2014 (5) TMI 136 - HC - Service Tax

Rate of service tax - Works contract - The works contract for civil works like construction of buildings, bridges or roads and repairs of such works carry tax liability at 2%. As against this, the works contract other than those mentioned above and for repairs of such works carry tax liability at 12%. - Held that - From the materials on record, the Tribunal noted that (i) such barriers are installed for protection of the vehicles and pedestrians. The speeding vehicles on highway may skid accidentally. (ii) to avoid such accidents, the barriers work as road restraint systems. It provides for a crash cushion. The Tribunal, therefore, concluded and rightly so, in our opinion, that the road-side metal crash barriers are integral part of the road. The Tribunal also held that installation of such barriers was in the nature of a civil work. The iron and metal barriers would have to be installed with cement-concrete work. The installation of any such barrier would require laying of cement-concrete foundation. It was, therefore, held that installation of such barriers is basically in the nature of civil work of buildings which, in turn, is a part of construction of a road. Since the rate of duty of 2% is extendable to the constructions like buildings, bridges or roads, we see no reason to interfere - Decided against Revenue.

Summary

Issues involved:
1. Interpretation of the rate of duty chargeable on the execution of contracts for supply and fixing of metal crash barriers.

Detailed analysis:
The main issue in this case revolves around the determination of the rate of duty chargeable from the respondent-assessee on the execution of contracts for supply and fixing of metal crash barriers. The respondent-assessee contended that the rate of duty should be 2%, while the Department argued for a 12% duty rate. The dispute arose from the interpretation of two entries in Schedule II-A regarding works contracts, where one entry prescribed a 2% rate for civil works like construction of buildings, bridges, or roads, and the other entry specified a 12% rate for works contracts other than those mentioned above.

The respondent-assessee had undertaken a contract for preparing and installing metal crash barriers, which are iron railings fitted on the sides of the road for accident prevention. The Commissioner initially questioned the assessee for discharging tax liability at 12%, but the assessee argued for a 2% rate. The VAT Tribunal allowed the Revision Petition, leading to the State challenging the decision in the High Court. The Tribunal's judgment emphasized that the crash barriers were integral to roads, serving as protection for vehicles and pedestrians. It was noted that the barriers were part of civil works, requiring cement-concrete work for installation, making them an essential component of road construction.

The High Court, after considering the submissions, upheld the Tribunal's decision, stating that the installation of metal crash barriers was akin to civil works like construction of buildings, bridges, or roads, falling under the 2% tax liability category. The Court agreed with the Tribunal's reasoning that the crash barriers were integral to roads and required a substantial amount of civil work for installation. Therefore, the Court dismissed the petitions, affirming the 2% tax rate for the supply and fixing of metal crash barriers, in line with the category of civil works under Schedule II-A.

In conclusion, the judgment focused on the interpretation of the tax liability rate for works contracts involving metal crash barriers, ultimately determining that such installations constitute civil works integral to road construction, warranting a 2% tax rate as per the relevant schedule entries.