High Court · 2025

Order

(pcr Iloarble Srl Justlce Narring Rao Nanditouda This Tax Revision Case is f,rled by the p: .itioner-State under Section 22 (ll read with Rule lO of the I PGST Rules, l9S7aggrieved by the order, dated 01.10.2OO8 i r T.A.No'412 of 2OO8 passed by the learned Sales Tax Appeil rte Tribunal, Andhra Pradesh, Hyderabad (for short, STATJ.

2. Heard Sri T. Chaitanya Kiran, lerl ned counsel representing Sri SwaroopOorilla, learned Sta:r ling Counsel for STAT and Sri A.V.A. Siva Kumar, Ietu ned counsel appearing for respondent. Perused the record. 2 PSKI & NNN tr4tc_35_2uE

3. The brief facts of the case are that the respondent - M/s. Surya Vamshi Spinning Mills Limited is manufacturer and Traders in Cotton Yarn, Cotton Waste and Fabrics. They are on the rolls of the Commercial Tax Offrcer, S.D. Road Circle, Secunderabad. The respondent herein filed audit reports, statement showing details of consumption, production and sales alfected within the then State of Andhra Pradesh and outside the State of Andhra Pradesh. In the Final Assessment for the year 2OOL-2OO2, they have availed sales tax deferment of Rs.2,58,843/-, for which the Commercial Tax Ofhcer issued a show-cause noti,ce, dated L7.lO.2OO3 to the respondent calling for written objecti'ons, if any, on the proposed turnovers. The said notice was received by the respondent on 20.10.2003 and filed objections on 2g.lO.2OO3 along with books of accounts as summoned on

11.09.2003 and linally in the Final Assessment for the year 2OOI -2oo2,the respondent availed Sales Tax Deferment of Rs.2,58,843/- and accordingly, the Commercial Tax Officer passed an order, dated 30.1O.2O03.

4. It is further case of the petitioner that the objections raised by tfrb'assessee are not tenable as per the \ ;r 3 PSKI & NNR] t stc_35.2 B APGST Act, 1957,as such the printing and the lyeing works are liable for tax. Section 5-F of APGST Act, 1!) i7 deals witlt 'Leny of tax oa transfer of propert5r ia good: involved ln the executior of utorks contract.' In respe<:t of objection raised by the petitioner as to excess availmen t of deferment on the ground that the Commercial Tax O:l cer has not detected the amount of deferment from Sales Trr : liabilit5r, the dealer was exarnined and it is held that in the ir >sence of any details, the objection raised by the dealer was r ot tenable as per tJre provisions of APGST Act, 1957. Further n the light of objection raised by the dealer, which is not tenir rle as per the provisions of APGST Act, 1957, as such the tax: ; proposed in show cause notice were confirmed by the revisir na-l authorit5r i.e., Deputy Commissioner (CT) by passing an orr :er.

5. Being aggrieved by the order passed I y the learned Deputy Commissioner (CT) Begumpet , ivision, the respondent herein, who is appellant therein preferred an appeal before the learned Sales Tax Appell Lte Tribunal, Andhra Pradesh, Hyderabad; urde T.A.No.4l'), of 2OO8 on three issues. i I l I i, l l 1 PsK] & NNRJ Uevc_35_m9 (1) That the respondent seeks the relief on lery of tax on purchase of PSF (Polyester Staple Fabric) and further contended that it purchased PSF from M/s.Reliance Industries Sales Oflice, Hyderabad, as those are tax paid purchases therefore, levy of tax on the respondent is not justified and it is clear violation of Clause (i) of sub-Section (4) of Section 5 of the APGST Act, 1957. "Section 5: Lvy of tar oa salea or purchases of goods: I 2 3 4 The taxes under this Section shall be assessed, levied and coll€cted in such manner, as may be prescribed: Provided that - (i) in respect of the same transaction, the buyer or the seller but not both, as determined by such rules as may be prescribed, shall be taxed."

6. It is further contended that the purchases ma& by the respondent from M/s. Reliance Industries were tax paid purchases and they produced certif,rcate before the Tfibunal.

