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TMI Blog2006 (9) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... ?" The facts emerging from the record of the case, which have necessitated the reference of the abovementioned question of law for the opinion of this court, are as under: M/s. Voltas Limited is a company incorporated under the provisions of the Companies Act, 1956. It is registered as a dealer under the provisions of the Gujarat Sales Tax Act, 1969 ("the Act", for short). The company, amongst other activities, is engaged in the business of carrying out jobs involving design, supply and installation of air-conditioning plants, which are treated by the company as indivisible works contracts. Earlier, the different rates of tax on sale of goods involved in the execution of works contracts, as set out in Part A of Schedule II-A of the Act, were as under: Sl. No. Description of works contract Entry No. in Schedule IIA of the Act Regular rate of tax 1. Installation of air-conditioners and A. C. coolers and for repairs thereof. 67 18% 2. Furniture and fixtures partitions including contracts for interior decoration and repairs thereof 104 8% 3. Fabrication and installation of lifts or elevators or escalators and for repairs thereof 120 12% 4. Fabrication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3,99,000 as per the contract deed dated October 22, 1993. The company was of the view that fabrication and installation of water-chilling plant was a works contract covered under entry 5 of the Schedule to the notification attracting the rate of composition at five per cent and was not covered by entry 8 of the Schedule, i.e., residuary entry attracting the rate of composition at 12 per cent. Therefore, the company filed an application under section 62 of the Act before the Deputy Commissioner of Sales Tax (Legal), Gujarat State, Ashram Road, Ahmedabad, and requested him to determine whether the air-conditioning and refrigeration plants were covered under entry 5 of the Schedule to the notification and the company was liable to pay composition rate of tax at five per cent only. It was also mentioned in the said application that in case the answer was in negative, it should be determined as to under which entry of the Schedule to the notification, the air-conditioning contract undertaken by the company would fall and which composition rate of tax would be payable. On the basis of the materials placed before him, the Deputy Commissioner by his order dated October 16, 1996 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Schedule to the notification. The company, therefore, preferred another appeal being Second Appeal No. 97 of 2001 before the Gujarat Sales Tax Tribunal at Ahmedabad. Appeal No. 16 of 1996 and Second Appeal No. 97 of 2001 were heard together by the Tribunal. The Tribunal noticed that in simple plant and machinery, the contractor would complete the erection of plant and machinery and go away, but nothing would be produced by the said contractor whereas in the case of fabrication and installation of air-conditioning plant, production of cooling of air is done or provided at the time of erection of the plant and machinery and, therefore, air-conditioning plant would be covered under entry 2 of the Schedule to the notification. The Tribunal noticed three different entries, which were in existence under the Act at the time when notification was issued under section 55A of the Act and held that if the Government had desired to give separate benefit to airconditioning plant, there would have been a separate entry in the Schedule to the said notification, but no separate entry was provided by the Government at all, which suggested that entry 2 of the Schedule to the notification cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r-conditioners" are followed by words A. C. coolers and, therefore, fabrication and installation of air-conditioning plant would not fall under entry 2, but would fall under entry 5 of the Schedule to the notification. It was argued that entry 2 of the Schedule to the notification cannot include, by very nature of its meaning, air-conditioning plant because fabrication and installation of the plant is quite different, which is contemplated by entry 5 of the Schedule to the notification. After referring to the entries of other States mentioned by the Tribunal in its judgment dated December 2, 2002 rendered in Appeal No. 16 of 1996 and Second Appeal No. 97 of 2001, it was argued that airconditioning plant is separately mentioned from air-conditioner and A. C. cooler as a result of which, it is wrong to hold that air-conditioning plant would fall under entry 2 of the Schedule to the notification. What was pointed out by the learned counsel for the assessee to the court was that fabrication requires preparation plant, lay-out drawing of the area to be air-conditioned as well as environmental conditions, etc., and, therefore, there is no good reason to exclude fabrication and insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r things a tax on the transfer of the property in goods, whether as goods or in some other form, involved in the execution of a works contract and, therefore, before answering the question referred to this court for its opinion, the court should ascertain as to what is transferred in the execution of works contract. It was argued that the tax leviable by virtue of entry 2 of the Schedule to the notification would be attracted to the facts of the case as transfer of airconditioners and/or A. C. coolers takes place in the execution of a works contract relating to the installation of an air-conditioning plant. The learned Advocate-General extensively referred to the meanings of "aircondition", "air-conditioner" and "air-conditioning" from Webster's Encyclopedic Unabridged Dictionary of the English Language, The New Shorter Oxford English Dictionary on Historical Principles, The Free Encyclopedia of Wikipedia, etc., and pointed out that "air-condition" means to furnish with an air-conditioning system and/or to treat air with such a system whereas "air-conditioner" means an air-conditioning device and "airconditioning" mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings and, therefore, common parlance test as is sought to be suggested to be applied by the leaned counsel for the assessee should not be adopted while interpreting entries 2 and 5 of the Schedule to the notification. What was pointed out by the learned counsel for the Revenue was that an air-conditioning system is capable of adding and removing humidity and moisture and/or filtering dust and odourants from the space or spaces it serves and as the same function is performed by the air-conditioner or A. C. cooler, the court should opine that the works contract of the assessee for installation of air-conditioning plant is covered by entry 2 of the Schedule to the notification. The learned counsel emphasised that there is nothing in entry 2, which would restrict the meaning of installation of air-conditioner or A. C. cooler only to boxes or cabinets in domestic use for cooling and, there being no qualifying clause in entry 2, it should be held that installation of air-conditioning plant is covered by entry 2 of the Schedule to the notification. The learned counsel for the Revenue asserted that the view taken by the Tribunal that works contract of the assessee relating to the installat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods involved in the execution of total value of works contract. As the assessee undertook air-conditioning and refrigeration job for M/s. Anupam Colours & Chemicals Industries by works contract ated October 22, 1993, it would be relevant to ascertain the nature of the goods involved in the execution of total value of the works contract. In Builders Association of India [1989] 73 STC 370; [1989] 2 SCC 645, the Supreme Court has explained as to what is "works contract". From the said decision, it is evident that in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd. [1958] 9 STC 353 (SC); AIR 1958 SC 560, the Supreme Court held that a works contract was an indivisible contract and turnover of the goods used in the execution of the works contract could not, therefore, become exigible to sales tax. It was in order to overcome the effect of the said decision Parliament amended article 366 by introducing sub-clause "(d)" of clause (29A). Sub-clause (b) of clause (29A) states that "tax on the sale or purchase of goods" includes among other things a tax on the transfer of property in the goods (whether as goods or in some other form) involved in the execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x the transfer of property in each of them. Having ascertained as to what a "works contract" is, as explained by the Supreme Court, it would be necessary to ascertain the nature of the goods involved in the execution of works contract relating to installation of airconditioners and A. C. coolers and for repairs thereof, as described in entry 2 of the Schedule to the notification issued under section 55A of the Act. Before interpreting the meaning of the words used in entry 2 and entry 5 of the Schedule to the notification issued under section 55A of the Act, it is necessary to trace the history of rate of tax on sale of goods involved in execution of a works contract. Prior to issuance of the notification, regular rate of tax on sale of goods involved in execution of a works contract was as under: 4. Fabrication and installation of plant and machinery and repairs thereof 39 8% 5. Construction of bodies on chassis of motor vehicles including three wheelers and for repairs thereof 128(5) 4% 6. Ship building including construction of barges, ferries, tugs, trawlers or dredgers and for repairs thereof 186 4% On introduction of composition scheme, as contemplate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in the business of carrying out jobs involving designs supply and installation of air conditioning plants", but it is not the case of the assessee that it is engaged in the business of fabrication of such plant and, therefore, entry 5 would not be applicable to the facts of the case. Having noticed the history of regular rates of tax on sale of goods involved in execution of works contract and difference between the regular rates and lump sum rates under section 55A on sale of goods involved in execution of works contract, it would be relevant to ascertain as to what is the meaning of words "installation of air-conditioners and A. C. coolers and for repairs thereof" as appearing in entry 2 of the Schedule to the notification. It is well-settled that for interpreting the meaning of the words used in entries of taxing statute, trade meaning as well as dictionary meanings are required to be considered to reconcile and harmonise the entry. In the light of dictionary meanings of the words "air-conditioner", "air-conditioning", etc., and the materials brought on the record of the reference as well as the petition, the question referred to this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts. This air is pulled through a filter where airborne particles such as dust and lint are removed. Sophisticated filters may remove microscopic pollutants as well. The filtered air is routed to air supply duct work that carries it back to rooms. Whenever the air-conditioner is running, this cycle repeats continually. Because the central air-conditioning unit is located outside the home, it offers a lower level of noise