The Telecom Department, as part of the Central Government, is considered a deemed dealer, which renders the contractor a second seller and exempts them from tax liability on materials supplied by the department on a cost recovery basis.

The Court made the following Order:

(per Hon’ble Sri Justice R. Raghunandan Rao)

1. The respondent herein had executed certain civil work contracts with M/s.VUDA, Municipal Corporation of Visakhapatnam as well as the Telecom Department. In the process of execution of these contracts, the respondent had been supplied with steel and cement by the contractees on cost recovery basis, for use in the works contracts. The respondent was sought to be taxed in relation to the use of steel and cement on the ground that the contractees are not registered dealers from whom tax could have been collected and as such, the respondent would be liable to pay tax.

2. The said issues came up before the Sales Tax Appellate Tribunal, by way of Tax Appeal Nos.617, 618 & 619 of 1997. The Tribunal dismissed Tax Appeal No.617 of 1997, holding that the respondent would be liable to pay tax on the turn-over relating to the supply of steel and cement by VUDA and Municipal Corporation of Visakhapatnam. However, Tax Appeal Nos.618 & 619 of 1997 were partly allowed on the ground that the supply of steel and cement in relation to the works executed with the Telecom Department shall stand on a different footing as the Telecom Department is a part of the Central Government and would be deemed to be a dealer for the purposes of the GST Act. The Tribunal has held that, in such a situation, the respondent would become second seller and would not be liable to pay any tax on the turn-over, following the Judgment of the erstwhile High Court of Andhra Pradesh in the case of State of Andhra Pradesh vs. Union of India , (1994) 104 STC 1

Aggrieved by the order of the Tribunal, in Tax Appeal No.619 of 1997, the State is in revision before this Court.

3. The main contention of the State is that the Tribunal, having held that M/s. VUDA and the Municipal Corporation of Visakhapatnam cannot be treated as deemed dealers, could not have held that the Telecom Department should be treated as a deemed dealer.

4. This contention of the State would have to be negatived in view of the Judgment of the erstwhile High Court of Andhra Pradesh in the case of State of Andhra Pradesh vs. Union of India , as stated above.

5. In the circumstances, we do not find any reason to interfere with the order of the Tribunal and this Tax Revision Case is accordingly, dismissed. There shall be no order as to costs.

As a sequel, pending miscellaneous applications, if any, shall stand closed.