THE HONOURABLE SRI JUSTICE GODA RAGHURAM AND THE HONOURABLE SRI JUSTICE SANJAY KUMAR W.P.Nos.27081 & 27116 OF 2009 14-12-2009 BETWEEN; M/S.Sarda Agro Oil Limited, rep. By its Mg. Director, Mr.Jagadish Sarda ...Petitioner (Petitioner in both writ petitions) vs. The Commercial Tax Officer, Sanatnagar Division, Hyderabad and others ...Respondents (Respondents in both writ petitions) THE HONOURABLE SRI JUSTICE GODA RAGHURAM A THE HONOURABLE SRI JUSTICE SANJAY KUMAR W.P.Nos.27081 & 27116 OF 2009 ORAL COMMON ORDER: Heard Mr. Lakshmi Kumaran the learned counsel for the petitioner and Mr. A.V. Krishna Koundinya, the Special Standing Counsel for the Commercial Taxes for the respondents. W.P.No.27081/09 is a matter arising under the provisions of the Central Sales Tax Act 1956 and W.P.No. 27116/09 under the A.P. General Sales Tax Act 1957 (hereinafter referred to as ‘the 1956 and 1957 Acts’ respectively). The petitioner is the same in both the writ petitions. The petitioner is in the business of manufacture, supply and erection of pre-fabricated shelters to different Telecom companies and other customers. According to the petitioner the customers may place a purchase order only for the supply or for erection of pre- fabricated shelters or a work order for both supply and erection of pre-fabricated shelters. When an order is placed only for supply of pre-fabricated shelters as per the customers’ specifications, the transaction ends with the supply being made – in commercial parlance known as ‘supply contract’. The petitioner treats it as an outright sale transaction and pays the applicable CST in case of inter-State sale on the turnover relatable to the supply portion. The customer may carry out the erection of the pre-fabricated shelters through the petitioner by placing a separate work order for such purpose or may get the erection executed through another agency. Where the work order is for only or separately for erection, the contract is referred to as ‘erection contract’. A third type of transaction is where the work order by the customer is for both supply and erection of pre-fabricated shelters involving design, drawing, fabrication and erection services, in such contracts the goods are manufactured as per the customers’ specific requirements and cannot be sold in the open market unless the specifications of the other customers are identical. Contracts of both supply and erection are referred to as ‘supply and erection contract’. In ‘supply and erection contract’ the petitioner treats the same as a works contract and pays applicable CST on the value of the goods. As the facts are similar, the facts in Writ petition No. 27081/09 are recorded. W.P.No. 17081/09 [CST Act 1956]:- For 2004-05, the 1st respondent passed an order of assessment dated 04.08.2008. The 3rd respondent exercising power of revision u/Sec. 20(2) of the 1957 Act r/w Sec. 9(2) of the 1956 Act issued a show cause notice dated 29.11.2008 proposing to revise the order of assessment on the ground that the Assessing Authority had erroneously allowed exemption for installation and transportation charges. The 3rd respondent opined that these transactions constitute pre-sale expenditure and hence liable to be included in the turnover and further found fault with the order of assessment for allowing exemption on amounts received towards installation charges and proposed to bring the turnover relating to these heads to tax @ 12%. The petitioner filed its objections. Eventually the 3rd respondent passed a revised assessment order dated 17.07.2009 computing the tax liability of the petitioner treating the transaction of supply and erection as a sale and not as a work contract; and determined the tax liability due at Rs.44,11,876/-. Consequent on the revised assessment order, the 1st respondent issued a notice dated 24.08.2009 demanding payment of Rs.44,11,876/-. Against the order dated 17.07.2009, the petitioner filed an application for stay before the 2nd respondent and during the pendency of this application filed W.P.No. 21662/09 for a stay pending consideration of its stay application by the 2nd respondent. The petitioner also preferred an appeal before the Sales Tax Appellate Tribunal against the revised assessment order dated 17.07.2009. During the pendency of the above writ petition, the 2nd respondent passed the order impugned, dated 13.11.2009 rejecting the application for stay preferred by the petitioner. In view of this development the petitioner