7. The second issue which was raised before the Sales Tax Appellate Tribunal was levy of tax on job work charges. He contended that the company which employed I I I I I t I , I i I I i i 'a i I I ! I I I I i ! I i I I jt: 1n 5 tevc_35-2@9 them for a job work, such as dyeing and paint ng and have supplied tl.e material required for such job -,r ork such as yarn, buttons, cups, collars, etc and the e r tire amount collected by the petitioner in respect of our job I /ork pertains only to the charges of power, labour and ma<:l Line charges. That they had also presented the certificat :s of letters received from the comp€rny employing them for r;r Lch job work.

8. The third issue which is raised was 'i,ithdrawal of deferment availed to the extent of 46,106 and rr ntinued that the petitioner company has been extended two I :ferments for Rs.20,80,69,76O/- arrcther for Rs.9,O5,73,69O1 They have enclosed deferment Certifrcates for both th.ese rmounts and have stated tl.at tl e company has availed i self of total deferment of Rs.45,68,734 I -. But, ttre deferr Lent account was debited by an amount of Rs.2,58,843/-. Si: :e more than what was required to be debited has been del) ted and it is petitioner's company which is prejudiced by thr: action of the Commercial Tax Oflicer and pleaded that e-<:ess amount debited should be reversed. 6 EK' & NIIRI uevc-35-2U)g

9. Having considered the entire submission made by both the appellants and respondents, the learned Tribunal has held that the revisional authority without gtving any proper reasons have rejected the objections raised by the dealer on the issue of polyester and Viscose. That in the absence of details of purchases of yarn, item-wise tax was levied as per the show-cause notice has been confrrmed' It is further held that the revisional authority did not make any effort to call for any specific documents required by him, although, he did not reject the certificate of M/s. Reliance Industries, cerfirying payment of purchase tax on PSF and BSF and it is further contended that as burden of proof lies on the Department. F\:rther, the revisioal authorit5r should have given cogent reasons for rejecting the same and if necessary call for more documents, if the same are required speci$ing tlre documents and the need for the same. Such an attitude, on the part of the revisional authority, is neither reflected by issuing show cause notice nor while confrrming the same in the revision order. 1(). Coming to the aspect of works contract, the learned Tribunal )fr" ,o the conclusion that the burden of -n 7 PSKJ & NNN trev._35-2009 I proof was upon the revisional authority to make enquiries/inspections, call for books of accountr; of not only the petitioner but also those companies which t mployed by the petitioner for the job work in order to provt' the charges made out in the show cause notice' Finally i r respect of deferent it is held that the deferent account has reen debited in excess and it is not the loss of the Government but the loss of the petitioner, as such the demand made on he company forthesameisbasedonarrimproperunderst€ndingofthe issue and frnally allowed the appeal filed by ttre : ssessee' The petitioner-revenue is seeking to set aside the orc er passed by the revisional authoritY'

11. Being aggrieved by the same' tl.e p: esent appeal was filed on the ground that ttre learned Trilr rnal was not justi,fired in allowing the appeal by setting asic t the order of the Deputy Commissioner of (CT) and the samt: is liable to be set aside-

12. It was further stated that the appell a rt received an amount towards the dying/ garments job r rork charges' which foTrms taxable turnover undei Sectiorr 5-f of APGST l' 8 PSIO & NNR] trerc 35 2Cm Act. This has not been assessed to tax under Section 5_f by Assessing Authority. The Revisional Authority has brought this amount and the assessee under 5-f of the AFGST Act. The appellant placed reliance on the Judgment of the Honble Supreme Court in M/s. Associated Cement Companies Limited v.Commissioner of Customsr wherein it was held as follows: 'A worlB contract, leither the dominant intention of the parties is relevant flot the trrctteEtage vslue of the property in toods that passed is if the dominant intention to r€nder service as Iong as the relevolt snd ev€! property in toods is transfeE€d, the Works Contract Act would be applicable,

