2025-VIL-1289-AP
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VAT High Court Cases

Andhra Pradesh VAT Act, 2005 – Works contracts - Invoking of Rule 17(1)(g) of the APVAT Rules, 2005 - Petitioner, a company incorporated in the USA, entered into a sub-sea constructions and diving contract for offshore gas field - Respondent initiated proceedings and passed assessment orders raising demands on the ground that the petitioner had not maintained proper books of accounts as required under Rule 31 of the AP VAT Rules - Respondent invoked Rule 17(1)(g) of the APVAT Rules to levy tax at 12.5% on the total consideration received by the petitioner, on the ground that the petitioner had not maintained the required books of accounts - Territorial jurisdiction of the AP VAT Act - The petitioner contended that 80% of the work under the contract was executed beyond 12 nautical miles from the coast of Andhra Pradesh and hence, would fall outside the territorial limits under the AP VAT Act - HELD – The Respondent cannot insist on production of books of accounts required under the Income Tax Act, 1961, as the petitioner had opted to offer its income on deemed basis of 10% gross receipts under Section 44BB(3) of the IT Act, 1961 and was not required to maintain such books of accounts. However, the respondent can ask for the accounts which are required to be maintained under Rule 31 of the AP VAT Rules. If the petitioner has produced such accounts, the respondent cannot invoke Rule 17(1)(g) to levy tax on the entire turnover at 12.5% - Further, the transactions that occurred beyond the territorial waters of 12 nautical miles from the coast would fall either within the contiguous zone or the exclusive economic zone of India, which are under the jurisdiction of the Central Government. Neither the State Legislature nor the Central Legislature would have the power to levy tax on the sale of goods made beyond the territorial waters of India – The matter is remanded back to the respondent to give the petitioner an opportunity to submit the entire records relating to the works contract and decide the assessment based on such records. The issues of whether the work was executed beyond 12 nautical miles and the applicable rate of tax is left open - The impugned assessment orders is set aside and the petition is disposed of by remand
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