Andhra Pradesh Value Added Tax Act, 2005 — Works-contract assessment — Rule 31 (records to be maintained) v. Rule 17(1)(g) (presumptive levy where accounts not maintained) — Assessment set aside and remitted for fresh consideration where factual dispute as to sufficiency of records exists.

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Andhra Pradesh Value Added Tax Act, 2005 — Works-contract assessment — Rule 31 (records to be maintained) v. Rule 17(1)(g) (presumptive levy where accounts not maintained) — Assessment set aside and remitted for fresh consideration where factual dispute as to sufficiency of records exists.
Where a works-contractor (foreign company) contends it maintained project accounts and produced records but declines to produce formal profit & loss books on the ground that it avails of deemed/composition provisions under Income-tax (s.44BB), the assessing authority cannot summarily invoke Rule 17(1)(g) unless Rule 31 records (separate contract-wise accounts) are demonstrably absent or deficient. Assessment orders invoking Rule 17(1)(g) without an opportunity to produce/complete records and without specifying deficiencies are liable to be set aside and remitted for fresh adjudication. Questions of territorial reach (whether work was performed beyond 12 nautical miles) and correct rate of tax are factual and to be considered afresh by the assessing authority. Garnishee proceedings predicated on the impugned assessments fall with them. Writ petitions allowed in part, assessments set aside and remanded.

RATIO DECIDENDI

1. Rule 17(1)(g) can be invoked only after the assessing authority is satisfied that the records required by Rule 31 are not produced or are inadequate to determine the value of goods incorporated in a works contract; the provision is a measure of last resort, not a substitute for proper examination of records tendered.
   Where a dealer/contractor asserts that project accounts (or other records contemplated by Rule 31) were produced and points to statutory/compositional regimes under the Income-tax law, the assessing authority must afford a fair opportunity to produce, explain and complete the required records; failure to do so renders an assessment under Rule 17(1)(g) vulnerable to judicial interference.

2. An assessing authority who concludes that submitted records are insufficient must record with specificity what is missing and give the assessee an opportunity to remedy the deficiency before proceeding to invoke the presumptive assessment.
   Absent such a course, the Court should remit the matter for fresh consideration rather than judicially substitute findings on contested factual matrices.

3. Questions of mixed or pure fact — e.g., territorial incidence of the works (whether incorporation of goods occurred beyond territorial waters) and the correct rate of tax — are to be left to the assessing authority to decide on remand after full factual inquiry; they are not to be resolved in writ proceedings where material disputes of fact persist.

BRIEF ANALYSIS / APPLICATION

• Facts: foreign contractor (Helix) executed subsea works; claimed majority work beyond 12 nautical miles; registered under Service Tax and as dealer under APVAT/CST; produced certain records but not formal profit & loss books (claimed composition under s.44BB IT Act). Assessing officer treated accounts as incomplete, invoked Rule 17(1)(g), assessed huge demands, and issued garnishee recovery; appellate authority remanded once; AO again invoked Rule 17(1)(g) and passed orders — leading to writs.

• Court’s approach:

  • The Court accepted that Rule 31 contemplates contract-wise records sufficient to disclose goods incorporated and cost elements; it does not literally require a multiplicity of full sets of books where a single set with contract-wise detail will suffice.

  • The Court held that, on the record, it was not possible to determine whether all required materials had been produced; therefore the appropriate remedy is to set aside the impugned assessments and remit to the assessing authority to afford the petitioner a proper opportunity to produce/complete records and to specify any deficiencies.

  • Territorial-waters and rate-of-tax contentions are factual questions. The Court declined to decide them on writ, leaving them to the assessing authority on remand.

  • As assessments were set aside, garnishee proceedings predicated on them fell away.

• Disposition: Assessment orders dated 20-02-2010 set aside and remanded for fresh adjudication; garnishee writ closed; no cost order.