The court ruled that tax assessments must be based on complete documentation, and jurisdictional questions regarding applicability beyond territorial waters remain open.

ORDER :

R. Raghunandan Rao, J.

The petitioner is a company incorporated in the United States of America. It had entered into a sub-sea constructions and diving contract, dated 21.12.2006 with M/s. Allseas Marine Contractors S.A, for on off shore Gas field, developed by M/s. Reliance Industries Limited, in the Krishna Godavari Basin situated in the Bay of Bengal. The contract awarded to the petitioner, was for laying a pipeline on the ocean floor, including installation of various sub-sea constructions like suction pipes, manifolds, Christmas trees, rigid jumpers, tying spools and infield umbilical lines etc. Under the contract the material, mentioned above was to be supplied by M/s. Allseas Marine Contractors and the petitioner was required to carry out engineering, planning and fabrication activities in relation to the installation of the sub-sea constructions. It is also the contention of the petitioner that about 80% of this work was done beyond 12 Nautical miles from the coast of Andhra Pradesh.

2. The petitioner had registered itself under the provisions of the Service Tax Act. Apart from this, the petitioner also obtained registration, as a dealer, under the provisions of the Andhra Pradesh Value Added Tax Act, 2005 [for short “the APVAT Act”] and the Central Sales Tax Act, 1956 [for short “the CST Act”]. The petitioner, on the ground that less than 1% of the value of the contract involved transfer of goods, had approached the 1^st respondent for quantification of taxable turnover for the purposes of deduction of tax at source. The 1^st respondent is said to have issued a certificate, in Form 501D, dated 10.04.2008, determining the taxable turnover at 3.5% of the total value of the contract on which tax would be liable to be deducted at 4%.

3. The 1^st respondent initiated proceedings by issuing of a notice, dated 28.08.2008, calling for information and record in connection with the works executed by the petitioner. After various communication exchanged between the petitioner and the 1^st respondent, the 1^st respondent passed Orders, dated 15.06.2009, for the period 2007-08 and 2008-09 raising a demand of Rs.2,51,61,401/-. The 1^st respondent rejected the accounts produced by the petitioner, on the ground that these were not a complete set of accounts and that the books of account, required to be maintained, under the Income Tax Act, 1961 was not produced. This order came to be challenged before the 2^nd respondent. The 2^nd respondent, by an Order, dated 11.08.2009, had set aside the levy and remanded the matter back to the 1^st respondent for passing orders afresh after considering the objections raised by the petitioner as well as the books of accounts and other material that would be produced by the petitioner.

4. The petitioner, in pursuance of the directions of the 2^nd respondent, is said to have filed month wise details of expenses incurred as per Rule-31 and copies of contracts etc obtained from vendors of the petitioner. At that stage, the 1^st respondent again issued a notice, dated 29.10.2009, proposing to levy tax of Rs.19,01,11,662/- and Rs.60,74,59,981/-, for the assessment years 2007-08 & 2008-09 respectively. The 1^st respondent, issued this notice, on the ground that the petitioner had failed to produce the books of accounts and consequently, the entire turnover would have to be taxed