Telangana High Court
M/S. S.B.P.L. Infrastructure Limited, vs The Commercial Tax Officer, on 28 May, 2025
Author: T. Vinod Kumar
Bench: T.Vinod Kumar, P.Sree Sudha
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
And
THE HON'BLE SMT. JUSTICE P.SREE SUDHA
WRIT PETITION Nos.22510 and 22615 of 2006
COMMON ORDER:
(Per Hon’ble Sri Justice T.Vinod Kumar)
W.P.No.22510 of 2006 is filed with the following prayers:
(a) Declaring the action of the 2nd respondent in passing the
impugned/revised assessment order dated 4-2-2006 in
proceedings Rc.No.1/3071/2003-04/APGST as illegal,
arbitrary, high handed and without authority of law and
contrary to the provisions of the Act and set aside the same
and declare that the petitioner is not exigible to tax on the
disputed turnover under Works Contract since the
petitioner has not transferred any property in goods in
favour of any third party.
(b) Declare the action of the 3rd respondent in rejecting the
petitioner’s appeal for the assessment year 2003-2004
under the APGST Act by the impugned order dated 01-07-
2006 in proceedings AR Sl.No.P/261/2005 on the ground
that no proof of payment was produced before him as
illegal, arbitrary and without authority of law and contrary
to the provisions of the Act and set aside the same and
declare that the petitioner need not deposit the 12.5% of
the disputed since the petitioner was granted exemption for
payment of Sales Tax being the recognized Special
Tourism Project under the A.P. State Tourism Policy, 1998
and pass such other order or orders ….”
2. W.P.No.22615 of 2006 is filed with the following prayers:
2
(a) Declaring the action of the 1st respondent in passing the
impugned/revised assessment order dated 4-2-2006 in
proceedings Rc.No.1/3071/2004-05/APGST as illegal,
arbitrary, high handed and without authority of law
and contrary to the provisions of the Act and set aside
the same and declare that the petitioner is not exigible
to tax on the disputed turnover under Works Contract
since the petitioner has not transferred any property in
goods in favour of any third party.
(b) Declare the action of the 2nd respondent in rejecting the
petitioner’s appeal for the assessment year 2004-2005
under the APGST Act by the impugned order dated
01-07-2006 in proceedings AR Sl.No.P/262/2005 on the
ground that no proof of payment was produced before
him as illegal, arbitrary and without authority of law
and contrary to the provisions of the Act and set aside
the same and declare that the petitioner need not
deposit the 12.5% of the disputed since the petitioner
was granted exemption for payment of Sales Tax being
the recognized Special Tourism Project under the A.P.
State Tourism Policy, 1998 and pass such other order
or orders ….”
3. Since, the parties are one and the issue involved is same,
these Writ Petitions are being disposed of by this common order.
4. The facts set out in W.P.No.22510 of 2006 are taken for
consideration of these Writ Petitions.
3
5. Heard learned counsel for the petitioner and learned Special
Standing Counsel for Commercial Taxes appearing on behalf of
respondents, and perused the record.
6. The petitioner has filed the present Writ Petitions assailing
the action of the 2nd respondent in passing the revised assessment
order date 04-02-2006 for the assessment year 2003-04 and
2004-05 under the provisions of the Andhra Pradesh General
Sales Tax Act, 1957 ( for short ‘the Act’) by treating the
petitioner has having executed works contract of construction
and subjecting the purchases made by it by adding 15% profit as
being illegal, arbitrary and without authority of law and contrary
to the provisions of the Act.
7. It is the case of the petitioner that aggrieved by the
aforesaid order of assessment, it had availed the remedy
provided under Section 19 of the Act by approaching the
3rd respondent authority, and the 3rd respondent by order dated
01-07-2006 had rejected the appeal on the ground that the
petitioner had failed to make payment of 12.5% of the disputed
tax as pre-condition for admission of the appeal as provided
under Section 19(1) of the Act.
4
8. Petitioner contends that originally, a Development
Agreement dated 27-06-2001 was entered into by one Sri
Gowrishanker Gupta and Smt.Sarita Gupta with the owners of a
piece of land to an extent of 7214 sq. yards situated at
Panjagutta, Hyderabad, for developing the aforesaid land for
construction of a multi-storied commercial complex, which was
followed by supplementary agreement dated 05-07-2002.
