Android Studio compiles dependencies but doesnt package aar into apk

Question

I am not that old to Gradle system. I have a Android project with an app with a library. I used Android Developer Page and this link for setting up but a bit different configuration which is as follows

source-code-root-folder/
   build.gradle
   + app-module/
       build.gradle
   + library-AAR-module/
       build.gradle

I have put the library in the dependency in the app module

dependencies {
    compile project(':library-AAR-module')
}

when I assemble, it compiles the library module but Neither I find the classes of library in the app nor the APK of the app contains the aar package stuffs. Am i doing wrong setup?