The State of Andhra Pradesh v. M/s.Bharat Heavy Electricals Limited

THE HON'BLE SRI JUSTICE P.SAM I(( SHY AND THE HON'BLE SRI JUSTICE SUDDALA CHALI PATHI RAO TREVC No.2OS of2OO9 ORDER: (Per the Hon'bte Sn Jzstice Sudr-Lalq Chalapathi R( ( The present Ta-x Revision Case is liled by the petitioner / Revenue assailing the orders passed ry the learned Sales Tax Appellate Tribunal, Andhra pradesh, Jyderabad (for short 'the learned STAT') in TA No.6S9 /2OO7 c1t.lB.O2.2OOg, whereby the said appeal preferred by the respo rdent/assessee was allowed b1' setting aside thc order of revisior passed under Section 2O(2) of APGST Act b_r, the Deputy Co:'; missioner(CT), Warangal Division, Warangal for the assessment vt: Lr 2OO 1-02

2. The brief facts of the case are that, the respc,r .dent/ assessee namelg M/s Bharat Heavy Electricals Limit :d, Paloncha, Khammam District Palvancha Khammam ll .strlct, is a Government of India undertaking cngaged in execu t ng ',vorks. It is a registered dealer under the provisions of ApGS.- Act, 1957 (for short 'the Act') and is on the rolls of the Commer: al Tax Officer, Kothagudem. For the assessment year 200 1 -02, the Assessing Authority granted exemption to the respondcnt/ar; cssee treating 2 the trar-rsactions as labour contracts, as there is no transfer of goods.

3. The Deputy Commissioner(CT) Warangal Division, Warangal (for short 'the revisional authority') revised the said assessment under Section 2O(2) of the Act uid.e order dt.l7.O4.2006, alleging that the assessing authority had erroneously exempted the value of materials supplied in the rvorks undertaken by the assessee and the said order rvas served on the assessee on 06.Ol.2OOZ.

4. Challenging the said order, the respondent/assessee filed appeal before the learned STAT in TA.No.659/2OO7 and the learned STAT has framed the follorving questions of law: I Whether the reuision order assessment gear 2OO 1 O2 u.tas purported dqte; and connected to not passed. on

2. Whether the impugned ordcrs are legallg sustairyable?

5. The learned STAT rvhrle examining the issue of limitation, held that the revision order dated 17.04.2006 was passed within thc prescribed period of limitation u/s.2O(21 o{ the Act. The learned STAT horve'er, held that the Rerzisional Authority had failed to discharge the burde- oi proving that there was transrer of 1 3 goods in the execution of works by the rssessee. and consequently, set aside the revisional order a,nd res.ored the order of the Assessing Authority , dt.l8 .O9 .2OO2.

6. Aggrieved by the order of restoration passed ty the learned STAT, the petitioner/ Revenue has filed the preser.r . Tax Revision Case. 7 . The present Tax Revision Case is admitted t r consider the following questions of law: 1 2 Whether STAT is right in setting aside r I e order of the Deputy Commissioner, Warangal? Whether enquiry is necessar5r when revis Lon was taken up by the revisional authority?

8. Heard Sri T. Chaitanya Kiran, learned Asst Government Pleader representing the special Government plearlr 'for State Tax appearing for petitioner/ Revenue ald Sri T.Rar ram. learned counsel for the respondent/ assessee.

9. The learned Asst. Government , I leader petitioner / Revenue would contend that the lear red Tribunal grossly erred in holding that no transfer of materiai i rvolved in the execution of works by the assessee, u,ithout ap6 reciating the e* !- \ "Fi?r:t 4 factua,l position and the evidence on record, which clearly estabtished that matcrials were, in fact, transferred in the course of execution of the t'orks by the assessee and hence, contended that the order of the learned STAT sufiers from legal inhrmity and is liable to be set aside.

10. Per contra, lea.rned cotrnsel for the respondent/assessee would submit that the assessee, being engaged in erection and commissioning of power plants, had executed only labour contracts and had not supplied any materials and the Tribunal, Lrpon appreciation of several spiral binriing volumes containing the erection invoices raised for the u'orks of KTPS Units and suppor*.ing documents, rightlS,' concluded that the payments received were towards labour and service charges, and there is no transfer of material involved in the u'orks carri'ed out by the assessee. He further contenCed that the assessing a'uthority was justihed in exempt;ng the said amount and the revisional authority under erroneous vie"vs and findings,r'has set aside the well consiclered orclers of the assessing authority' Thus, prayed to dismiss the Revision. 5 -

11. We have givet-r eamest con:iideration to tlr I submissions made by the counsel appearing on eitl:er side ai-J perused the record

12.Thesoleissuethatarisesforcorrsideratiorrltl-risrer,ision is, whether the findirrgs of the ,\ssessing Authoritr ' :rs affirmed by the learned STAT, insofar as treating the transar: ions as purely relating to labour and service charges ald consec I Lr:ntial grant of exemption in the absence of any evirlence of suppl ' ol materials by the assessec, are legally sustainable and valid'

