CHAITANYA ELECTRICALS Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THE appellant M/s. Chaitanya Electricals, Hyderabad, has filed this appeal against the revision orders of Additional Commissioner (CT) (Legal), Hyderabad, dated 5.5.2005. Vide pre -revision show cause notice dated 04.03.2005, the Additional Commissioner had stated the reasons for this revision. M/s. Chaitanya Electricals, Hyderabad were finally assessed for the year 1998 -99 and the Commercial Tax Officer allowed exemption on a turnover of Rs. 1,00,41,966/ - relating to the purchase value of certain items like Transformers, AC and DG sets purchased from outside the state and transferred as property in goods involved in execution of works contract. Aggrieved by the said assessment, the appellant preferred an appeal before the Appellate Deputy Commissioner seeking further relief for an amount of Rs. 42,96,739/ - relatable to the turnover exempted under Rule 6(2) of the APGST Rules, 1957. The A.D.C., accepting the contentions put forth by the assessee allowed the appeal. The Additional Commissioner (CT) (Legal), however, found fault with the orders of both the assessing authority as well as the Appellate Deputy Commissioner, who according to him did not set out the true proposition of the law with regard to levy of tax on works contract. According to the revisional authority, the assessing authority allowed exemption on an amount of Rs. 1,00,41,966/ - presumably as per III Proviso to Sec. 5F of the APGST Act, 1957, which had been a subject matter of interpretation by the Hon'ble A.P. High Court in the case of M/s. Gannon Dunkerley, reported at : 23 APSTJ 195. According to the revisional authority, though the goods were purchased from out of State since the 'C' Forms were issued by the appellant himself who is the contractor in the works contract the exemption towards interstate purchases should not have been allowed by the assessing authority. Also for the same reason exemption sought on the turnover of Rs. 42,96,739/ - was not available to the appellant. The Additional Commissioner, therefore, proposed to set -aside the orders of the lower authorities and revised the assessment on a turnover of Rs. 1,00,41,966/ - and also a turnover of Rs. 42,96,739/ - and assessed them to tax @ 6% apart from levy of turnover tax @ 1% U/s. 5 -A of the Act on the turnovers scored U/s. 5F of the Act, 1957.

(2.) THE appellant filed their objections and also appeared for hearing before the Additional Commissioner on this issue. Their arguments advanced before the Additional Commissioner as well as before us are along the following lines. The goods in question were purchased from outside the State and moved from other States to the designated work sites of the appellant in Andhra Pradesh and constitute purchases in the course of interstate trade or commerce within the meaning of Sec. 3A of the CST Act and suffered Central Sales Tax as applicable under the CST Act, 1956. Accordingly, the sales turnover of the said goods was not liable to be subjected to works contract tax as deemed sales under APGST Act, 1957 vide Rule 6(2)(1) of the APGST Rules, 1957. According to them, the movement of goods from outside the State of Andhra Pradesh was occasioned as per the terms of the contracts. Sec. 3 of the CST Act, 1956 formulates the principles to determine the sales or purchases in the course of interstate trade or commerce. A sale or purchase of goods shall be deemed to have taken place in the course of interstate trade or commerce if the sale or purchase occasions the movement of goods from one state to another or is effected by a transferring of documents of title to the goods during their movement from one State to another. In the case of appellants, the goods moved from other States into State of Andhra Pradesh in pursuance of contract of sale. Accordingly, purchase of the impugned goods constituted purchases in the course of interstate trade or commerce within the meaning of Sec. 3A of the CST Act, 1956. Irrespective of the event or place of effecting the transfer of property in goods. For the purpose of Sec. 3A of the CST Act, 1956, it is not necessary that the contract of sale must itself provide for and cause the movement of goods or that the movement of goods must be occasioned specifically in accordance with the terms of the contract. It does not itself provide the movement of goods from one state to another, where such movement is the result of a covenant in the contract of sale or is an incident of that contract. Therefore, according to the appellant, the test is movement of goods from one state to another in the course of inter state trade or commerce. The transfer of property in the state in which the works contract is executed does not determine the situs of an interstate sale. The appellants have relied on the following cases in support of their contentions.

(3.) THE learned State Representative has, on the other hand, supported the orders of the Additional Commissioner (CT) (Legal), Hyderabad.