THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION Nos.14913 and 14923 of 2011 Dated:11.07.2011 Between: Smt.Pujari Renuka Devi, And another. … Petition And The Government of Andhra Pradesh, Represented by its Secretary, Revenue Department, Secretariat, Hyderabad, And others. ... Responde THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION Nos.14913 and 14923 of 2011 COMMON ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) These two writ petitions are being disposed of by this common orde the factual background, and the issues which arise for consideration, are same. The petitioner in W.P.No.14913 of 2011 (hereafter referred to as the petitioner) is the wife of the petitioner in W.P.No.14923 of 2011 (here referred to as the second petitioner). The petitioners assail the assessment orders dated 16.03.2011 pas under Section 4(7) of the Andhra Pradesh Value Added Tax Act, 2005 (the A The assessments cover the period from 2006-2007 to 2009-2010. The case of the petitioners, in brief, is as follows. The petitioners residents of Yenumalapalli Village of Puttaparthi Mandal in Anantapur Dist During 2006-2008 the first petitioner purchased five shops, and during 20 2008 the second petitioner purchased three apartments in Puttaparthi To from Sri A.Sai Krishna for a total sale consideration of Rs.11,96,000/- 9,05,000/- respectively. These are part of an apartment block - Sai Sri Arca Subsequently, it is their case that they sold the shops and flats to diffe parties. The third respondent, based on the report of the Vigilance Enforcement Department, Anantapur, issued show cause notices da 12.12.2009. It is alleged that the petitioners constructed apartments, sold registered them with the Sub-Registrar, Bukkapatnam, receiving valua consideration and, as they are not registered dealers under the Act, they liable to pay tax at 12.5% under Section 4(7) of the Act read with Rule 17 of Andhra Pradesh Value Added Tax Rules, 2005 (the Rules). They were a informed that they are entitled to standard deduction of 30% of the t consideration. After receiving the show cause notices, the petitioners submi explanations/objections. They contended that they are not builders and they only purchasers of flats in Sai Sri Arcade, Puttaparthi, and that they sold aw the same to other persons. They furnished all the details. After receiving objections, the third respondent passed the impugned orders observing that objections filed by the petitioners are not accepted. The petitioners wo contend that they are not works contractors or builders and, therefore, t cannot be taxed as dealers under Section 4(7) of the Act. At the stage of admission itself, the third respondent filed cou affidavits opposing the writ petitions on two grounds: that the petitioners h not availed the effective and efficacious alternative remedy and, that as per report of the Vigilance & Enforcement Department, the petitioners are liabl pay the tax in terms of Section 4(7) of the Act read with Rule 17 of the Ru There is nothing substantial coming from the counter. We have heard the Counsel for the petitioners and the Special Coun for Commercial Taxes. Our attention has been invited to the decision of Supreme Court in K.Raheja Development Corporation v State Karnataka[1]. Section 2(45) of the Act defines “works contract” to include agreement for carrying out for cash or for deferred payment or for any o valuable consideration, the building construction, manufacture, process fabrication, erection, installation, laying, fitting out, improvement, modificat repair or commissioning of any movable or immovable property. As per Sec 2(10) of the Act a ‘dealer’ means, inter alia, any person who carries on executes any works contract involving supply or use of material directly otherwise, whether for cash or for deferred payment. Therefore, every wo contractor is a dealer for the purpose of levying value added tax under the A Under Section 4(7)(d) of the Act, any dealer engaged in construction and sel of residential apartments, houses, buildings or commercial complexes may to pay tax by way of composition at the rate of 4% of twenty five percent (25% the consideration received or receivable or the market value fixed for purpose of stamp duty whichever is higher subject to such conditions as may prescribed. Therefore, only a dealer engaged in construction and selling residential apartments, houses or commercial complexes is liable to pay va added tax. A purchaser does not come within the meaning of a dealer o works contractor. In K.Raheja Development Corporation the Supreme Court conside the question whether a works contractor, who enters into developm agreement with the owner of land, is liable to pay turnover tax under Karnataka Sales Tax Act, 1957. A distinction was made between a bui entering into development agreement to carry out construction activity on be of someone else for cash or deferred payment, and a dealer/builder who en into agreement after the flats or commercial units are constructed. It was h that if the builder himself constructs the flats and transfers it to others he can be treated as a dealer for the purpose of levying tax. On the contrary, if a bui enters into a development agreement to carry out construction activity on be of the owner, such dealer would be carrying out works contract and beco liable to pay the tax attracted to such a situation. The relevant observations as follows. We have heard the parties, perused the various documents and considered the cases cited at the bar. As has been rightly submitted by Mr.Hegde the definition of the term “works contract” in the said Act is an inclusive definition. It does not include merely a works contract as normally understood. It is a wide definition which includes “any agreement” for carrying out building or construction activity for cash, deferred payment or other valuable consideration. The definition does not make a distinction based on who carries on the construction activity. Thus even an owner of the property may also be said to be carrying on a works contract if he enters into an agreement to construct for cash, deferred payment or other valuable consideration. We, therefore, do not need to go into the questions whether the appellants are owners as even if the appellants are owners to the extent that they have entered into agreements to carry out construction activity on behalf of somebody else for cash, deferred payment or other valuable consideration, they would be carrying out a works contract and would become liable to pay turnover tax on the transfer of property in the goods involved in such works contract. Further under the said Act there is no distinction between construction of residential flats or commercial units. Thus, a works contract, within the meaning of the term in the said Act, can also be for construction of commercial units. For the purposes of considering whether an agreement amounts to a works contract or not, the provisions of Karnataka Ownership Flats (Regulation of Promotion of Construction, Sales, Management and Transfer) Act, 1974 will have no relevance. … Thus the appellants are undertaking to build as developers for the prospective purchaser. Such construction/development is to be on payment of a price in various instalments set out in the agreement. As the appellants are not the owners they claim a “lien” on the property. Of course, under clause 7 they have right to terminate the agreement and to dispose off the unit if a breach is committed by the purchaser. However, merely having such a clause does not mean that the agreement ceases to be a works contract within the meaning of the term in the said Act. All that this means is that if there is a termination and that particular unit is not resold but retained by the appellants, there would be no works contract to that extent. But so long as there is no termination the construction is for and on behalf of purchaser. Therefore, it remains a works contract within the meaning of the term as defined under the said Act. It must be clarified that if the agreement is entered into after the flat or unit is already constructed, then there would be no works contract. But so long as the agreement is entered into before the construction is complete it would be a works contract. (emphasis supplied) Applying the above ratio we hold that the petitioners cannot be treated works contractors and brought under Section 4(7)(d) of the Act for the purpos tax. The Writ Petitions are accordingly disposed of, and the impug assessment orders are set aside. There shall be no order as to costs. ____________ (V.V.S.RAO ____________________________ (RAMESH RANGANATHAN 11.07.2011 vs [1] (2005) 141 STC 298