Decided on May 16,2011

Sarojini Engineering Works Appellant


U. Yedukondalu, J. - (1.) THIS is an appeal filed against the Advance Ruling Orders of the Advance Ruling Authority issued vide A.R. Com/2/2010 dated 16.03.2011 on the clarification sought by M/s. Sarojini Engineering Works under Section -67 of the APVAT Act, 2005 FACTS: The facts leading to the present appeal and the facts of the case of the appellants, in brief, are as follows: The appellants were registered dealers on the rolls of the CTO, Steel Plant Circle, Visakhapatnam. They are doing the business of execution of Works Contracts. M/s. Abhijeet Ferro -tech Limited (for short, 'AFL') is a Special Economic Zone Unit (for Short, 'SEZ') in Andhra Pradesh. M/s. Abhijeet Projects Limited (for short, 'APL) is a main EPC contractor for AFL. The APL, in turn, appointed the appellants as sub -contractors. The appellants execute works contracts for supply of specific goods to APL. To know the legal position on tax liability, they have filed an application before the Advance Ruling Authority (for short, 'ARA') and sought clarification under Section -67 of the AP VAT Act read with Rule -66 (2) of APVAT Rules on the following points: - i) Whether the Principle Contractor (main) as well as the sub -contractor are also eligible for VAT exemption from payment of VAT. ii) Whether the VAT dealers are also entitled for exemption on the sales made by them to SEW for use in execution of the sub -contract. The ARA gave clarification on the above said two issues. Aggrieved by the orders of the ARA, the appellants filed the present appeal before this Tribunal.
(2.) CONTENTIONS : - The appellants contended that the ARA erroneously passed orders holding that the sales made by a dealer to main contractor or a sub -contractor executing works contracts in the processing Zone of the SEZ are not eligible for exemption. The ARA failed to appreciate the provisions of Section -7 of the APVAT Act. The entries in the First Schedule are governed by the Section -7 of the Act. The ARA also wrongly held that the provisions of Section -7A prevails over the Entry 59 -A of First Schedule. Entry 59 -A is not governed by the provisions of Section -7. It is governed by Section -7 of the Act over the Entry 59 -A of First Schedule. The provisions of the Act have to be considered harmoniously rather reading of provision isolated. As per Section -7 read with Entry 59 -A of Schedule -I, no tax could be levied on sales made to the contractor. Sales made by any dealer to a contractor engaged by a SEZ Unit for use in processing area of SEZ, are exempted from payment of tax. When the Authorities are inclined to rely on Section -7A, they shall not ignore Section -7 of the Act. The goods, sold by the appellants to the contractor (APF) of the Unit located in SEZ for use in the processing area of SEZ, are exempted from levy of tax. For these reasons, the orders of the ARA are liable to be set aside. Finally, the appellants prayed for allowing the appeal by declaring that the goods sold by the appellants to the APF are exempted from payment of tax. The submissions of the learned AR and the learned SR were heard. The learned AR reiterated the contentions urged in the grounds of appeal. The learned SR supported the orders of the ARA.
(3.) POINTS : - The points for determination are as under: a) Whether the Clarification Orders passed by the Advance Ruling Authority are sustainable as per the facts and law? b) To what relief?;

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