9. Petitioner further contends that while the above mentioned
agreement between the above mentioned parties was in force, it
had entered into an Agreement of Sale and Irrevocable Power of
Attorney dated 23-09-2004 with the original owners and
Gowrishanker Gupta and Smt.Sarita Gupta by superseeding the
earlier agreements/documents entered into between the original
land owners and the Developers to purchase all the piece of land
to an extent of 7214 sq. yards situated at Panjagutta, Hyderabad
for valuable consideration and took up construction of
commercial complex therein on its own.
10. It is the further case of the petitioner that by virtue of the
agreement of sale and irrevocable PoA entered into with the
owners and earlier developers, the petitioner took up
5
construction of commercial complex on its own and for
undertaking the said construction, it had purchased various
material during the year 2003-04 and as such, it cannot be treated
as execution of works contract.
11. It is the further case of the petitioner that since, it did not
undertake any execution of works contract and since, no sales
were made, it had filed Nil returns with the 2nd respondent
authority, on whose rolls the petitioner is registered under the
provisions of the Act.
12. Petitioner contends that initially, Nil returns filed by it were
accepted by the 1st respondent by issuing formal proceeding
dated 26-05-2004.
13. Petitioner further contends that notwithstanding the fact that
formal proceeding has been issued by the 1st respondent, the
2nd respondent in purported exercise of power under Section
14(4) of the Act, had proposed to set aside the aforesaid formal
assessment proceeding and to assess the petitioner to tax under
the provisions of Section 5-F of the Act on the ground that the
value of the goods purchased and incorporated into the works
contract by the petitioner to the tune of Rs.9,07,96,188/- by
6
adding the profit element of 15%, amounting to
Rs.10,44,15,616/- would have to consider as the value of goods
incorporated in execution of works contract and liable to tax as
per Section 5-F of the Act.
14. Petitioner further contends that on the 2nd respondent
proposing to revise the assessment in purported exercise of
power under Section 14(4) of the Act, it was issued with show
cause notice dated 02-12-2005, upon which the petitioner had
submitted its explanation on 19-12-2005.
15. Petitioner contends that by the aforesaid explanation/reply
submitted by it to the show cause notice issued by the
2nd respondent, it had contended that there is no taxable turnover
as per the profit and loss Account; that the assessment made on
the basis of AA9 return with Nil turnover is correct; that as the
construction is not meant for sale, the estimation of turnover
based on purchases is not correct; that the project is approved by
the Tourism Department as eligible for incentives; that if any,
construction is for resale, the Tourism Department will not
approve the project for incentives as the end use will vary
depending upon the buyer’s wish; and that as there is no sale
7
receipts, requested to drop the proposal to levy tax under Section
5-F of the Act by treating the activity of the petitioner as works
contract.
16. Petitioner also contended that the 2nd respondent, did not
agree with the explanation submitted by it and by observing that
the petitioner though had claimed of it is being Tourism Unit and
is eligible for the incentives as are in vogue and the certificate
dated 29-05-2004 issued to the petitioner for Multiplex-cum-
Shopping Mall at Panjagutta, Hyderabad by treating the same as
a tourism unit entitled for incentives, however, did not place any
material on record of it being granted special incentives and as
such, not liable to tax on the turnover, had assessed the petitioner
to tax at 8% on the purchase value of the goods incorporated in
execution of works contract by adding 15% profit margin under
Section 5-F of the Act resulting in demand of tax in a sum of
Rs.83,53,250/-.
17. Petitioner contends that on the aforesaid assessment order
being passed by the 2nd respondent, the petitioner had availed the
remedy of appeal in terms of Section 19 of the Act before the 3rd
respondent by filing appeal on 04-03-2006.
8
18. Petitioner further contends that since, it has been issued
with certificate dated 29-05-2004 by the Youth Advancement,
Tourism & Culture Development, Government of Andhra
Pradesh extending various concessions, which inter alia included
100% sales tax exemption for 5 years for new units, the
petitioner did not make the payment of 12.5% of the disputed tax
as prescribed under proviso to Section 19 of the Act for
maintaining the appeal.
