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2016 (5) TMI 497 - BOMBAY HIGH COURT

2016 (5) TMI 497 - BOMBAY HIGH COURT - [2016] 91 VST 129 (Bom) - 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 .....

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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 buildin .....

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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 co .....

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ngs 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 - Sales Tax Reference No. 55 of 2014, Reference Application No. 80 of 2010, Second Appeal No. 106 of 2007 - Dated:- 6-5-2016 - S. C. Dharmadhikari And A. A. Sayed, JJ. For the Applicant : Mr. F. B. Andhyarujina, Sr.Couns .....

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n the Execution of Works Contracts (Re-enacted) Act, 1989, (hereinafter referred to as the Works Contract Act) read with section 61(1) of the Bombay Sales Tax Act, 1959: Whether on the facts and in the circumstance of the case, the Tribunal was justified in holding that the contract for construction of glass curtain walls executed by the Applicant which was awarded to it by the employers, namely, ICICI Ltd. and M/s. Wockhardt Ltd. would not constitute contracts for construction of building nor w .....

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6 of 2007 under the Works Contract Act in respect of the period 01.04.1999 to 31.03.2000 in terms of which, the Tribunal held that the contract for construction of glass walls was not construction of building contract or incidental or ancillary contract to the contract for construction of building, and that consequently the Applicant was not entitled to composite/concessional rate of tax under the Notification dated 8 March 2000. The Appeal arose out of assessment proceedings under the Bombay Sa .....

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lls. In the modern age of architecture these glass walls have replaced the traditional brick walls and many buildings are constructed and developed using glass walls. If the glass walls are erected for a building then brick walls are not required as these glass walls have all the characteristics of traditional brick walls as a result of which there are modern highrise buildings and skyscrapers. In applying the rates as applicable under the Work Contracts Act, the Applicant has relied upon the No .....

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2000 for ICICI Bank and Wockhardt for construction of glass wall work, the assessment order of 31 March 2005 held that the Applicant was not eligible for the benefit under the Notification dated 8 March 2000. The order of the Assessing Officer was upheld by the Deputy Commissioner of Sales Tax (Appeal). Aggrieved by the order of the Deputy Commissioner of Sales Tax (Appeal) the Applicant filed Appeal before the Tribunal. The Tribunal held that the activity undertaken by the Appellant was not co .....

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ted in respect thereof, which are not really material for the purpose of deciding the present Reference. Suffice it to say that in the meanwhile assessment proceedings were completed in April 2013 and a demand of ₹ 14.17 crore (which includes penalty and interest) was made on the Applicant against which the Applicant has paid a sum of ₹ 10.21 crore and a stay was granted to recovery. 6. We have heard learned Senior Counsel for the Applicant and the learned Special Counsel for the Res .....

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he entire building. Learned Senior Counsel contended that aluminum glazing contract is nothing but a construction contract of a building and would therefore qualify as 'construction contract' made for 'building' liable to composition rate at the relevant time i.e. 2%. He submitted that with the passage of time and because of new inventions and adoption of new technology the term 'construction contract' has changed conceptually and these contracts should be considered as & .....

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on, heat, light, wind and rains. 8. Learned Senior Counsel has also drawn our attention to the definition of building under the Regulation 2(3)(11) of the Development Control Regulation for Greater Mumbai, 1991 (DCR). The Regulation 2(3)(11) reads as follows: Building means a structure, constructed with any materials whatsoever for any purpose, whether used for human habitation or not, and includes:- (i) foundation, plinth, walls, floors, roofs,chimneys, plumbing and building services, fixed pla .....

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be considered to be Buildings . 9. Learned Senior Counsel submitted that in a building where curtain wall of glass is constructed, the design is prepared right at the inception and prior to the construction of the building and unless the building is constructed in a particular manner and as per specification, the curtain wall of glass cannot be constructed. The learned Senior Counsel tendered a compilation of literature and adverted to the following portions therefrom: A Curtain wall is a nonbe .....

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Guide- Curtain Walls by Nik Vigener, PE and Mark A. Brown, Revised by the Chairs of the Building Enclosure Councils with assistance from Richard Keleher and Rob Kistler. The Facade Group, LLC.Development and review supported through a grant from the American Architectural Manufacturers Association.. The term curtain wall is defined in most literature to be any building wall of any material that is designed to resist lateral loads due to wind or earthquake and its own self weight. In other words, .....

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nd other surfacing materials supported by or within a metal framework. Facade is a French origin word meaning the front face. The use of glass in the exterior facades provided more of light and good ambience to the occupant of the building which gave rise to the increasing use of glass. For the architectural point of view the use of glass gave aesthetic view to the building itself. A structure supported by aluminum frame work which is made up for Mullion and Transom is called as a curtain wall S .....

