Sub-contractors in Special Economic Zones are entitled to tax exemption under Entry 59-A of the AP VAT Act, as both Entry 59-A and Section 7-A can coexist without conflict.

JUDGMENT :

R. Raghunandan Rao, J.

The petitioner was a dealer, registered under the A.P. VAT Act.

2. In the year 2010-2011, one M/s. Abhijeet Ferro-tech Limited established a unit in the Visakhapatnam Special Economic Zone (SEZ). For the purposes of setting up the said plant, an EPC contractor named M/s. Abjhijeet Projects Limited was awarded the contract of setting up the unit. M/s. Abjhijeet Projects Limited in turn sub- contracted the work, on a back to back basis, to the petitioner herein, by way of a letter of intent, dated 04.03.2010.

3. The contention of the petitioner was that, by virtue of Entry59-A in the 1^st schedule to the AP VAT Act, 2005, the petitioner, as a sub- contractor of M/s. Abjhijeet Projects Limited was entitled to an exemption of the turnover relating to the works contract under which the SEZ unit of M/s. Abhijeet Ferro-tech Limited was being established. The further contention of the petitioner was that Entry 59-A, had been interpreted by the erstwhile High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh, in the case of M/s. Larsen and Toubro and Others vs. State of Andhra Pradesh,, [(2006) 148 STC 616] which had held that sub-contractors are also covered under Entry 59-A.

4. As there was some ambiguity about this position of law, upon the subsequent insertion of Section 7-A, the petitioner approached the authority for Advance Ruling. The said authority, by its order, dated 09.06.2009 in A.R.COM/45/2008 had held that even sub- contractors are entitled to the benefit of Entry 59-A of the 1^st schedule to the AP VAT Act. However, the authority for Advance Ruling also held that by virtue of inclusion of Section 7-A, in the AP VAT Act, the benefit available under Entry 59-A is not available any more. Aggrieved by the said order, the petitioner had approached the Sales Tax Appellate Tribunal, by way of T.A.No.66 of 2011. This appeal was dismissed by the Tribunal, by an order, dated 16.05.2011, affirming the view taken by the authority for Advance Ruling. In parallel proceedings, the petitioner was also assessed the tax and the turnover of the petitioner relating to the setting up of the unit in the SEZ area was included and taxed. Apart from this, the authorities also levied a penalty on the petitioner. Aggrieved by the said order of the Tribunal as well as the orders of the assessment and penalties, the petitioner had approached this Court, by way of various writ petitions. The details of these petitions are as follows:

5. Heard Sri A. Sarveswara Rao, learned counsel for the petitioner and the learned Government Pleader for Commercial Taxes. The relevant provisions of law, which require to be considered, are Section 7-A of the AP VAT Act and Entry 59A of Schedule-I of the AP VAT Act. It may also be noticed that Entry 59A was added to the schedule on 01.06.2008 and Section 7A was inserted in the AP VAT Act on 25.09.2008. These provisions read as follows:

7-A Notwithstanding anything contained in this Act, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer to a registered dealer for the purpose of setting up operation, maintenance, manufacture, trading, production, processing, assembling, repairing, reconditioning, re- engineering, packaging or for use as packing material or packing accessories in an unit located in any Special Economic Zone or for development, operation and maintenance of Special Economic Zone by the developer of the Special Economic Zone, if such registered dealer has been authorized to establish such unit or to develop, operate a