19. Petitioner contends that since, it is granted exemption by
treating the petitioner as a Tourism Unit, the said exemption
would be applicable in relation to filing and maintaining of the
appeal. The 3rd respondent authority however, without
considering the same, had rejected the appeal by its order dated
01-07-2006, observing that the petitioner failed to produce proof
of payment of 12.5% of the disputed tax and since the Second
proviso appended to Section 19(1) of the Act explicitly provides
for payment of 12.5% of the disputed as a pre-condition for
admission of the appeal, and in the absence of fulfillment of
condition of payment of 12.5% of the disputed tax, the appeal
filed by the petitioner against the revised assessment order of the
2nd respondent for the year 2003-04 under the Act stands as ‘not
9
entertainable’ for failure of payment of 12.5% of the disputed
tax.
20. Petitioner contends that since the petitioner has been
granted incentives in the form of exemption by the Youth
Advancement, Tourism and Culture Development, Government
of Andhra Pradesh, the 3rd respondent ought not to have rejected
the appeal on the aforementioned ground.
21. It is also contended by the petitioner that though, a further
appeal is provided under the Act to the Tribunal under Section
21 of the Act, since, the Tribunal being an instrumentality
created under the Act cannot over ride the statutory provision,
and thus, the said remedy would not be an efficacious remedy
and as such, the petitioner is entitled to maintain the present Writ
Petition by assailing the Revised assessment order as well as
appellate order.
22. Respondent Nos.1 and 4 filed counter-affidavit.
23. By the counter-affidavit filed on behalf of 1st respondent,
learned Special Standing Counsel would contend that the
petitioner in fact had obtained G-Form on two occasions for
purchasing goods at concessional rate of tax, which benefit is
10
only available if the petitioner is executing works contract and
not purchasing the goods for being used for its own construction.
24. Learned Special Standing Counsel appearing on behalf of
respondents would further submit that since the petitioner at the
first instance having chosen to avail the remedy of appeal, cannot
abandon the said course of action midway and assail the order of
assessment as well as rejection order in a Writ Petition, after
about 8 months from the date of passing of the order.
25. Learned Special Standing Counsel would further submit
that insofar as the claim of the petitioner of it having granted
exemption from payment of sales tax and as such, the
3rd respondent ought to have entertained the appeal filed by the
petitioner without insisting for payment of pre-deposit of 12.5%
of the disputed tax, it is contended that from a perusal of the
order of the 3rd respondent rejecting the appeal, it would be clear
that the petitioner had failed to produce any exemption certificate
granted by the Commercial Tax authorities in respect of
petitioner’s project from levy of sales tax to justify the claim of it
not being liable to make pre-deposit in terms of second proviso
to Section 19 of the Act.
11
26. Learned Special Standing Counsel would further contend
that though the Youth Advancement, Tourism and Culture
Development, Government of Andhra Pradesh had issued
certificate dated 29-05-2004 recognizing the petitioner’s
Multiplex-cum-Shopping Mall as a tourism unit under the
Andhra Pradesh Tourism Policy, 1998, the petitioner was
required to obtain necessary approvals from the concerned local
bodies and other agencies in order to avail such benefit and
inasmuch as no exemption certificate has been issued by the
Commercial Tax Department, the petitioner cannot claim of it
being exempted from payment of sales tax.
27. Learned Special Standing Counsel appearing on behalf of
respondents would further contend that as the petitioner never
approached the Commercial Tax Authorities for granting
exemption from payment of Sales Tax in terms of the certificate
issued by the Youth Advancement, Tourism and Culture
Development, Government of Andhra Pradesh recognizing the
petitioner as a Tourism Unit, the petitioner cannot claim of it not
being liable to pay sales tax on execution of works contract.
12
28. Learned Special Sanding Counsel would also contend that
the exemption provided under the Andhra Pradesh Tourism
Policy is to be extended by the concerned agencies as would be
evident from the certificate issued by the Tourism Authorities
and the said exemption is also in respect of output tax payable on
the tourism unit commencing its activity and not in relation to
construction undertaken by the petitioner as a builder.
