M/s. lmage Creative private Limited v. Commissioner of Commercial Taxes and others', in

TIIE HONOURABLE SRI JUSTICE P.SAM K( ISHY AND THE HONOT]RABLE SRI JUSTICE SUDDALA CHALAPATHI RAO TREVC No.7 OF 2025 JUDGMENT: (per Hon'ble Sri Justice P.Sam Koshy) Heard Mr.A.V.A.Siva Kartikeya, leamerl counsel representing Mr.J.V.Rao, learned counsel for the peli ioner and Mr. Swaroop Oorilla, Ieamed Special Govemment Plear er for the State Tax for the respondent. Perused the record.

2. The instant tax revision case has been preferr d by the assessee assailing the order dated 10.06.2025 passed in't A.No.197 of 2011 by the leamed Telangana Value Added Tar Appellate Tribunal, Hyderabad (for short 'the Tribunal').

3. The petitioner is engaged in the business of execrLl ng works contracts. It is a registered dealer under the provisir rs of the Telangana Value Added Tax Act, 2005 and is also on I e rolls of the Commercial Tax Offrcer under the service tax r: listration. The relevant period in the hstant case is 2009-2010, dur ng which the petitioner is said to have entered into a contract with llindustan I I L 2

1. Petroleum Corporation Limited (HPCL) for execution of purely service labour works relating to installation, testing, pre-commissioning and laying of offshore pipeline from Single Point Mooring (SPM) to Land Fall Point (LFP) at Visakhapatnam. The entire turnover was disclosed in its VAT as also the CST retums and the petitioner had paid the applicable taxes. However, since it was a service contract, the petitioner claims to have paid the total service tax on the entire gross receipts. However, the authorities from the VAT Department initiated proceedings. The petitioner having not paid the value added tax on the works contract executed by it, the Assessing Officer adopted the gross receipts and passed an order dated29.07.20l 1. The order of the Assessing Authority under the VAT was subjected to challenge before the first Appellate Authority and both before the Assessing Authority as also before the first Appellate Authority, it was the categorical stand of the petitioner that the nature of work executed by the petitioner was purely labour oriented and which involved expertise and skill and any transfer involved in the execution of works was only incidental and also was chargeable to tax and that I 3 the petitioner's work predominant portion was that of ervice and the petitioner had paid the service tax on the entire w,) k receipts. Before the first appellate authority, the petitioner harL challenged the order on two grounds, firstly so far as the quantum t concerned and secondly so far as the levy of value added tax or .he service portion. The first Appellate Authority, in the course cl passing of the order on 25.09.2013, was convinced so far as the t1 rantum not being properly verified and vide the said order had rtr randed the matter, however, though there was a categorical findinli ty the first Appellate Authority, which for ready reference is eproduced below: "The Learned Assessing Authority erred in r;r mputing the Tumovers and determining the lncorporatiorr Rs.22,32,72,4951. The Learned Assessing Autl not taken into consideration the nature of the which involved expertise and skill and any trt property involved in the course of execution of v only incidental to the main work of labour. The /alue at ,rity has lontract lsfer of ork was -earned Assessing Authority has also not taken into cons deration that the entire contract value of Rs. 247.00 Ct< chargeable to service tax and the Contractee rl M/s. HPCL, has paid Service Tax on the full valt Contract without any abatement. The Princip ( states that Service Tax and VAT are mutually ( and once the entire contract value has suffered s,: 'es was )mpany, e of the of law xclusrve /ice tax, : I f, 4 the same cannot be subjected to VAT. The Appellant Company relies on the Judgment of the Honorable Apex Court in the case of "M/s. lmage Creative private Limited Vs. Commissioner of Commercial Taxes and others', in (2008) 12 VST 371 in support of its contentions". The said clause deals with the specific argumeflt of the petitioner so far as the service tax being paid on the entire gross receipts that he has received from HPCL. However, while remanding the matter, the first Appellate Authority seems to have left it open to the Assessing Authority to decide the same and did not make any observation so far as the verification of the payment of service tax on the service portion of petitioner's work. The Assessing Authority after the remand was made had again re-quantified the same. However, the aspect of lely oftax on the service component was not touched and the Assessing Authority after verification of the records passed an order re-quantiSing the Ermount of VAT payable. Since the aspect ofthe petitioner having paid the service tax which was not looked into or verified by the authorities, the petitioner again preferred an appeal before the first Appellate Authority and thereafter before the Tribunal, both of whom confirmed the order of the Assessing Authority without dealing the 7 5 aspect of levy of tax on the service component fir which the petitioner claims to have already paid service tax f'r the entire gross receipts. The present tax revision case has beer iled by the petitioner confining his claim so far as this aspect is con :emed.

