Certificate which stood issued on 21.01.1989. Under the G2
Certificate, the assessee could make local purchase of cement by
issuing 'G' Forms and the said purchase would be at concessional
rate of tax on such purchases. The Commissioner (CT) had issued
a circular on 08.01.2005 vide Ref.No.A1(4)1437/2004, wherein, it 3
was held that contractors executing works contract would not be
entitled to purchase cement by issuing 'G' Forms and they would
not be permitted to purchase cement at concessional rate of tax
under Section 5B of the APGST Act, 1957. The assessee was in the
business of execution of works contract and also had
manufacturing units wherein the cement pipes were
manufactured. In the course of execution of the works contract,
they used the cement pipes manufactured from their
manufacturing unit.
7. It was the contention of the Revenue that the assessee had
utilized the cement in the execution of the works contract and thus
they have violated the declaration and hence liable to pay penalty
under Section 5B read with Section 7-A(2) of the APGST Act, 1957.
A show cause notice was issued in this regard, to which the
assessee submitted their contentions and objections.
8. According to the assessee, they had purchased the cement
against 'G' Forms on the strength of the cement being incorporated
in the G2 Certificate and that the works contractors were permitted
to purchase goods against 'G' Forms as per circular dated
23.10.1998. It was also the contention of the assessee that they
are they are manufacturers of cement pipes which are utilized in
the execution of works contract. Further, by fiction of law, there 4
was a transfer of goods. Meanwhile, vide G.O.Ms.No.496, dated
17.07.2001, the Government had withdrawn concessional rate of
tax on the purchase of cement. Further, holding 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. The Assessing Officer imposed penalty upon the
petitioner.
9. The assessee preferred an appeal before the Revisional
Authority. The Revisional Authority while allowing the appeal,
decided the case in favour of the assessee setting aside the order of
the Assessing Authority specifically holding that the assessee was
entitled to purchase cement for production of finished goods at a
concessional rate and that the cement pipes manufactured at the
assessee's manufacturing unit used in the execution of works
contract was a deemed sale of cement pipes. It is this order of the
Revisional Authority which the Revenue had challenged before the
Appellate Deputy Commissioner (CT) where the order passed by
the Commercial Tax Officer was set aside holding that Section 5B
of the APGST Act, 1957, envisages finished goods to be used for
general commercial merchandise and must be marketable as
'chattel-qua-chattel'.
5
10. It was the opinion of the Revisional Authority that even
though cement pipes manufactured by the assessee was being
used in the execution of the works contract and the same amounts
to a deemed sale, but in law, it cannot be treated as a sale for the
reason that there is no transfer of property in goods. Therefore,
ordered that the assessee should pay tax at the rate of 12% under
Section 5F of the APGST Act, 1957 on the sale of cement pipes
instead of 4% that was paid by the assessee under Section 5G of
the APGST Act, 1957. It is this order which has been reversed by
the Tribunal leading to filing of the present Tax Revision Cases.
11. Having heard the contentions put forth on either side and on
perusal of records, it would be relevant at this juncture, to take
note of the admitted finding of facts arrived at by the Tribunal
which for ready reference is reproduced herein under:
"12. Now, it has to be seen whether the appellant is liable to pay penalty U/s.5B(2) read with Sec.7-A(2) of the Act. If the appellant is liable to pay penalty U/s.5B(2) then only Section 7-A(2) can be read with Sec.5B(2) of the Act.
13. Admittedly, the appellant is having manufacturing units of cement pipes. Therefore, no penalty can be levied under clause 1 of Sub-Section 2 of Section.5B. Now, it has to be seen whether clause 2 of sub-Section 2 of Sec.5B attracted i.e., whether the appellant have purchased goods by furnishing declaration under the proviso to sub-section 1 sold 'such goods' contrary to such declaration. The appellant has not sold cement, hence clause 2 of Sec.5B is also not attracted.
14. The declaration shall be in form G. As discussed above Form G contains the particulars. The appellant was issued registration certificate U/s.5B w.e.f. 21.1.1989. The 6
appellant effected local purchases of cement by issuing G Forms and availed the concessional rate of tax on such purchases. The appellant is having manufacturing units of cement pipes. They are manufacturing cement pipes and some cement pipes are sold in the course of execution of contract works and some of them are sold in the course of interstate trade and commerce. The appellant is also a works contractor. They are executing the works contracts more specifically in the nature of laying RCC/MS Pipes. So, it is not in dispute that the cement pipes manufactured by them are used in the execution of works contracts. Whether the use of cement pipes in works contracts amounts to sale of cement and whether the appellant violated conditions of Registration Certificate making them liable for the penalty.