13. Furttrer, following the judgment of the Apex Court,the Bombay High Court in case of Commissioner of Sales Tax v. Mathurshree Textiles Limited2 was also relied wherein it was held as follows: "ttoperty oI the material such as chemicals €olours, dyes us€d in the prcess ot d\mg and printidA arE pa6s€d on to th€ Ebd,c of the cuslomer ard such passhg oI propenv ot the materiEl is a d€eE€d ssle aad tax is leviable on such materiat under Works Conrracr_ Appvint thc above judgmcits, thc Revisional Authority has nghrty ass€s*d rhar atr&unr rEceived towards ofganr€nts u.rder vorks co[tracr under Secri,on SF of the AIIGST Acr . 14. It is also fi.rrther contended that the dealer did not furnish any information about the purchase of polyester and viscose and in the absence of details of purchases of the yarn, ' 120011 4 Supreme Court Cases 59A 'z2oo3 scc online Bom 830 \ 9 PSKI & NNR) trevc_35-2G)9 the Revisional authorities rightly proposd the . ax which the learned Tribunal has reversed on tl.e gro : nd that the Revisional authority has not conducted any irr piry, neither specilically asked the cornpany dealer to produce the documents for verilication to be bad in law. It a as contended that the petitioner having received the sJlo'w cause notice issued by the revisional authority, it should h: ve responded to the same with evidence and docurnents to dt fend its case. It was further contended that the finding ;iven by the Tribunal that the burden of proof lies on t he revisional authority is erroneous and in fact the brrrdr: r lies on the dealer since the petitioner has not fumishec. any material before the Revisional Authority and the learn: I Tribunal at best ought to have remanded the matter to revisional authority and thus prays to allow the appeal.

15. POINT: Considering the contenti,ons and rival c rntentions of both the parties, the points that arose for co: Lsideration in this tax revision case are (1) whether ther: is escaped assessment of tax @ 4o/o; (2) whether the re is excess 10 Ue,lc 35 2@ deferment of tax availed as per APGST Assessment order, dated 30. 10.2003; and (3) whether dyeing/ manufacturing works of Garments, which forms have taxable under Section 5-F of the APGST Act. But, tlley have not been assessed to tax under Section 5-F of the APGST Act on the ground that the property in goods involved in execution of works, the question of applicability of Works Contract does not arise.

16. As property of the material, such as chemicals color-rrs, dyes used in the process of dying and printing are passed on to the fabric of the customers and such passing of property of the materiat is a deemed sale and leviable for tax on such material under Works Contract. Applying the above judgments, the revisional Authority has rightly assessed that amount received towards Sarments under Works Contract under Section 5F ofthe APGST Act. L7 . But tJ:e grievance of the petitioner is that the revisional ar.rthority has not conducted any enquiry and did not speciEcally ask the petitioner-company to produce documents for verilication which is bad in law. Further the revisional authorit5r also issued show-cause notice and the I :,T) t1 PSKI & NNN fievc_35_201D petitioner had responded to the sarne with evidence of documents to defend its case. / lE. He further contended that the Revisirl ral Authority has rightly assessed that amount received towr ds dyeing of garment under Works Contract under Sectior 5-F of the APGST Act. He also contended that the lea;: red Tribunal allowed the appeal on the ground that tlle revisi! ral authority has not conducted any enquiry and did not sl :cifically ask the respondent-company to produce doc .rments for verifrcation is bad in law and further ttre revisi: ral authority issued show-cause notice and the appellant hact responded to notice with evidence of documents to deft:: Ld the case property. He also contended that casting bt: 'den on the appellant was bad. Further, in Matushree Textl ets case, the High Court of Bombay at paragraph Nos. 7 ar-"t 8 and 11 it was held as follows: "7. Mr. Bhamcha submitted ttlat the coloured shade o: is due to the chemical reaction of dyes and chemicals er if it is held that in the process of dyeing and printing, I chemicals have ceased to exist as goods, in view of 1l passing on to the fabrics, there is deemed sale of ttre dy and colours used irr the process of dyeing and printing hetd that in the process of dyeing arld printing there i property in goods, the Tribunal could not have t.t the fabrics C that, even re dyes and 3ir property :s, chemical 'hat, having r transfer of .d that ttle LZ 6K! & NNRT teuc_3s_AXB provisions of ttle Works Contracts Act arE not attracted on the ground.that the quantity of the property in goods that Passes is too insignificant. That under tIrc Works Contrac'ts Act, it is not relevant as to how much quantity of the property in goods Passes but what is relevant is, passing of property in goods eitlrer as goods or in any other form. Once, a finding of fact is recorded that in dyeing and printing, the ProPerty of colours, dyes and chemicals passes' then the works Contracts Act squarety applies and it is not at all relevant to consider as to how much property in the goods passes Mr' Bharucha submitted that how much tax is leviable or irow to determine tlle taxable turnover is not an issue raised in this reference.