29. Learned Special Standing Counsel would further contend
that the claim of the petitioner of it having undertaken
construction for itself is also belied by the fact that the
Agreement of Sale and Irrevocable PoA entered into by it with
the owners and earlier Developers is dated 23-09-2004, till such
time, the petitioner is only considered as a contractor on behalf
of the owners and the developers, who had entered into
agreement initially on 27-06-2001 with a supplementary
agreement again on 05-07-2002.
30. Learned Special Standing Counsel thus, contends that the
petitioner during the period 2003-04 was acting as builder /
contractor for which it had purchased various goods to the tune
of Rs.9,07,96,188/- and incorporated the same in works contract
13
executed by it, and for the said reason, the
2nd respondent by its revised assessment order, had brought the
aforesaid turnover to tax under the provisions of Section 5-F of
the Act by adding 15% as profit margin to the value of goods
purchased as the petitioner did not disclose the details of its
purchases and sales and had filed only ‘Nil’ return.
31. Learned Special Standing Counsel would further contend
that since in respect of the same construction, the petitioner
having been assessed to tax under the provisions of 5-F of the
Act for the year 2002-03, it is not open for the petitioner to claim
that during the year 2003-04, it had not undertaken execution of
works contract by incorporating the material into the
construction and that the said construction is being undertaking
for self purposes.
32. Learned Special Standing Counsel would further contend
that the 3rd respondent before rejecting the appeal filed by the
petitioner as not maintainable on 01-07-2006, had issued first
notice dated 21-03-2006 termed as ‘Check Memo’ calling upon
the petitioner to produce proof of payment of 12.5% of the
disputed tax, upon which the petitioner had filed letter dated
14
23-02-2006 claiming that it had filed a representation before the
Principal Secretary, Revenue Department, Government of
Andhra Pradesh requesting to exempt from payment of 12.5% of
the disputed tax and pleaded for an opportunity of personal
hearing.
33. Learned Special Standing Counsel further submits that on
petitioner submitting the aforesaid letter, the 3rd respondent has
issued another notice dated 29-04-2006 directing the petitioner to
furnish proof of payment of 12.5% of the disputed tax within 7
days from the date of receipt of said notice, and thereafter the
3rd respondent also afforded an opportunity of hearing to the
petitioner.
34. Learned Special Standing Counsel further submits that in
response to the aforesaid notice issued by the 3rd respondent, the
authorized representative of the petitioner appeared before the
3rd respondent, but however, did not produce any proof of
payment of 12.5% of the disputed tax or it having been granted
any exemption from the Government from payment of 12.5% of
the disputed tax.
15
35. Learned Special Standing Counsel would thus, contend that
since, the petitioner had neither made payment of mandatory
deposit of 12.5% of the disputed tax for maintaining the appeal
nor filed any certificate granting it exemption from payment of
tax, the 3rd respondent authority issued the order dated 01-07-
2006 rejecting the appeal filed by the petitioner as ‘not
maintainable’.
36. Learned Special Standing Counsel would contend that
since, the construction undertaken by the petitioner during the
year 2003-04 is intended for the land owner and developers
under the Development Agreement dated 27-06-2001, the
petitioner would be liable to tax on the value of goods
incorporated in the execution of works contract at the relevant
point of time and it is for the said reason, the 2nd respondent had
assessed the turnover tax under Section 5F of the Act @ 8%
provided under the Act.
37. By stating as above, learned Special Standing Counsel
seeks for dismissal of the Writ Petitions.
38. The 4th respondent by the counter-affidavit filed contended
that petitioner is not registered with the Director of Tourism and
16
therefore not entitled for exemption under the Andhra Pradesh
Tourism Policy, 1998.
