ANKIT PACKAGING LTD. Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS is an appeal filed against the orders of Deputy Commissioner (CT), Begumpet Division, Hyderabad in Rc.No.E3/R/5/04 -05/APGST, dated 9 -9 -2005, disallowing sales tax deferment on turnover related to works contract and also disallowing set off of tax in terms of G.O.Ms. No. 574, Revenue, dated 9 -6 -1987 on raw material falling under Entry 186 of First Schedule to the APGST Act which is converted to finished products falling under Entry 187 of the First Schedule to the APGST Act. The brief facts of the case are that the appellant M/s. Ankit Packaging Limited is a dealer engaged in the business of manufacturing packing materials. The appellant purchases plastic granules (Raw -materials) under Item 186 in the first schedule to the APGST Act and manufactures packaging films falling under Item 187 of the same schedule. The films are manufactured according to the given specifications and designs of customers and this activity of the appellant has been accepted as a works contract by the department. The department also allowed the appellant to pay tax under composition scheme envisaged by Section 5G of the Act. The appellant is also availing Industrial Incentives as per the final eligibility certificate issued by the Commissioner of Industries in No. 48/Desk 20(2)/95, dated 18 -3 -2005. The Commercial Tax Officer, Marredpally Circle finalized the assessment of the appellant for the year 1998 -99 and allowed set off of Rs. 4,25,305/ - of tax paid on purchases of plastic granules in the State from the tax payable on the sale of plastic articles in the State as per G.O.Ms. No. 574, Revenue, dated 9 -6 -1989. He also allowed sales tax deferment in respect of the entire amount of tax levied i.e., on Rs. 1,39,591/ - in accordance with the final eligibility certificate issued to the appellant by the Industries Department. However, the Revisional Authority i.e., DC (CT), Begumpet Division, Hyderabad revised the orders of the Commercial Tax Officer to the extent of not allowing set -off allowed by the Commercial Tax Officer under G.O.Ms. No. 574 and also holding that the appellant is ineligible for tax deferment, as the nature of business of the appellant was works contract. Aggrieved by the said revision order, the appellant preferred this appeal.

(2.) THE appellant submitted that the Revisional Authority has erred in interpreting the provisions relating to set off of tax on works contract. It is the appellant's contention that G.O.Ms. No. 574 is applicable to their case as they are manufacturing articles of plastic referred to in item No. 187 of the First Schedule from out of raw -material referred to in Item 186 of the First Schedule to the Act. According to them, the DC is wrong is stating that the tax under works contract is levied on use of goods and not on finished goods. They have stated that in the case of M/s. Gannon Dunkerley and Company Vs. State of Rajasthan and Others reported in : 88 STC 204, the Hon'ble Supreme Court held as follows:

(3.) THE Learned State representative has supported the orders of the Revisional Authority and stated that G.O.Ms. No. 574 is not applicable where goods are supplied by way of works contract. Further, on the deferment issue also he has supported the order of DC and stated that as per guidelines of Industries Department, incentives are available only on manufacture. However, when asked to produce copy of these guidelines, he was unable to do so.