8. Relying upon the decision of the apex Court in tl1e case of Associated cement Companles Ltd' v' Commissioner of Customs reported in [20011 124 STC 59, Mr. Bharucha submitted that bv uirtue of the Forty-sixth Amendment of the Constitution, the States have been empowered to levy tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of t]le Works Contracts Act and' therefore' notwithstanding the fact that there is no agreement to transfer the material or goods used in t}rc execution of the works contract' if there is transfer of goods, either as goods or in some other [orm' then the provisions of the Works Contracts Act are attracted He submitted that in the aforesaid threeJudge Bench decision of the apex Court, most of the decisions relied upon by the resPondents have been considered. He submitted tllat as per the said three- Judge Bench decision, in a works contract, neither the dominant intention of the parties is relevant rlor the PercentaBe value of the property in goods that Passes is rel€vant arrd even if the dominant intention is to render service, so long as the Foperty in goods is transferred, the Works Contracts Act would be apptcable'

11. Mr. Joshi, learned Senior Counsel appeariog for the respondents, on the oth€r hand, submitted that the process of dyeing and printing does not fall within ttre ambit or purview of the Works Contracts Act. as there is rreither tmnsf€r of gds nor any \ / r-l) 13 PSIO & NNR.I trevc_35_2@ in goods involved. He submittec hat for th€ passinB of the prop€rty purpose of dyeing, the grey cloth suppted by the c rstomer is passed. through a chemical solution prePared by ttre res rondent for several times and on completion of dyeing, the entin) solution is tlrown as waste. He submitted that for PreParing lt : chemical solution, materials such as dyes, chemicals and colour; arc used' The said materials are not transferred either as goodri :r in some other form to the customer. In other words, according -t Mr' Joshi, in the process ot dyeing, if on account of chemical rer tion of the materials used, the fabrics get coloured shade, then, sr :h coloured strade is transferred on the theory of accretion and no by way of transfer of the proPerty of the materials used in dyeir4 Mr' Joshi submitted that to constitute transfer of the goods' tt( 'e must be intention to transfer goods, there must be price fu:t I for such transfer of goods and there must be actual transfer of 6 lods which are visible and perceivable. [n other words, the chattel r Llst Pass as a chattel. In the contract for dyeing, neither tltere is ntention to transfer goods nor any intention to transfer the propertl in goods in any form and in fact on dyeing, neither the goods as loods or in some other form can be seen or perceived on the fabrt< Therefore, there is no transfer of goods and consequently thert is no sale cdthin the meantng of the Works Contracts Act." 19. Having considered the contentions of both the parties in respect of excess availment of (l )ferrnent, as deferment c€rnnot be created/established in e;<:ess, as it is not loss to the Government but loss to the pet tioner which the petitioner ought not to have sought for dema nd basing on the said understanding. Further, it is cl: rr from the decisions submitted and also evidence that as he revisional authority did not make any enquiry or cogent r(r: sorrs to as to t4 PSru & NNR' tetc_35_2qE the petitioner's stand in respect of collection of job work charges as a proof in revision and it is also an admitted fact that the burden is upon the revisional authority to make proper enquiry and call for books of accounts of rrot only the petitioner, but also the companies, as burden which lies on zthe department, before rejecting the same, the revisional authority should give cogent r€asons for the same by specifying the documents. As the same is not reflected by issuing show-cause notice, the said supply of material involved in job work was done by ttrem was presented only before the Tribunal and not presented along with letter dated,