13. On a penrsal of the impugned order of the Ie I evident that in slmila-r matters concerning the siur learned STAT in T.A. No. 1496 of. 2OO4, dt'28 04 :l appeal, setting aside the order of the Additional dt. 15.06.2004. I.ikewise, for the other assessmetr 'ned STAT, it is e assessee, the 05 ailon,ed Lhe Commissioner, $ 1,ear 1995-96, the Commissioner of Commercial Taxes,. H-r'dc - Lbad, b1' order dated 10.07.2003, dropped the proposed reris ' n on idcntical facts. Further, for the assessmellt J'ears 1997 t revision proceedings were also dropped b1 r 2000, similar I h e Additional Commissioner (CT), following the Ful1 Bench lecision of the learned STAT on thc same isstle. The relevant prr tion of the said .-\ --I 6 decision of the Full Bench of the learned srAT as extracted in the impugned order, is reproduced hereunder: "As there is no transfer of mateial inuolued in the uroks contract, euen if the said work is assumed to haue been exeanted bg the appellant there utill be no taxable tumouer as there is no transfer of mateial from the appellant to the contractee. Hence, it is immateial Luhether the sub contractors are registered or unregistered dealers. As the paAments u_tere made touards the labour contracts, the said labour charges ore exempted frorn payment of tax. Onlg LuLrcn there is transfer of matenal, tox can be leuied onlg to the extent of transkr of moterial. As it is found. that tLlere is no transkr of mateial in this case and_ the expenditure incurred by the appellant in execution of the ruorks is onlg tou_tards labour and establishment chorges and consumables etc., tuhich are entitlecl for d,eduction, there is no toxable net tumouer os held by the Appellate Deputg Commissioner. We are of tlrc consldered. yieut that the Additional Commissioner ened in setting aside the orders of the Appellate Deputy Cornnrissioner (CT), u.tithout sufJicient reosons ond he also erred in remand-ing the matter without ang specifi_c directions. As the d octLments haue already been ueiJied by the fuipelate Deputy Commissioner (CT), on tuto occasions, further remand_ is unnecessary. Moreouer, the appellant is no other tharu the Gouentmertt of India undertakinq and they haue no recLsorrs to giue false statements to the effect that there taos no mateial transfer in the execution of uork. Hence, for all the ,7 7 aboue said reasons, the intpugned reuision ord.ers L re not sustainable in lau. Thus, these ttuo poirlrts are f,t tnd in fauour of the appellant."

14. Upon perusal of the order.s of the 1ea NCd STAT, dt.l&.O2.2OO9 and the Assessing Authority, dt. 1g.(r( evident that there is no transfer of any mater i .2002, it is I from the respondent/assessee in relation to erection of tout plant and the Dy. Commissioner (CT), Warangal l) rs in KTPS vision, i. e., revisional authority, has also faiied to indicate or sr:[ stantiate in what manner and to what extent any material r.r rs allegedly transferred by the assessee to KTpS/ApGENCO in the )-xecu tion of the works.

15. Further, when in fact, no materials were suppli: I and there is no transfer of goods, the question of furnishing par: not arise, and the finding of the revisional author i lulars does d 1, that the assessee had not furnished the particulars of materi.; s involved, appears to be perverse. In the case of this nature, brl den lies on the Revisional Authority to conduct an enquiry and r r tablish the alleged transfer of materials in the works before r :vising the assessment, which obligation was not discharged by th : revisional authoritv. 8 i'

16. On the other hand, the revisional authority failed to consider \ the payments made to sub-contractors, sala-ries of personnel, and other administrative expenses, and failed to appreciate the assessment orders in proper perspective and ought to have compiled the figures r,vith reference to the invoices raisecl on the customers before arriving at the findings and thus, the order of the revisional authori.ty are not based on proper appreciation and is totally by non-applica.tion o[ mind.

17. In the absence of any evidcnce indicating transfer of material, the arnounts paid tou'a:ds services are 1iable to be exer.rrpted uncler Section 38 of the Act. Consequentl-v, u'e hold that the revisional order passed was not l;ased on valicl reasoning and is thus, perverse arrd unsustainable. ,

18. In vierv of the above findings, \'e are of the considered opinion that the learrred STA'I ivas j ustified in sctting aside the revisional order of thc Deputy Commissioner(C'l), Warangal Divisron, Warangal, dt:7.O4.2OO5. 'l'he questions of larv are accordingly arrsrvered again:;t the petitioner/ Revenue zinC in favour of the responclent/ assessee. Hence, the Tax Revision Case is devoid of merits ald is 1iab1r: to be dismissed. 9 t- I

19. Accordinglv, the Ta-x R.evision Case is dismissrr [. No order as to costs. As a sequel thereto, miscellaneous petitions pe -rding if any, sha1l stand ciosed. /TTRUE COPY// SD/. P. 'ONNA KRISHNA ASSISI \NT REGISTRARe l; :CTION OFFICER To, 1 The Sales Tax Appellate Tribunal' Andhra l'"!9-"1' Hyd: abad i o"; aa; sri Suiibabu s (sPL sc Fo-R crAP)[oPUC] a On" CC to lr/is. T Ramam, Advocate [OPUC] 4. Two CD CoPies Kamlsa Y\- a HIGH COURT DATED:1 411012025 I : _ :=:-\ Li t1 ., \ ..,/J )': t. .\ I .t. c) I' i ?ir?[ (/; - L' ..' '-:-'- ')r I t ORDER TREVC.No.205 of 2009 DISMISSING THE TAX REVISION CASE G .r{A