Telangana High Court

M/S Leighton India Contractors Private ... vs State Of Telangana on 20 November, 2025

Author: P.Sam Koshy

Bench: P.Sam Koshy

     THE HONOURABLE SRI JUSTICE P.SAM KOSHY
                     AND
           THE HONOURABLE SRI JUSTICE
            SUDDALA CHALAPATHI RAO

                      TREVC No.7 OF 2025

JUDGMENT:

(per Hon'ble Sri Justice P.Sam Koshy)

Heard Mr.A.V.A.Siva Kartikeya, learned counsel

representing Mr.J.V.Rao, learned counsel for the petitioner and

Mr.Swaroop Oorilla, learned Special Government Pleader for the

State Tax for the respondent. Perused the record.

2. The instant tax revision case has been preferred by the

assessee assailing the order dated 10.06.2025 passed in T.A.No.197

of 2017 by the learned Telangana Value Added Tax Appellate

Tribunal, Hyderabad (for short 'the Tribunal').

3. The petitioner is engaged in the business of executing works

contracts. It is a registered dealer under the provisions of the

Telangana Value Added Tax Act, 2005 and is also on the rolls of

the Commercial Tax Officer under the service tax registration.

The relevant period in the instant case is 2009-2010, during which

the petitioner is said to have entered into a contract with Hindustan

Petroleum Corporation Limited (HPCL) for execution of

purely service labour works relating to installation, testing,

pre-commissioning and laying of offshore pipeline from Single

Point Mooring (SPM) to Land Fall Point (LFP) at Visakhapatnam.

The entire turnover was disclosed in its VAT as also the CST

returns and the petitioner had paid the applicable taxes. However,

since it was a service contract, the petitioner claims to have

paid the total service tax on the entire gross receipts. However, the

authorities from the VAT Department initiated proceedings.

The petitioner having not paid the value added tax on the works

contract executed by it, the Assessing Officer adopted the gross

receipts and passed an order dated 29.07.2011. The order of the

Assessing Authority under the VAT was subjected to challenge

before the first Appellate Authority and both before the Assessing

Authority as also before the first Appellate Authority, it was the

categorical stand of the petitioner that the nature of work executed

by the petitioner was purely labour oriented and which involved

expertise and skill and any transfer involved in the execution of

works was only incidental and also was chargeable to tax and that

the petitioner's work predominant portion was that of service and

the petitioner had paid the service tax on the entire work receipts.

Before the first appellate authority, the petitioner had challenged

the order on two grounds, firstly so far as the quantum is concerned

and secondly so far as the levy of value added tax on the service

portion. The first Appellate Authority, in the course of passing of

the order on 25.09.2013, was convinced so far as the quantum not

being properly verified and vide the said order had remanded the

matter, however, though there was a categorical finding by the first

Appellate Authority, which for ready reference is reproduced

below:

"The Learned Assessing Authority erred in computing the Turnovers and determining the Incorporation Value at Rs.22,32,72,495/-. The Learned Assessing Authority has not taken into consideration the nature of the Contract which involved expertise and skill and any transfer of property involved in the course of execution of work was only incidental to the main work of labour. The Learned Assessing Authority has also not taken into consideration that the entire contract value of Rs. 247.00 Crores was chargeable to service tax and the Contractee Company, M/s. HPCL, has paid Service Tax on the full value of the Contract without any abatement. The Principle of law states that Service Tax and VAT are mutually exclusive and once the entire contract value has suffered service tax,

the same cannot be subjected to VAT. The Appellant Company relies on the Judgment of the Honorable Apex Court in the case of "M/s. Image Creative Private Limited Vs. Commissioner of Commercial Taxes and others" in (2008) 12 VST 371 in support of its contentions".

The said clause deals with the specific argument of the petitioner so

far as the service tax being paid on the entire gross receipts that he

has received from HPCL. However, while remanding the matter,

the first Appellate Authority seems to have left it open to the

Assessing Authority to decide the same and did not make any

observation so far as the verification of the payment of service tax

on the service portion of petitioner's work. The Assessing

Authority after the remand was made had again re-quantified the

same. However, the aspect of levy of tax on the service component

was not touched and the Assessing Authority after verification of

the records passed an order re-quantifying the amount of VAT

payable. Since the aspect of the petitioner having paid the service

tax which was not looked into or verified by the authorities, the

petitioner again preferred an appeal before the first Appellate

Authority and thereafter before the Tribunal, both of whom

confirmed the order of the Assessing Authority without dealing the

aspect of levy of tax on the service component for which the

petitioner claims to have already paid service tax for the entire

gross receipts. The present tax revision case has been filed by the

petitioner confining his claim so far as this aspect is concerned.

4. Learned Special Government Pleader, however, submits that

if we look into the order passed by the first Appellate Authority at

the first instance on 25.09.2013, the Assessing Authority and the

Appellate Authority and the Tribunal thereafter have strictly gone

by the order passed by the first Appellate Authority to the extent of

observations made in the remand order and since there was no

observation so far as the verification of the payment of service tax

made by the petitioner is concerned, there was no occasion for the

authorities to have ventured into that arena for which there was no

remand and thus the learned Special Government prayed for

rejection of the petition, confirming the orders passed by the

Tribunal.

5. Having heard the contentions of either side and on perusal of

the record, the plain reading of the clause which has been

reproduced in the preceding paragraph by the first Appellate

Authority itself is clear indication that even the first Appellate

Authority had taken note of the ground raised by the petitioner so

far as the petitioner having paid the service tax on the entire gross

receipts is concerned and since the petitioner has paid the service

tax, whether the petitioner would simultaneously be exigible to

VAT ought to had been considered by the Assessing Authority

when the matter stood remanded back. When the matter was

remanded by the first Appellate Authority to decide the claim after

due verification of the books of accounts and other relevant

documentary evidence to be produced by the petitioner, the

opportunity was granted upon the Assessing Authority to pass such

orders as deemed fit in accordance with the provisions of law,

which includes the verification of the fact whether the petitioner

has paid service tax for the entire gross receipts or not and if he has

paid, what would be the consequence.

6. For ready reference, the operative part of the order of the

first Appellate Authority is reproduced herewith and which would

substantiate the claim of the petitioners in this regard:

"In view of the above facts and circumstances of the case, I feel it just and proper to remit the matter back to the Assessing Authority, who shall verify the claim of the appellant with reference to the books of account and other relevant documentary evidence that would be produced by the appellant and to pass such orders as deemed fit in accordance with the provisions of law, after giving the appellant a reasonable opportunity to explain their case. With this direction, the impugned order is set-aside on the disputed turnover of Rs.18,57,93.840/- (tax effect - Rs.1,16,01,132/-) and the appeal thereon remanded".

7. This aspect seems to have not been properly appreciated by

the Assessing Authority after the remand stage and also by the first

Appellate Authority and the Appellate Tribunal, all of whom had

strictly adopted the same stand that which has been taken by the

Assessing Authority.

8. This order having been passed by the Assessing Authority

which has been confirmed by the subsequent two appellate forums

does not seem to be proper, legal and justified, particularly in the

teeth of the observations made by the first Appellate Authority and

the observations made by the first Appellate Authority while

making the remand in his order dated 25.09.2013.

9. In view of the same, we are inclined to set aside the order