2015 (5) TMI 171 - HC - VAT and Sales Tax

Exemption on payment of exemption fees @ 1.5% - Assessing Officer (AO) was of the view that looking to the nature of the contract i.e. installation of plant & machinery including PSPO water treatment plants, laying of pipe line with material, it falls under the item/category 3 of the above mentioned notification and as such, is liable to charge exemption fees @ 2.25% - Held that - It is essentially a finding of fact recorded by the lower authorities and the Tax Board, after appreciation of evidence, material on record and looking to the terms of the works contract, has clearly come to a definite finding of fact that the work assigned to the petitioner-assessee cannot be segregated and its main activity was construction/establishing plant & machinery of the sewerage treatment plant and that apart laying down pipelines with material which falls under the item/category 3 of the notification. It is also apparent that the work is a composite one and neither from the contract nor the activity undertaken by the petitioner-assessee, he has been able to segregate for the amount incurred by it on different activities separately. - On reading of the work assigned to the petitioner, and the Notification, in my view, there was composite agreement of contract and the major activity being of laying of pipeline with material, water treatment plant etc., then it would certainly be falling in item/category No.3 of the notification and all the three authorities in unison have come to a finding of fact based on the terms of the contract. Accordingly, once it is a finding of fact based on the terms of the contract, in my view, no question of law can be said to arise out of the order of the Tax Board and this Court does not find any perversity, illegality and impropriety in the order impugned so as to call for interference. - Decided against assessee.

Summary

Issues:
Interpretation of notification for exemption fees on works contract related to installation of plants and machinery including water treatment plants.

Analysis:
The petitioner, a contractor, was awarded a works contract for a Sewerage Treatment Plant (STP) by RUIDP. The dispute arose regarding the classification under a notification for exemption fees. The petitioner believed the contract fell under the category of "civil work" and should be charged at 1.5% exemption fee. However, the Assessing Officer (AO) classified it under category 3 of the notification, which required a 2.25% exemption fee. The Deputy Commissioner (Appeals) and the Tax Board upheld the AO's decision, leading to the petitioner filing a revision petition.

The petitioner argued that the authorities did not consider the real controversy and merely relied on the notification's categories. They contended that the work involved setting up a sewerage system, plant & machinery, and maintenance for five years, which should be classified differently. The respondent contended that the contract primarily involved a water treatment plant and fell under category 3 as determined by the lower authorities based on the contract terms and activities involved.

The court analyzed the terms of the contract and the notification. It noted that the work was a composite one involving construction of plant & machinery for the sewerage treatment plant and laying down pipelines with material. The court found that the authorities correctly classified the work under category 3 of the notification based on the contract terms. The court emphasized that the work was a composite agreement, and no segregation of costs for different activities was provided by the petitioner. The court dismissed the revision petition, stating that no question of law arose from the Tax Board's order and found no grounds for interference.

In conclusion, the court upheld the classification of the works contract under category 3 of the notification for exemption fees. The court found no merit in the petitioner's arguments and dismissed the revision petition without costs.