15. It is not in dispute that the Commissioner of Commercial Taxes issued a certificate in CCT's Ref.AI(2)/984/98, dt.23.10.1998 and clarified that the contractors can use G Forms U/s.5F of the Act, and such contractors can also opt for composition U/s.5G of the Act. Admittedly, no conditions are enumerated in the said clarification. Therefore, the appellant, being a works contractor, could issue G Forms by virtue of the above referred clarification till G.O.Ms.496, Revenue (CT.II) Department, dated 17.7.2001. The Government issued said G.O and certain goods including cement are made not eligible for concessional rate of tax U/s.5G of the Act. However, the proviso to the G.O clarifies that the purchase of cement by the manufacturers of finished goods like asbestoes sheets, pipes, paint manufacturers using white cement, hallow bricks are eligible for concessional rate of tax U/s.5G, it those manufacturers use the cement purchased by them as raw material to produce finished goods 'for sale'. It has to be seen that there is no condition that the finished goods must be sold either in Section B or in the Rules. The only condition which Section 5B envisages is that the dealer who purchases raw material or other goods must manufacture goods i.e., they must have manufacturing units. Admittedly, the appellant comes within the purview of the said proviso and because the appellant has purchased the cement for manufacturing cement pipes. So using the cement purchased by issuing G Forms for manufacturing cement pipes is not in dispute. Of course, the proviso to the above referred G.O., shows that the dealers who produce the finished goods for sale are entitled for concessional rate of tax U/s.5B. The appellant has manufactured cement pipes. The turnover pertaining to the cement pipes used in the works contract is in dispute. There cannot be any doubt that the cement pipes can be treated as finished goods, because it is also not in dispute 7
that the appellant sold a part of manufactured cement pipes in the course of interstate trade and commerce. It is also not in dispute that that some of the finished goods i.e., cement pipes are used in works contract.
19. In the case between Sangam Healthcare Products Limited Vs. State of Andhra Pradesh reported in (2005) 41 APSTJ 1, this Tribunal held that the penalty under Section 5B(2)(ii) could be leived only under two circumstances. One is when the dealer purchases goods by issuing G Forms without having its manufacturing unit. Another circumstance is having manufacturing unit and having purchased goods by issuing 'G' Forms, sells such goods contrary to such declaration made in G Form. Therefore Sec.5B(2)(ii) does not authorize the Revenue to levy penalty in the case of mistake of 'G' Forms.
20. It also appears that applying a Circular dated.8.1.2005 to the previous assessment years without any clause for retrospective effect is not justified. A circular may be binding on authorities, but the same cannot be given effect to the previous assessment years unless there is a specific clause giving retrospective effect to it. In view of the above discussion, we are of the view of that prior to issuing G.O.Ms.No.496, dated.17.7.2001, the contractors were eligible to purchase cement by issuing 'G' Forms by virtue of the Circular in CCT's Ref.A1(2)/984/98, dt.23.10.1998. However, after issuing G.O.Ms.No.496, dated.17.7.2001, the dealers are eligible for concessional rate of tax under Sec.5B if they use the cement for the manufacturing of finished goods for sale. Cement pipes manufactured by the appellant have to be treated as finished goods. However, the sale of such goods i.e., cement pipes in this case has to be treated as the goods transferred in the works contract and such goods are deemed to have been sold U/s.5F of the Act. Therefore, the finished goods i.e., cement pipes are deemed to have been sold in the works contracts. Hence, there is no sale of cement purchased by the appellant for manufacturing cement pipes.
In the light of the above discussion, we set-aside the impugned order passed by the revisional authority and restore the order of the Appellate Deputy Commissioner. Consequently, the order of the C.T.O., imposing penalty stands set-aside."
12. In the afore given admitted factual backdrop, the aforesaid
finding of facts by the Tribunal cannot under any stretch of 8
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.
13. A similar view was taken by this Bench while deciding Tax
Revision Case No.8 of 2008 and batch on 09.10.2023, wherein in
paragraph No.19, this Bench had taken a similar stand while
dismissing the Tax Revision Cases filed by the assessee which
again for ready reference, is reproduced herein under:
"19. 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. The Government of India, Ministry of Finance, Department of Revenue itself vide their Circular No.237 of 1996, while clarifying as to whether the product "ready-mix concrete"
can be classified as a finished product or not, held that "ready-mix concrete" is a material in a wet process state and is not a finished product like block or pre-caste tiles, beams, etc. and had thus, clarified that all pending disputes and assessments on the issue may be settled in the light of the aforesaid guidelines."
14. In the light of the decision of this Bench in the aforesaid Tax
Revision Cases leading of which being Tax Revision Case No.8 of
2008, and the categorical finding of facts given by the Tribunal, we
are of the considered opinion that 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 9
finding of the High Court of Andhra Pradesh in the case of
B. Seenaiah & Co. Vs. Commercial Tax Officer, Kairatabasd
Circle, Hyderabad and others 1 wherein the High Court of
Andhra Pradesh dealing with the phrase 'deemed sale' has held as
under:
"though at the point of time when the petitioner paid the seigniorage fee for extraction of the boulders there might not have been a sale, after extraction of the boulders, the boulders became the property of the petitioner. The boulders were converted into the required sizes of metal, the metal was transported and utilized by the petitioner for laying the road. The seigniorage fee paid and the expenditure incurred by the petitioner towards conversion of the boulders into metal, loading, unloading, transportation, etc., would be the cost of the metal to the petitioner, which was used in execution of the works contract i.e., laying the road. 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."
The aforesaid judgment of the High Court of Andhra Pradesh in the
case of B. Seenaiah & Co. (1 supra) strengthens the view of the
Tribunal.
15. Thus, we do not find any 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.
1 (2001) 124 STC 248 10
16. The three Tax Revision Cases therefore stands dismissed.
No order as to costs.
As a sequel, pending miscellaneous petitions if any, shall
stand closed.
__________________ P.SAM KOSHY, J
__________________ N.TUKARAMJI, J
Date: 03.01.2024 GSD
