Dismissed

The State of Ap. Stat,Hyd. v. M/S Moktali Engineering Co. Ltd. Chityal

Telangana HC29 Nov 2022TRC/165/2003

Case brief

AI extract

What is this about?

The High Court in Tax Revision Case No. 165 of 2003 held that the erection of galleries and trestles at the customer's site using purchased raw materials was a works contract. Since no charging section existed to tax such deemed sales, the Tribunal's dismissal of tax liability was upheld.

What did the court decide?

The Tax Revision Case was dismissed without costs; no tax could be levied on the erection of galleries and trestles under the applicable Act.

The State of Ap. Stat,Hyd. Vs M/S Moktali Engineering… — GST and Indirect Tax | Telangana HC (2022)

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IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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TUESDAY, THE TWENTY NINTH DAY OF NOVEMBER rWO THOUSAND AND TWENTY TWO

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PRESENT

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THE HONOURABLE SRI JUSTICE T.VINOD KUMAR AND THE HONOURABLE SRI JUSTICE PULLA KARTHIK

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Tax Revision Case No. 165 of200 3

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Tax Revision under Section 22(1) rlw. Rule 10 of the A.P.G.S.T Act, against the order dated 22.05.2OO2 made in T.A.No.669 ol 1997 on the file of the Sales Tax Appellate Tribunal, Hyderabad, made against the order dated 16.10.1996 made in Appeal No.N/25l96-97 on the file of the Deputy Commissioner (CT) Hyderabad (R) Division, Hyderabad, prefened against the order dated 30.09.19S5 in Assessment No.679B/91-92 (APGST) on the file of the Commercial Tax Officer, Nalgonda, Hyderabad.

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Between:

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The State of Andhra Pradesh, rep. by the State Representative before S.T.A.T., D.No.54-404 to 408, Nampally, Andhra Pradesh, Hyderabad.

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...Petitioner.

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AND

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M/s. Moktali Engineering Co., Ltd., Chityal, Nalgonda District.

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,..Respondent.

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Counsel for the Petitioner : Sri L. Venkateshwar Rao, Spl. SC for Taxes.

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Counsel for the Respondent: Sri P. Karthik Ramana for

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Sri S.Dwarakanath

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The Gourt made the following: ORDER

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THE HON'BLE SRI JUSTICE T. VINOD KITIvIAR

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A}ID

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THI HON'BLE SRI JUSTICE PULLA KARI'IIIB:

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Tax Revision Case No. 165 of 2OOS

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ORDER:1pe. thc h>rr'ble -Sn Jrislice T.Vinod Kttntar)

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This^'i'ax Rcvision Case, at lhe behest o, tlle ll(lver)ue, is filed being aggneved by the order of the Sales Tax Appell;r c 'lribunal (for short 'Tribunzrl') , rn^'1.A. No. 669 ol t997 , dt.22.O5.2OC:t.

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The issue that falls for consideration in this r: vision is, as to whether galk rir s ard trestles fabricated and r rer:te .l at site, can be subjected to ta: ils sale of such goods by, using ta_x : lid M.S.Shects, M.S.Rounds, A tgles, etc. The assessmenL year inv,tl,.ed is 199 l-92 under the APGS T A<:t, I957(for sholt 'the ActJ.

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Heard Sri L. Vr3n[216561yar Rao, learned Specral Si.anrling Counsel appearing for the petitioner, Sri l,.Karthik Rarnana learned counsel appearing lor tt e re sponde n t-asse ssee, and perused tire rer:ord.

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It is the r ontention of the Revenue that tlte res 1>:;nd ent-assessee had purchase< M,S.Sheets, M.S.Rounds, Angles, r:tc., from local registered cleal:rs and used the same in thc mal.:r ng of galleries, trestles, etc., al rd sold the same by raising invoir:es arril sirrce the goods purchased by t having undergonc a change lr-om t-r' lorm in u'hich they are 1;urch asccl, nerv and difli:rent goods (lislin,r frorn tl-rc goods purchased hav: cotne into existence, the resporrdent-lssessee is liable to pay tax.

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It is further contcncled on^{behallol the petitionerRevenuethat} thc Tribunal erred in not^{appreciating that the sale of engineering} goods by the responden t-assessee^{as galleries,trestles, etc, are not in} the same form as^{M.S.Sheets, M.S.Rounds,etc., purchased by it, and} the said goods have^{been usecl as raw-malerial in the manufactureof} galleries and trestles, the^{goodssoldby the respondent-assessee being} different from raw-material,^{like M.S.Sheets,M'S Rounds,etc',are} liable to tax.^{Further,the respondent-assessee himsetf had treated} these goods sold^{by him as being differentgoodsfrom that of the raw-} material purchased^{by it, and the respondent-assesseehad collected} taxontheSaleofthesamefromitscustomers,theTribunalerredin setting aside the^{order of both the AppellateAuthority as well as the} Assessing Authority^{wherebythe turnover relating to the sale of} galleries and trestles^{have been subjected to tax, inasmuch as thereis} no sale of same^{goods as chattel-qu a-chatteL}