18. 1 1.2004. It is also contended that the respondents have made specific request for personal hearing and the said request was rejected. 2o.. For the sake of convenience and better appreciation of entire facts and law in respect of tJle Works Contract, Section5-F ofthe APGST Act is hereby extracted: '5-F. Lcvy of tax on traaefer of propcrty lu goods involved ln the erecutlon of worlr contract' Notwithstanding anlthing contained in Section 5 or Section 6, every dealer shalt pay a tax under this Act for each Jrear, on his turnover of transfer of proprrty in goods whet-her as goods or in t \ \ / j n 15 PSXI & NNR) trevc 35 2@ some other form, invotved in the execution of works c(n tract, at the rate of six paise on every rupee of his turnover: .Provided that t€x shall be paid at the rate of four paise on every mpee of his turnover pertaining to declared go'r s, if the goods have not suffered tax earlier, and to tax shall tx payable on the turnover pertaining to declared goods, if such gc rds have suffered tax earlier under this Act and transferred rom the @ntractor to the contractee in the same form in u t ich they were purchased by the contractor: Provided further that no tax sha-ll be levied on the turnover of transfer of property in goods, specifred in tl : Fourth Schedule to the Act, involved in the execution of work:; rontract, if such goode are transferred from t.l.e contract ) to the @ntractee in the sarne from in which they were pttr: rased by tlle contractor: Provided also that no such tax shall be leviabi turnover of transfer of property in goods whether as Cc some ottler form involved in the execution of works r< such transfer from the contractor to the contractee (c a sale in tlte course of inter-state trade or commer Section 3 or an outside the State sale under Section a , in ttrc coursc of import or export under Section 5 of t-t Sa]es Tax Act, 1956 (Central Act, 47 of 19561 bul include the goods either obtained or purchased f1 States and used in the execution of works contract: : on tl1e rds or in 'rtract, if rstitutes e under cr a sale Central loes not m other Provided also that no tax sha-ll be payable ttr Section on the tumover relating to the alnounts paid contractor as consideration for the execution of works whether wholly or partly subject to the production ()f I such sub-contractor is registered dealer liable to tax t Act and that the turnover o[ such amount is inclurl return of turnover frled by such sub-contractor." der this o a sub- contract .oof that nder the d in the L6 PSKI & NNRT nettc_35-2@

21. As it is rightty contended by the learned counsel for the respondent that as the burden is upon the State to cdl for the specific documents and also to make enquiry and tl.en give a cogent reason to contradict the appellant stand and as the Tribunal has not made any enquiries or inspections and calledforbooksoftheaccountsofnotonlytheappellant,but also those companies which employed the appellant for the job work in order to prove the charges made out in the show cause notice. In the absence of any such documentary evidence being presented before the revisional authority' the revision authority has rightly came to conclusion that the demand made by the company for the same is based on improper understanding of the issue' He further contented that the finding given by the learned Tribunal that the revisional authority has not given any cogent reason for rejecting his contention that the burden of proof lies on the department and on receipt of the show cause notice when a certifrcate by the registered dealer has been presented before ttre revisional authority, the revisional authority shall gl.e cogent reasons for rejecting the same and if necessary should 77 PSP & NNRJ tr6rc_35-fi8 have called for more documents the same are required speci$ing the docurnents and need for the samt,

22. Considering the same, this Bench is r f the opinion that as t-he entire material placed would clear y show tllat there is no question of law involved in this tax -evision case and the entire rests on factual aspects of the c rse, as such this bench is of tlle opinion that the there is no t oint involved in the present case and accordingly the ta:r rer sion case is deserves to be dismissed.

23. In the result, the Tax Revision Case s dismissed. There shall be no order as to costs. Miscellaneous petitions, if any, pending shall stand closed. SD/. A.V.S. PRASAD I EPUTY REGISTRAR //TRUECOPY/ / ]EC'TION OFFICER To,

1. The Sales Tax Appellate Tribunal, Anclhra pradesh, Hyd., abad 2. The Deputy Comnnissioner (CiiB_;gr.;,' D;;#;, l{v, I .rabad. 3. one CC to-Sri Dantu Srinivis ( SpL"SC Fontiiea".cat [opUC] 4. one CC ro Sri A.V.A.siva Kartikeya, na".."[itjplcf 5. Two CD Copies. JCKIrlSL HIGHCOURT DATFD:Z7/11,/2f,25 ORDER TREVC.No.35 of 2@9 Dismissing the T.R.E.V.C. without costs l" \ \o0 d.r t I I I t I I i I' I i f1 .) 0 6 rtB 2028 * /j5 ( I 7 Z. i))- -\ I I ,