withdrew W.P.No. 21662/09 on 30.11.2009 as this had become infructuous. Consequently the 1st respondent issued a notice dated 24.11.2009 demanding payment of the liability under the 1956 Act and the 1957 Act as well (the liability under the 1956 Act being the subject matter of W.P.No. 27116/09). In W.P.No. 27116/09 the issue is under the 1957. The order of assessment was passed by the 1st respondent on 28.03.2008. The 3rd respondent passed the revised assessment order u/Sec. 20(2) of the 1957 Act after due notice, treating the contract of supply and erection as a sale and not a works contract and exigible to tax as such and determined a short levy of tax at Rs.39,86,648/-. As the petitioner’s application for stay was rejected by the order of the 2nd respondent dt 13.11.2009, a composite demand notice dated 24.11.2009 was issued by the 1st respondent demanding payment of the tax liability (as already stated), under both the1956 and 1957 Acts. Against the revised assessment order dated 17.07.2009 under the 1957 Act also the petitioner preferred an appeal to the Sales Tax Appellate Tribunal. Challenging the two orders both dated 13.11.2009 of the 2nd respondent declining grant of stay and the consequent order of the 1st respondent dated 24.11.2009 demanding payment of the tax liability as determined in the revised assessment orders, these two writ petitions are filed. In the impugned order dated 13.11.2009 the 2nd respondent declined grant of stay holding that in view of the judgment of the Supreme Court in Kone Elevators case (140 STC 22) and as in the transaction of supply and erection the predominant element is supply of pre-fabricated shelters, the work of erection being only a minor and incidental activity to the main activity of supply, the transactions are to be treated as sale of pre-fabricated shelters. It requires to be noticed that the nature of the contracts involved in the case of the petitioner and the contracts/transactions involved in Kone Elevators case are not identical. What is the extent of distinction and what the impact on the petitioner’s liability to tax under the 1956 and 1957 Acts, are matters falling for determination by the Sales Tax Appellate Tribunal in the appeals preferred by the petitioner against the revised assessment orders dated 17.07.2009. This is so in the context of the petitioner’s claim before the 2nd respondent and in these writ petitions as well, that the contracts for supply and erection involve design, drawing, fabrication and erection including execution of certain civil works in the process and therefore the transaction is wholly distinct from the facts involved in the Kone Elevators case. We decline and refrain from a deeper and more critical analysis of the principal contention of the petitioner that the work of supply and erection of pre-fabricated shelters constitute works contracts and not a sale as determined in the revised assessment orders. We refrain from a pronouncement on merits since any substantive decision on these aspects would tantamount to pre- judging the issues which are substantively pending in the petitioner’s appeals before the Sales Tax Appellate Tribunal. We are however satisfied that the petitioner has an arguable position to assert in the pending appeals. In the facts and circumstances we consider it appropriate and that interests of justice are served if stay were granted subject to conditions. Accordingly there shall be a stay of all further proceedings pursuant to the revised assessment orders, both dated 17.07.2009 passed by the 3rd respondent under the provisions of the Acts of 1956 and 1957, in respect of the assessment year 2004- 05, subject to the condition that the petitioner deposits an amount representing fifty percent (50%) of the liability as set out in the demand notice dated 24.11.2009 issued by the 1st respondent, within eight (8) weeks from today. In default of such deposit within the time stipulated, the respondents would be at liberty to proceed for collection of the entire balance liability specified. The eventual liability of the petitioner would however depend on the outcome of the appeals preferred by the petitioner and pending before the Sales Tax Appellate Tribunal. The writ petitions are disposed of as above at the stage of admission. There shall however be no order as to costs. ______________ GODA RAGHURAM,J ______________ SANJAY KUMAR, J 14TH DECEMBER 2009. Note: Issue CC as soon as Possible. (B/O) TSNR