2016 (5) TMI 497 - HC - VAT and Sales Tax

Entitlement to composite/concessional rate of tax under the Notification dated 8 March 2000 - Works contract Act - Whether the contracts of construction of glass curtain wall executed by the applicant would constitute contracts for construction of buildings mentioned in para A of the above Notification issued for the purpose of section 6A(1) of the Works Contract Act or would it constitute contracts incidental for ancillary to the contracts mentioned in paragraph B of the said Notification. Held that - the term construction of buildings would not involve the fixing of glass walls. Since the Applicant is seeking a lesser rate of tax, the burden is on the Applicant and the provisions of the Notification dated 8 March 2000 have to be construed strictly. The word construction and the word building are not defined in the Act and are to be read in the context of their ordinary meaning. The work of fixing glass to a building in our view can in no manner said to be an activity which is covered under Notification dated 8 March 2000. The fabricated structural glazings prepared by the Applicant are transported to the site by the Applicant and affixed on the exterior portion of the building, which building is constructed by the building contractor who is a third party. There is no dispute that Applicant is not a building contractor, in that, it is not in the business of construction and erection of buildings. The activity of affixing glass and erecting glass walls with aluminium frame work requires an altogether different expertise, and is ordinarily sub-contracted by the building contractor. The contention that some of the walls in the building are not required to be constructed by laying bricks and they are substituted by affixing the glass would not carry the case of the Applicant further. We are also unable to accept the contention that the work of the Applicant would be covered under the term incidental or ancillary activity to the construction of the building as that would have to have a direct nexus to the construction of the building itself. Therefore, the alternative argument that the contract would get covered by paragraph B of the said Notification which includes incidental or ancillary contract to the contract of construction also cannot be accepted. What meaning is to be attached to the word building as mentioned in the Notification would have to be determined considering the facts and circumstances of each case. In our view, the reliance on the definition of building in the Regulation 2(3)(11) of DCR is misplaced and would not assist the Applicant in any manner. That definition is in the context and purposes of DCR and cannot be imported and applied in the facts and circumstances of the present case. Therefore, the contracts of construction of glass curtain wall executed by the Applicant would not constitute contracts for construction of buildings mentioned in para A of the Notification dated 8 March 2000 issued for the purpose of section 6A(1) of the Works Contract Act nor would it constitute contracts incidental for ancillary to the contracts mentioned in paragraph B of the said Notification. - Reference disposed of

Summary

Issues Involved:

1. Whether the contract for construction of glass curtain walls constitutes contracts for construction of buildings.
2. Whether such contracts are incidental or ancillary to the contracts mentioned in paragraph 'A' of the Notification dated 8 March 2000 under section 6A(1) of the Works Contract Act.

Detailed Analysis:

1. Contract for Construction of Glass Curtain Walls:

The central question was whether the contract for constructing glass curtain walls, executed by the Applicant, qualifies as a "construction of building" contract under the Works Contract Act. The Applicant, a registered dealer under the Works Contract Act and the Bombay Sales Tax Act, argued that these glass walls are permanent and replace traditional brick walls in modern buildings. The Applicant contended that such contracts should be considered as building contracts, eligible for a beneficial tax rate under the Notification dated 8 March 2000. They emphasized that the term "construction contract" has evolved with technological advancements and should include glass walls as part of building construction.

However, the court held that the term "construction of buildings" in the Notification does not encompass the fixing of glass walls. The court noted that the essential materials like glass and aluminum for structural glazing are procured from third parties, and the process involves fabrication and assembly at the factory before being transported and affixed to the building. The court emphasized that the Applicant is not a building contractor but specializes in affixing glass and erecting glass walls, which is a different expertise. Therefore, the contracts for glass curtain walls do not qualify as "construction of buildings" contracts under the Notification.

2. Incidental or Ancillary Contracts:

The Applicant alternatively argued that their contracts should be considered incidental or ancillary to the construction contracts mentioned in paragraph 'A' of the Notification. They claimed that glass walls are a technological advancement and serve multiple purposes, including protection from environmental factors.

The court rejected this argument, stating that for a contract to be considered incidental or ancillary, it must have a direct nexus to the construction of the building itself. The court found that the work of affixing glass walls does not meet this criterion. The court also dismissed the reliance on the definition of "building" in the Development Control Regulation for Greater Mumbai, 1991, as it is context-specific and not applicable to the present case.

Conclusion:

The court concluded that the contracts for constructing glass curtain walls do not constitute contracts for the construction of buildings as mentioned in paragraph 'A' of the Notification dated 8 March 2000. Additionally, these contracts are not incidental or ancillary to the contracts mentioned in paragraph 'A'. Consequently, the Applicant is not entitled to the composite/concessional rate of tax under the said Notification. The Reference was disposed of accordingly.