SOBHA DEVELOPERS LTD. Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS is an appeal filed against the order passed by the Appellate Deputy Commissioner (C.T.), Hyderabad Rural Division, Hyderabad (for short, 'A.D.C.'), dated 7 -9 -2009 for the tax period from August, 2006 to March, 2007. The assessee is on the rolls of Commercial Tax Officer, Madapur Circle (for short, 'C.T.O.'). The C.T.O. noticed that the assessee is a Civil Contractor engaged in executing works to M/s. Infosys Ltd. After obtaining necessary authorization, he visited the business premises culminating in audit of the books of account of the assessee wherein he noticed that the assessee was paying V.A.T. @ 12.5% in accordance with Rule 17(1)(8) of the A.P. V.A.T. Rules, 2005. He further observed that the assessee filed V.A.T. returns in Form V.A.T. 200 declaring receipts excluding labour charges as well as Service Tax. Deeming such exclusion as rendering the returns filed as incorrect and incomplete, he accordingly issued notice of assessment of V.A.T. dated 17 -3 -2009 in Form V.A.T. 305A. The assessee replied to the show cause notice stating that they executed Works Contract and paid tax based on the provisions of Section 4(7)(a) of A.P. V.A.T. Act, 2005 read with Rule 17(1)(g) of A.P. V.A.T. Rules. The assessee contended that they have collected Service Tax on labour charges and such component is not liable to tax under the V.A.T. Act. The assessee also relied upon the Supreme Court decision in the case of B.S.N.L. v. Union of India : 145 STC p.91 wherein it was held that State Government cannot tax any amount on which Service Tax is leviable under the Central Act. However, the C.T.O. after consideration of the reply rejected these contentions and held that Service Tax is includible in the turnover since Section 4(7)(a) stipulates that the dealer shall pay tax at 12.5% on the total consideration received/receivable subject only to the deductions prescribed at fixed percentage as laid down in Rule 17(1)(g). The C.T.O. further held that Sale Price is defined under Section 2(29) of A.P. V.A.T. Act as the total amount set out in the tax invoice excluding only the Value Added Tax. In other words, except V.A.T., Sale Price does not exclude any other item including Service Tax. He also distinguished the B.S.N.L. case supra relied upon by the assessee by stating that this case is not applicable to the facts of the case in as much as the Apex Court ruled on the competence of the State Government to levy tax on the service transactions. On appeal to the A.D.C. the A.D.C. relying on the decision of Supreme Court in the case of Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes and Others, reported in : (2008) 12 VST 372 held that Service Tax is includible in the turnover. He further held that the decision of this Tribunal in T.A. No. 883/2003, dated 2 -4 -2009 in the case of Bharat Bijilee Ltd., is not applicable to the facts of this case and dismissed the appeal leading to filing of the present appeal before this Tribunal. The learned Counsel for lite appellant while reiterating the grounds of appeal brought to the notice of [his Tribunal that the facts of the case are covered by the decision of this Tribunal in the case of Indian Commerce and Industries Co. Pvt. Ltd. v. State of Andhra Pradesh in T.A. No. 433/2011, dated 2 -7 -2012.

(2.) HEARD arguments of both sides.

(3.) POINT : We have perused the material on record and the case laws cited before us. As held by the Supreme Court in the case of Imagic Creative Pvt. Ltd., "payment of service tax as also the V.A.T. is mutually exclusive. Therefore, they should be held to be applicable having regard to the respective parameters of Service Tax and the Sales Tax as envisaged in a composite contract as contrary distinguished from an indivisible contract. It is, therefore difficult to hold that in a case of this nature, Sales Tax would be payable on the value of the entire contract irrespective of the element of service provided."