39. We have taken note of respective contentions urged.
40. Though, on behalf of the petitioner it has been vehemently
contended that the petitioner being the owner of the subject
property and having undertaken the construction for itself cannot
be considered as works contractor, as if it is executing the
contract for a third party for it to be liable to tax, as rightly
contended by the learned Special Standing Counsel appearing on
behalf of the respondents the Agreement of Sale and Irrevocable
PoA under which the petitioner claims itself as purchaser has
come into existence on 23-09-2004, which is subsequent to the
assessment year involved i.e. 2003-04 w.e.f. 01-04-2003 to 31-
03-2004. It is also pertinent to note that though, the petitioner
had claimed of it being a purchaser of the subject property and
thus, the construction undertaken by it is for self, and thus not
being liable to tax, a reading of the aforesaid Agreement of Sale
and Irrevocable Power of Attorney, in particular Clause-5 thereof
reads as under:
17
” The owners hereby confirm that they shall only be
delivering possession of the schedule property to the purchaser
on execution of the sale deed for the schedule property or on
any mutually agreed terms/date between the owners and the
purchaser, which will be evidenced by the owners and the
purchaser which the purchaser has agreed to and confirms by
affixing its seal along with the signature of its authorized
signatory hereto and covenants with the owners that the
purchaser having perused all the necessary documents and
related papers in respect of the schedule property and having
satisfied itself in all aspects that the owners have good and
perfect right, title and authority to the schedule property and
that the owners have not done or knowingly done any act,
deed or thing whereby the schedule property is in any way
materially encumbered or title of the owners affected.”
41. A perusal of the aforesaid clause would clearly go to show
that there is no transfer of title in favour of the petitioner either
during the year 2003-04 or 2004-05 under the aforesaid
document more so, when the same is titled as ‘Agreement of
Sale and Irrevocable Power of Attorney’ granted in favour of the
petitioner for undertaking the construction of Multiplex-cum-
Shopping Mall. Thus, the said document cannot be considered as
a sale deed conferring absolute right on the petitioner as sought
to be urged.
42. Further, as noted above, the said agreement of sale entered
into is only on 23-09-2004 and as such, cannot be made
18
applicable in relation to goods purchased by the petitioner for the
earlier period.
43. It is trite law that under an agreement of sale, no rights for
the property can be vested and by the said document, the parties
only agree to do future act and it is only upon execution of sale
deed, which is duly registered in terms of Section 17 of the
Registration Act, one can claim absolute right and title to the
property. (See: Sanjay Sharma Vs. Kotak Mahindra Bank
Limited and others 1).
44. In the facts of the present case, as noted herein above, since
Clause-5 of the agreement of sale clearly records the owners
executing sale deed at a later date, the petitioner under the said
agreement cannot claim having vested with any right or interest
or title in the subject property, and the said agreement of sale
cannot be considered as a sale deed. It is also not out of place to
mention that the petitioner has not placed before this Court the
details of the stamp duty paid on the Agreement of Sale and
Irrevocable Power of Attorney for this Court to accept the
1
2024 SCC OnLine SC 4589
19
contention that under the said document, a right and interest in
the property having been created in favour of the petitioner.
45. Since, the petitioner cannot claim itself to be the owner of
the property, the construction/work executed by the petitioner by
incorporating the material purchased by it during such period,
would only have to be considered as for and on behalf of the
owners and developers who had entered into the agreement for
developing the subject property under agreement dated 27-06-
2001 notwithstanding the fact that the developers who had
entered into the aforesaid agreement in their individual capacity
are Directors of the petitioner, which is a private limited
company at the relevant point of time.
46. Though, on behalf of the petitioner, it has been contended
of it having been granted exemptions by treating it as a Tourism
Unit by the Government of Andhra Pradesh under Certificate
dated 29-05-2004, a reading of the aforesaid Certificate issued
by the Principal Secretary to Government, Youth Advancement,
Tourism and Culture Department, clearly indicates that the
petitioner’s construction i.e. Multiplex-cum-Shopping Mall has
been recognized as Tourism Unit under the A.P. Tourism Policy,
20
1998 and is entitled for ‘any incentives, concessions’ as are in
vogue subject to obtaining necessary approvals from the
concerned local bodies and other agencies. The contents of the
above certificate would go to show that the petitioner is required
to approach the concerned authorities to claim/avail the
incentives/concessions as are available to a Tourism Unit by
enclosing the said certificate. The said fact would be further
clear from the letter dated 20-10-20024 filed by the petitioner
(filed partly i.e. only first page) detailing the incentives and
concessions available under the A.P. Tourism Policy, 1998
which a Tourism Unit can avail.