indoors than a free-standing air-conditioning unit. Thus, there is no manner of doubt that by executing the works contract relating to installation of air-conditioning plant, what is provided is central air-conditioning system/device. Air-conditioning systems are succinctly explained in paragraph 23 of the decision in Collector of Central Excise v. Subros Ltd. [1989] 43 ELT 543 (Tribunal). As this court fully concurs with the said explanation, it is proposed to reproduce relevant part of paragraph 23 of the said decision, which is as under: "Air-conditioning systems are either unitary or built-up. The window or conditioning system: the entire system is housed in a single package which contains heat removal, dehumidification, and filtration capabilities. Wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilter, a cooling coil, a heating coil, and a fan in a suitable casing. The filter removes dust from both return and outside air. The cooling coil, either containing recirculating chilled water or boiling refrigerant, lowers air temperature sufficiently to dehumidify it to the required degree. The heating coil, in winter, serves a straightforward heating function, but when the cooling coil is functioning, it serves to raise the temperature of the dehumidified air (to reheat it) to the exact temperature required to perform its function, in microcosm, in room units in each space, as part of a self-contained, unitary, air-conditioner, or it may be a huge unit handling return air from an entire building. " The above meanings and uses of central air-conditioning would indicate that the basics and theories of central air-conditioning are not different from those of room air-conditioners, window air-conditioners, split airconditioners or A. C. coolers. It may be mentioned that the assessee itself had produced certain literature to show how a central air-conditioning job is undertaken, supervised, carried out and the type of plant that goes into existence, for consideration of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s; (10) electrical switchboards comprising incoming and outgoing switches, etc. The air-conditioning systems are classified according to their construction and operating characters into individual room machines, unitary package machines and central hydronic-air-conditioning system. A room air-conditioner is usually installed through the window. It becomes a part of the building facade. In separated indoor-outdoor unit of split system, the indoor unit houses the supply fan and cooling coil. The outdoor unit houses the compressor and a condenser. Space air is returned to the room air-conditioner through the lower return grille. It is then cooled and dehumidified by the DX-coil during cooling process. The conditioned air is discharged to the space from the top supply grille. Outdoor air is introduced through a small opening before it is mixed with the return air. Central air-conditioning plant erected at the site of the client and by using different refrigeration equipment are not bought and sold like room/ window machines or even splits or package units and cannot be installed like room/split air-conditioners. In the air-conditioning industry, these are undertaken as projects or A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract involving installation of air-conditioners and A. C. coolers and for repairs thereof is liable to tax at 15 per cent on sale of goods involved in the execution of works contract. In a sense, composition scheme introduced will have to be regarded as an exemption notification and will have to be construed strictly in view of the principles enunciated by the Supreme Court in a catena of decisions. So construed, there is no manner of doubt that installation of air-conditioning plant would fall within the scope of entry 2 of the Schedule to the notification and not within the scope of entry 5 of the Schedule to the said notification. The contention that in common parlance, air-conditioner, room air-conditioner, window air-conditioner, A. C. cooler, air-conditioning plant, etc., are differently known and, therefore, it should be held that the installation of air-conditioning plant would fall within entry 5 of the Schedule to the notification cannot be accepted because the common parlance test to suggest that "installation of air-conditioning plant" is different from installation of room air-conditioner, etc., is not brought on record of the reference by the assessee and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpression "installation of air-conditioners or A. C. coolers and repairs thereof" to window airconditioner or split air-conditioner, etc., i.e., only boxes or cabinets in domestic house for cooling and closure. In the case of a window airconditioner or split air-conditioner, what is achieved is control of the temperature, humidity and purity of the air of a small area whereas in the case of air-conditioning plant, what is achieved is control of temperature, humidity and purity of the air of a large area such as an office, theatre, laboratory, house or the like. In ordinary case of fabrication and installation of plant and machinery, no production results when the plant and machinery are erected. In other words, it is a simple case of supply of plant and machinery whereas in the case of supply of air-conditioning plant, what is done by the contractor is to install a complete unit by itself, which is functional in all respects. Therefore, entry 2 would cover the case of installation of air-conditioning plant and such an installation would not be covered by entry 5 of the Schedule to the notification. It may be mentioned that the plea based on different entries found in dif ..... 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