4. Learned Special Government Pleader, however. ubmits that if we look into the order passed by the first Appellate \uthority at the first instance on Z5.Og.2Ol3, the Assessing Auth'l ity and the Appellate Authority and the Tribunal thereafter have r :rictly gone by the order passed by the first Appellate Authority to I re extent of observations made in the remand order and since th :re was no observation so far as the verification of the payment o service tax made by the petitioner is concemed, there was no oc(z sion for the authorities to have ventured into that arena for which t lere was no remand and thus the leamed Special Govemment prayed for rejection of the petition, confirming the orders ptLr sed by the Tribunal.

5. Having heard the contentions of either side and t n perusal of the record, the plain reading of the clause whi': has been reproduced in the preceding paragraph by the fir': : Appellate t'* 6 Authority itself is clear indication that even the first Appellate Authority had taken note of the ground raised by the petitioner so far as the petitioner having paid the service tax on the entire gross receipts is concemed and since the petitioner has paid the service tax, whether the petitioner would simultaneously be exigible to VAT ought to had been considered by the Assessing Authority when the matter stood remanded back. When the matter was remanded by the frrst Appellate Authority to decide the claim after due verification of the books of accounts and other relevant documentary evidence to be produced by the petitioner, the opportunity was granted upon the Assessing Authority to pass such orders as deemed fit in accordance with the provisions of law, which includes the verification of the fact whether the petitioner has paid service tax for the entire gross receipts or not and if he has paid, what would be the consequence.

6. For ready reference, the operative part of the order of the first Appellate Authority is reproduced herewith and which would substantiate the claim ofthe petitioners in this regard: 7 ,/ "ln view of the above facts and circumstar< :s of the case, I feel it just and proper to remit the matte back to the Assessing Authority, who shall verify the cla appellant with reference to the books of ac: other relevanl documentary evidence that v produced by the appellant and to pass such ( deemed fit in accordance with the provisions o' giving the appellant a reasonable opportunity t their case. With this direction, the impugnetl set-aside on the disputed turnover of Rs.18,57 (tax effect - Rs.1,16,01,1321-) and the apper remanded'. m of the unt and ould be rders as aw, after r explain order is

93.840/- thereon

7. This aspect seems to have not been properly zll preciated by the Assessing Authority after the remand stage and air r by the first Appellate Authority and the Appellate Tribunal, all r f whom had strictly adopted the same stand that which has beer, iaken by the Assessing Authority.

8. This order having been passed by the Asses:ri rg Authority which has been confirmed by the subsequent two apD:llate forums does not seem to be proper, legal and justified, parti, ularly in the teeth of the observations made by the first Appellate r .uthority and the observations made by the first Appellate Aut T orify while making the remand in his order dated25.09.2013. 8

9. In view of the same, we are inclined to set aside the order passed by the Assessing Authority, the first Appellate Authority as also by the Appellate Tribunal and remand the matter back to the Assessing Authority only so far as the verification of the records to ascertain whether the petitioner has paid service tax on the entire gross receipts paid by the HPCL in the course of execution of the works contract and if he has paid, what would be the consequence, and appropriate decision be taken strictly in accordance with the provisions of the Telangana Value Added Tax Act, 2005.

10. The tax revision case is, accordingly, IS allowed and disposed of. There shall be no order as to costs. Consequently, miscellaneous petitions pending, if any, shall stand closed. //TRUE COPY// s .I. NAGA LAKSHMI JOINT REGISTRAR SECTION OFFICER Added Tax Appellate Trib STATE TAX, High Court for the State of Telangana at Hyderabad. Commissioner (ST) (FAC), Punjagutta Division, To

1. The Telangana Value 2. Two CCs to GP FOR Hyderabad. [OUT] 3. The Appellate Joint Hyderabad. Karn/PR u,

4. The Commercial Tax Officer, S.D.Road Circle, Hyderabad 5. One CC to Mr. J.V. Rao, Advocate [OpUC] 6. Two CD Copies HIGH COURT DATED:2011112025 JUDGMENT TREVC.No.T of 2025 1 .:... ) ,0 MlJEI i 1' a. ' - r.- -\\__r_2. lj '.'1'.'r: ;/ ; ALLOWING THE TAX REVISION CASE q 1 $ V