47. Though, it is contended by the petitioner that the Certificate
dated 29-05-2004 as issued by the Youth Advancement, Tourism
and Culture Department, Government of Andhra Pradesh would
entitle it to 100% sales tax exemption for a period of 5 years,
inasmuch as no eligibility certificate as issued by the
Government of Commissioner of Commercial Taxes has been
placed before this Court or for that matter before the First
Appellate Authority or the Assessing Authority at the time of
assessment, the claim of the petitioner of it having been granted
21
exemption from payment of sales tax for a period of 5 years can
only be a self-serving statement and cannot be accepted.
48. Further, it is also to be noted that even if the petitioner is
granted exemption by recognizing it as a Tourism Unit, the said
exemption would only be applicable in respect of output tax i.e.
sales tax payable on its sale and from the date as mentioned in
the eligibility certificate and cannot be applied in respect of
works it had undertaken as works contractor for the year 2003-04
or 2004-05, when no such certificate of exemption had been
granted in its favour.
49. Further, the 3rd respondent in W.P.No.22615 of 2006 by the
counter-affidavit having made a categorical statement of
petitioner not being registered as a recognized ‘Tourism Unit’
and as such not entitled for exemption under A.P.Tourisim
Policy, 1998, further belies the claim of the petitioner.
50. Though, during the course of hearing of the Writ Petition,
petitioner had filed additional documents enclosing therewith
copy of the 7th Annual report for the year 2003-04, a perusal of
the said balance sheet would also show that during the year
2003-04 in Schedule -V attached to the balance sheet under the
22
heading ‘Fixed Asset’, there is no mention of the land which the
petitioner claims to have purchased under agreement of sale
dated 23-09-2004 for it to claim the purchase of goods used in
construction is for self. Further, as noted herein above, by
Clause-5 of the Agreement of Sale and Irrevocable Power of
Attorney, the owners having specifically mentioned to execute
‘sale deed’ at later point of time, all the purchases made by the
petitioner would have to be construed as in relation to for being
incorporated into the execution of works contract only.
51. Thus, this Court is of the considered view that the order of
the 2nd respondent authority in subjecting the value of purchase
of goods incorporated in execution of works contract by the
petitioner during the year 2003-04 or 2004-05 by adding a profit
margin of 15% and subjecting the same to tax under the
provisions of Section 5-F of the Act cannot be held as either
illegal or contrary or without authority of law.
52. Further, on the 2nd respondent authority having passed the
order of assessment on 06-02-2006, the petitioner having availed
the remedy of appeal provided under the Act on 04-03-2006, is
required to make payment of 12.5% of the disputed tax assessed
23
by the Assessing Authority in order to maintain the aforesaid
appeal.
53. Despite the petitioner being issued with check memo at the
first instance on 21-03-2006 sent by ‘Certificate of Posting’ on
23-03-2006 and the petitioner in response to the same having
claimed of it approaching the Government for issuing of
exemption certificate, and not furnishing any such exemption
certificate obtained from the Government, and the 3rd respondent
thereafter issuing another notice calling upon the petitioner to
produce proof of payment of mandatory tax of 12.5% of the
disputed tax within 7 days, and even in response to the said
notice, petitioner having failed either to produce the proof of
payment or exemption certificate obtained from the Government,
even after being afforded with the opportunity of personal
hearing, the petitioner cannot claim that the order of the
3rd respondent in rejecting the appeal as ‘not maintainable’ as
contrary to the Act.
54. If only the claim of the petitioner of it having been granted
exemption from payment of sales tax, the Assessing Authority at
24
the first instance would not have assessed it to tax at all forcing
the petitioner to avail the remedy of appeal.
55. Since, even after filing of the appeal, as the petitioner had
failed to produce the exemption certificate granted by the
concerned Commercial Tax authorities or Government
specifying the period of 5 years during which the exemption
certificate would be in vogue or even before this Court now, this
Court is of the view that the said claim of the petitioner is only
intended to avoid payment of tax assessed on it.
56. For the aforesaid reasons, this Court is of the considered
view that the present Writ Petitions as filed are devoid of merit
and are accordingly dismissed. No order as to costs.
57. As a sequel, miscellaneous petitions pending if any shall
stand closed.
____________________
T. VINOD KUMAR, J
_________________
P.SREE SUDHA, J
Date: 28.05.2025
Vsv