2026:APHC:23378 APHC010574392004 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI [3529]

(Special Original Jurisdiction)

MONDAY, THE SECOND DAY OF FEBRUARY TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR TAX REVISION CASE NO: 52/2004 Between:

1. T HE STATE OF AP. REP.BY SR BEFORE STAT, HYD, REP. BY STATE REPRESENTATIVE SALES TAX APPELLATE TRIBUNAL D.NO. 5-4-404 TO 408 NAMPALLY, ANDHRA PRADESH ...PETITIONER AND

1. M /S R C M KONDAIAH, D.No. 47-15-13 Dwarakanagar Visakhaptnam.

...RESPONDENT To take the TRC on file and set aside the orders of ethe STAT in TA No.

123/1999k dated 8-4-2003 Counsel for the Petitioner:

1. GP FOR COMMERCIAL TAX Counsel for the Respondent:

1. A SARVESWAR RAO The Court made the following Order:

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

The respondent had carried on works contract, in relation to the year

1995-1996, which came to be assessed to tax by the Commercial Tax Officer. In the course of the said assessment, the Commercial Tax Officer had determined the turn-over of the respondent, which would be exigible to tax, and levied tax on the turn-over of Rs.15,33,240/-, under Section 5 (f) of the A.P. General Sales Tax Act, 1957. It appears that the Commercial Tax Officer had added 5% to the purchase value as expenses for freight and other incidental charges and increased the value of the material by applying Rule 6 (3) (1) of the A.P. General Sales Tax Rules, 1957 on the ground that the works had been spread over more than one financial year.

2. The Deputy Commissioner revised this order of assessment by initially excluding the value of the steel supplied by the contractee and increasing the value of the material supplied by the respondent on the ground that establishment expenses and profit should also be added. This order of revision of the Deputy Commissioner was challenged before the Tribunal by the respondent.

3. The main contention of the respondent is that Rule 6 (2) of the Rules could not have been applied and it is only Rule 6 (3) (1) which can be applied inasmuch as the contract had been executed for a period of one financial year.

4. The Tribunal had held that it is only Rule 6 (3) (1) which would be applicable where the contract extends for a period of more than one assessment year. The Tribunal had also held that it is only the actual purchase value that can be taken into account for determining the turn-over when Rule 6 (3) (1) is applied and that the Deputy Commissioner erred in adding establishment charges and profits. For this purpose, the Tribunal relied upon a Judgment of the erstwhile High Court of Andhra Pradesh at Hyderabad, in the case of Media Communications vs. Govt. of Andhra Pradesh, 1997 (105) STC 227. Aggrieved by this order of the Tribunal, dated 08.04.2006, the State is in revision before this Court.

5. Rule 6 (2) sets out the amounts that need to be included or considered while determining the turn-over of a dealer, executing works contract. This Rule does not specify that it would be applicable only if the turn- over relates to a contract executed within one financial year. However, Rule 6 (3) (1) specifies that Rule 6 (3) would be applicable where the execution of works contract extends for a period of more than one year. Rule 6 (3) (2) sets out the amounts which should be deducted in relation to certain types of contracts.

6. In view of the specific stipulation in Rule 6 (3) (1), it must be held that the view of the Tribunal, that it is only Rule 6 (3) (1) which would be applicable to the present case, is correct.

7. Sri A. Sarveswar Rao, learned counsel for the respondent would contend that a full-bench of the erstwhile High Court of Andhra Pradesh in the case of State of Andhra Pradesh vs. Seven Hills Constructions, (2012) 54 VST 66 (AP), had held that it is only the cost of incorporation of goods in the course of execution of works contracts which should be taken into account and not the values set out.

8. In