SUDHAS LAB Vs. STATE OF ANDHRA PRADESH

JUDGEMENT

(1.) THIS is an appeal against the orders of the Appellate Deputy Commissioner (CT), Secunderabad, in proceedings Appeal No. 795/95 -96, dated 18.3.1996 remanding the appeal arising out of the orders of the Deputy Commercial Tax Officer, Vidyanagar Circle, Hyderabad, in G.I.R. No. 6672/95 -96, dated 6.3.1996. The appellant is engaged in processing and printing of colour films and disclosed a gross turnover of Rs. 12,11,500/ -. It claimed exemption on the entire turnover on the ground that there was no sale of material involved in processing and printing colour films for customers. This claim was not accepted by the Dy. Commercial Tax Officer, who relied on the amended definition of 'works contract' which includes 'processing' of movable property. Accordingly, he taxed the entire turnover of Rs. 12,11,500/ - at 6 per cent, because the dealer did not furnish a break -up of the turnover as between the material and charges received.

(2.) ON appeal, the Appellate Deputy Commissioner, relied on the decision of the Kerala High Court in the case of Bavens v. Union of India and Others (97 STC 161) and concluded that there was a 'deemed sale' of material used in the 'process' and 'developing' and 'printing' photographic rolls which attracted liability under Section 5F of the APGST Act. He set aside the assessment order and remanded back to the Dy. Commercial Tax Officer, with a direction to assess afresh, keeping in view the observations of the Kerala High Court in the above case and to bring to tax the value of the photographic paper and chemicals used in processing and developing the reels and to arrive at the taxable turnover accordingly. The appellant is aggrieved against such findings of the Appellate Deputy Commissioner, and has preferred this appeal.

(3.) WE shall first set forth the findings of the Appellate Deputy Commissioner, and the decisions he relied on. Before the Appellate Deputy Commissioner the appellant cited the decision of the A.S.T.O. and Others v. B.C. Kame : (1977) (39 STC 237)(SC) and the decision of the Supreme Court in State of Tamil Nadu v. Anandam Viszvanathan, (1989) (73 STC 1). The Appellate Deputy Commissioner, rejected the contention of the appellant that the nature of the contract must be seen as to whether there was an intention to sell material or whether materials used were incidental to the execution of a service contract. The appellant also relied on the decision of the Supreme Court in The Government of Andhra Pradesh v. Guntur Tobaccos Limited ( : 16 STC 240), but this did not find favour with the Appellate Deputy Commissioner. According to the Appellate Deputy Commissioner, every dealer engaged in execution of works contract shall pay tax with effect from 1.4.1995 at the rate of 6 per cent on transfer of property in goods involved in such execution of works contracts which includes processing of movable property as in the appellant's case. The Appellate Deputy Commissioner, also rejected the applicability of this Tribunal's decision in the case of Tokyo Bajaj Colour Lab, Hyderabad v. State of Andhra Pradesh (19 APSTJ p.179) on the ground that it related to the definition of Works Contract prior to its amendment with effect from 1.4.1995 from which date even 'processing' was included in the definition of works contract. The Appellate Deputy Commissioner, then referred to the decisions and observations of the Supreme Court in the case of State of Tamil Nadu v. Anandam Viswanadhan (73 STC page 1), but observed that the said decision was rendered without examining the facts of the case with reference to the 46th constitutional amendment and the consequent changes brought about in the State Acts with regard to taxing of works contract receipts. According to the Appellate Deputy Commissioner, the appellant's case was squarely covered by the decision of the Kerala High Court in the case of Bavens v. Union of India (97 STC 161). He quoted extensively from the judgment and remanded the appeal back to the Dy. Commercial Tax Officer, with directions to ascertain and tax the value of photographic paper and chemicals used in processing the photographic rolls for customers.