THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE SUDDALA CHALAPATHI RAO TREVC No.7 OF 2025 JUDGMENT : (per Hon’ble Sri Justice P.Sam Koshy)

Heard Mr.A.V.A.Siva Kartikeya, learned counsel representing Mr.J.V.Rao, learned counsel for the petitioner and Mr.Swaroop Oorilla, learned Special Government Pleader for the State Tax for the respondent. Perused the record.

2. The instant tax revision case has been preferred by the assessee assailing the order dated 10.06.2025 passed in T.A.No.197 of 2017 by the learned Telangana Value Added Tax Appellate Tribunal, Hyderabad (for short ‘the Tribunal’).

3. The petitioner is engaged in the business of executing works contracts. It is a registered dealer under the provisions of the Telangana Value Added Tax Act, 2005 and is also on the rolls of the Commercial Tax Officer under the service tax registration. The relevant period in the instant case is 2009-2010, during which the petitioner is said to have entered into a contract with Hindustan Petroleum Corporation Limited (HPCL) for execution of purely service labour works relating to installation, testing, pre-commissioning and laying of offshore pipeline from Single Point Mooring (SPM) to Land Fall Point (LFP) at Visakhapatnam. The entire turnover was disclosed in its VAT as also the CST returns and the petitioner had paid the applicable taxes. However, since it was a service contract, the petitioner claims to have paid the total service tax on the entire gross receipts. However, the authorities from the VAT Department initiated proceedings. The petitioner having not paid the value added tax on the works contract executed by it, the Assessing Officer adopted the gross receipts and passed an order dated 29.07.2011. The order of the Assessing Authority under the VAT was subjected to challenge before the first Appellate Authority and both before the Assessing Authority as also before the first Appellate Authority, it was the categorical stand of the petitioner that the nature of work executed by the petitioner was purely labour oriented and which involved expertise and skill and any transfer involved in the execution of works was only incidental and also was chargeable to tax and that the petitioner’s work predominant portion was that of service and the petitioner had paid the service tax on the entire work receipts. Before the first appellate authority, the petitioner had challenged the order on two grounds, firstly so far as the quantum is concerned and secondly so far as the levy of value added tax on the service portion. The first Appellate Authority, in the course of passing of the order on 25.09.2013, was convinced so far as the quantum not being properly verified and vide the said order had remanded the matter, however, though there was a categorical finding by the first Appellate Authority, which for ready reference is reproduced below:

“The Learned Assessing Authority erred in computing the Turnovers and determining the Incorporation Value at Rs.22,32,72,495/-. The Learned Assessing Authority has not taken into consideration the nature of the Contract which involved expertise and skill and any transfer of property involved in the course of execution of work was only incidental to the main work of labour. The Learned Assessing Authority has also not taken into consideration that the entire contract value of Rs. 247.00 Crores was chargeable to service tax and the Contractee Company, M/s. HPCL, has paid Service Tax on the full value of the Contract without any abatement. The Principle of law states that Service Tax and VAT are mutually exclusive and once the entire contract value has suffered service tax, the same cannot be subjected to VAT. The Appellant Company relies on the Judgment of the Honorable Apex Court in the case of "M/s. Image Creative Private Limited Vs. Commissioner of Commercial Taxes and others" in (2008) 12 VST 371 in support of its contentions”.

The said clause deals with the specific argument of the p