The burden of proof to establish tax liability lies with the Department; authorities must conduct adequate inquiries and provide cogent reasons for rejecting evidence before imposing tax demands under the Works Contract provisions of the APGST Act.

This Tax Revision Case is filed by the petitioner-State under Section 22 (1) read with Rule 10 of the APGST Rules, 1957aggrieved by the order, dated 01.10.2008 in T.A.No.412 of 2008 passed by the learned Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad (for short, STAT’).

2. Heard Sri T. Chaitanya Kiran, learned counsel representing Sri SwaroopOorilla, learned Standing Counsel for STAT and Sri A.V.A. Siva Kumar, learned counsel appearing for respondent. Perused the record.

3. The brief facts of the case are that the respondent - M/s. Surya Vamshi Spinning Mills Limited is manufacturer and Traders in Cotton Yarn, Cotton Waste and Fabrics. They are on the rolls of the Commercial Tax Officer, S.D. Road Circle, Secunderabad. The respondent herein filed audit reports, statement showing details of consumption, production and sales affected within the then State of Andhra Pradesh and outside the State of Andhra Pradesh. In the Final Assessment for the year 2001-2002, they have availed sales tax deferment of Rs.2,58,843/-, for which the Commercial Tax Officer issued a show-cause notice, dated 17.10.2003 to the respondent calling for written objections, if any, on the proposed turnovers. The said notice was received by the respondent on 20.10.2003 and filed objections on 29.10.2003 along with books of accounts as summoned on 11.09.2003 and finally in the Final Assessment for the year 2001-2002,the respondent availed Sales Tax Deferment of Rs.2,58,843/- and accordingly, the Commercial Tax Officer passed an order, dated 30.10.2003.

4. It is further case of the petitioner that the objections raised by the assessee are not tenable as per the APGST Act,1957,as such the printing and the dyeing works are liable for tax. Section 5-F of APGST Act, 1957 deals with ‘Levy of tax on transfer of property in goods involved in the execution of works contract.’ In respect of objection raised by the petitioner as to excess availment of deferment on the ground that the Commercial Tax Officer has not detected the amount of deferment from Sales Tax liability, the dealer was examined and it is held that in the absence of any details, the objection raised by the dealer was not tenable as per the provisions of APGST Act, 1957. Further, in the light of objection raised by the dealer, which is not tenable as per the provisions of APGST Act, 1957, as such the taxes proposed in show cause notice were confirmed by the revisional authority i.e., Deputy Commissioner (CT) by passing an order.

5. Being aggrieved by the order passed by the learned Deputy Commissioner (CT) Begumpet Division, the respondent herein, who is appellant therein,preferred an appeal before the learned Sales Tax Appellate Tribunal, Andhra Pradesh, Hyderabad, vide T.A.No.412 of 2008 on three issues.

(1) That the respondent seeks the relief on levy of tax on purchase of PSF (Polyester Staple Fabric) and further contended that it purchased PSF from M/s.Reliance Industries Sales Office, Hyderabad, as those are tax paid purchases therefore, levy of tax on the respondent is not justified and it is clear violation of Clause (i) of sub-Section (4) of Section 5 of the APGST Act, 1957.

“Section 5: Levy of tax on sales or purchases of goods:

1 ……..

2 ……..

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4 The taxes under this Section shall be assessed, levied and collected in such manner, as may be prescribed:

Provided that –

(i) in respect of the same transaction, the buyer or the seller but not both, as determined by such rules as may be prescrib