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crapers, still more elegantly revealed in the iconic Seagram Building by Mies van der Rohe and Phillip Johson. On the aforesaid premise, it is contended that the contracts awarded to the Applicant be treated as 'building construction contracts' covered by Notification dated 8 March 2000 and the Applicant would be entitled to the composite/concessional rate of tax under the said Notification. 10. Learned Special Counsel on behalf of the Respondent on the other hand submitted that the cont .....

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n section 6A of Works Contract Act are meant for composition of tax at a lesser rate, thereby the Applicant gets exemption to certain extent and the Notification dated 8 March 2000 has to be construed strictly. The learned Special Counsel submitted that the word 'building' is not defined in the Act and has to be construed in its ordinary grammatical sense. She has placed reliance on the following judgments: (i) Ghansyamdas vs. Deviprasad & Anr, AIR 1966 SC 1998 (ii) Mohammad Umar Anr .....

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ted) Act, 1989 (Mah.XXXVI of 1989), the Government of Maharashtra hereby notifies the following contracts to be the construction contracts for the purpose of sub-section (1) of the said section 6A, namely:- A. Contracts for construction of,- (1) Building, (2) Roads, (3) Runways, (4) Bridges, Flyover bridges, Railway overbridges, (5) Dams, (6) Tunnels, (7) Canals, (8) Barrages, (9) diversions, (10) Rail tracks, (11) Causeways, Subways, Spillways, (12) Water supply schemes, (13) Sewerage Works, (1 .....

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9;A' of the Notification dated 8 March 2000 nor would they constitute contracts incidental or ancillary to any contract as mentioned in paragraph B of the Notification dated 8 March 2000 issued under section 6A(I) of the Works Contract Act and would not be covered by the said Notification. In the judgment and order dated 9 July 2010 of the Tribunal in Second Appeal No.106 of 2007, the case of the Applicant is interalia recorded. In paragraph 3 it is stated as follows: … The work is ca .....

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all, glass walls are used. vii) Structural glazing of the building is something without brick walls'. Instead of brick wall a glass wall is constructed. It is further recorded in paragraph 4 that in respect of the assessment, the Applicant s case was that it had undertaken the contract of fabrication and erection of structural glazing works and the work of aluminum glazing contract would qualify as a construction contract made for building liable to composition rate of tax. Being aggrieved b .....

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what is stated to be the contract with ICICI and contract with Wakhardt. It cannot be disputed that the essential raw materials like glass and aluminum for the work of structural glazing are procured by the Appellant from third parties. In one of the letters at page No.143 of the Compilation it is stated that the procurement of glass, double sided tapes and structural silicone sealants will also be undertaken overseas . In the said letter it is further stated that the period for completion of gl .....

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that it will be our responsibility to procure the glass in consultation with the architects and clients, however some paper formalities of import will be channelled through you for which we solicit your co-operation, being actual users . 14. The conditions of contract for the Aluminium and Glazing Work between the Applicant and ICICI (page Nos.148 to 150 of Compilation) are relevant. Clauses 4,7, 9, 11, 12 and 13 thereof are extracted hereunder: 4. The proposed structure is ground plus 11 floor .....

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urement from foreign collaborator and its factory will be given a long with detailed time schedule. Monthly production capacity of aluminium extrusions and location of factory shall be given in the tender letter. All wastage, and breakage of glass will be borne by the contractor. Contractor will have to provide necessary scaffolding for his work. 7. The glazing/panelling work carried out by the contractor has to be in true line, level & Plumb. He will give details and the accuracy, that can .....

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coat and heat strengthened may be provided with opacifaer film and 50mm thick insulation. Some portion of spandrel area is provided with Alucobond/Reynobond composite aluminium panels with PVF2 painting on a aluminium framework as shown in elevations. Some area is also provided with granite panels supported on aluminium framework as shown in elevations. All wastage and breakage will be borne by the Contractor. Double glazing by unitised system will be factory made and sealed properly. The fixin .....

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vel will be guaranteed by the foreign collaborator. In case of failure/partial failure by Indian contractor the balance work will be completed by the foreign collaborator in stipulated time. The Indian contractor and foreign collaborator will jointly furnish performance guarantee for 5% of the contract amount by approved bank guarantee. 12. The proposal elevation treatment shows aluminum frame work with glazing/patented aluminum panels/polished granite panels 25mm to 32mm thick with proper fixin .....

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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 (See Tata Iron and Steel vs. State of Maharashtra, (2005) 4 SCC 272). 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 M .....

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in walls are typically designed and assembled aluminium frames filled with glass. The process involves fabrication and assembling of the specially designed extruded powder coated aluminium sections into a frame. On to the frame, the glazed panels are bounded. All these activities are done at the factory of the applicant. These fabricated structural glazings are transported to the work site where they are erected on to the building. … … … The words fabrication, erection and s .....

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ions into a frame on which glazed panels are bounded. These structures are then erected onto the building. 17. 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 acti .....

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