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l,earned counsel^{appearing for the.respondent-assessee'on the} other hand,^{submits that the order of the Tribunal does not suffer from} any error inasmuch^{as the Tribunal had recorded a hnding of fact that} the goods that^{have been purchasedby the respondent-assessee are} pursuant to a work^{order placed by its customer for fabrication'supply} and erection^{of structural work lor conveyorsystem at the customer} location and^{that the goodspurchasedby it have been incorporated in} the execution^{of said work of fabrication undertakenby it at the} customer^{location and thereforecannot be subjected to tax'}

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Lerrrned counsel for the respondent-assesst r: fu -ther submi[s that at I he r( levant point o[ timc therc !r.as no clL. Lrgrnrl scction b, which thc rcc< ipts of works contract u,ould bc subjc:tr:rl to ta-x and it is for the said rc asorr, the Revenue authorities hirve sr u,lht to lev1, tax bv treating the, l oods as sale of diffcrenr goods fronr that o[ thc raw material purc rased by it, without considering the 1: (_ t ol usagc of the same in the e {ecLiLion of fabricati.n work at cllstornc r loc ation amouns to urorks c()n tt act.

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We havt noted the respectivr: contentions urge:.

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L A readi rg of the impugncci ordcr indi-ates that rhe ,lribunal having go.e hro,gh the work order, dt.2g.()3.1g()r, f.und tha[ the respondent-as sessee was awarderl with a con tr€ cl, fc,r erection of galleries and restles by undertal<ing labricati.n ar thc customcr,s sitc itself. The lribunal also noted that the use of rau,_material, like M.S.Sheets, Iv.S.Rounds and Angles, etc., by the rr ) s lor dent_assessee in lhe manufe cture o[ new products is intended lor ]r3ctron of gallerie s and lrestles a the customer location pursuant to th: ,lrder placed, and observed that "from the raork ord_er ploced. by tle custom.r, it is euident that gallenes t,.nd restles are only the strucfures u,hir.,-t ar<,to be built on the site bg thz contractor by using M.S.Sheets. 1l,L S t?,tund and angels, etc., and theA are not goods or chattel which ca.n be sL.ld_ ,tnd physica g deLiuered to ttLe atstomer". By observing so, thr_, Trilrurral also found that both lhe ower authorities erred in basing therr t:.rnclusions on the invt.rrcrss a.d c serl>okcd the fact that in the corrmn rr lrrirrg to thc mode

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-1-

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of dispatch,^{what is mentioncdis 'site fabricationitem' and held that} "the erection^{ofgalleies and' trestlescannot bg ang stretchof} imagination^{be considered os mant'focture of goods and' production of} The Tribunal^{also found that the structures} commercial^commoditl '" erected^{on the site, in other t'ords' build and construcled on the site'} become^{attached to the si[e and car'notbe shifted from place to place'} 10. The^{Tribunat while holdingthat the fabrication undertakenby} the respondent-assessee^{using the raw-ma[erial purchased by it' like -} M.S.Sheets,M.S.RoundsandAnglt:s,etc.,Cannotbetreatedassaleof such material,^{has placed relianceon the decision of the Tribunalin} M/s Lakshoi^{Kisan Industriesand others v' State of A'P'l whereby} it has^{been held that the goodsmanufacturedat site have formedpart} oftheland,whichisimmovablepropertyandcannotbetreatedassale ofsuchmaterial.TheTribunal,bTnotingasabove'heldthatthelower Authorities^{failedto decide the n:rture of the transaction correctlyon} the basis^{of the facts of the case and erroneously subjected the} turnover^{relatingto erectionof galleries and trestles as sale of said} goods. The^{Tribunal furtherheld that the nature of work executed by} the respondent-assessee^{being a works contract'use of raw material in} the execution^{of works contractis only a deemedsale and as the} appellant^{pleads that such deemed saleis second sale in their hands as} they^{purchased this material from registered dealerswithin the State}

'^{1g npstlto:}

\'hich is not disputcd br, both the lorver : uthor itrcs, the dispurcd tlrrno\rers reL.ting, to the reduction ol gallerics :inc rcstlcs ..1nnot be srrbjt'ctccl t() 1ax as the material likc M.S.ShccLs an I ,\n11le s, rtc., used in the same b :conre second sales, not exigiblc to Lax rl I the hands of the appellan t.

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1 1. The l'ri runzLl also further observed that thoul1-. th,: provrsions of APGST Act, l9's7 have been amended consec lr,lnt to the 46rh constiturional :rmendment, to include in thc dcfini:iorr o[ ,Sal<:,, the 'deemed salc' by u,ay of Explanation_Vl, and also bv rl,:fining as to urhar constitures a ,r'orks contract,, however, no chargir 11 scr:tion has been incorpornted to lery tax on such transactions of u.or <s, co,tLract.

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Inasmu:h as the transaction involved irr the ;rescnt Revision, in the view of tl e Tribunal, being works contra<.t inv,)tyin6i deemed sale, which vrcw i; r the considered opinion ol this Corr:r is a conclusion rightl1, arrive I at by the Tribunal, particulrtrly, in tlre absence of charging secton, no tax can be levied on u,orks cor rracl. l.urther, in absence ol ch arging section to leyy tax on a u,orks C,.)ntt_act u,ould not by itself auth, rrize levy of tax on the goods involved n th e execution of such works c( ntract by treating the same as szrle o1. 1c,ods simplicitor.

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In view ol lhe above conclusion arrjvt.d at :,y Lls, we see no question of.aw arising from the order of the Iribunar for being considered by this Court and this TRC is withouL an., rner it.

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