The Division Bench of Bombay High Court has recently held that the contracts for the construction of glass walls executed by the Applicants would not constitute ‘contracts for the construction of building’.
The substantial question of law to be decided by the Court was whether the contract for construction of glass curtain walls executed by the applicant which was awarded to it by the employers, namely ICICI Bank Ltd. and M/s Wockhardt would not constitute contracts for construction of building nor would they constitute the contracts incidental or ancillary to the contracts for the purpose of Works Contract Act..?
The Applicant in the instant case is a registered dealer under both the Works Contract Act and the Bombay Sales Tax Act. The reference application was filed pursuant to the Order dated 9 July 2010 passed by the Tribunal in the applicant’s own case in Second Appeal No. 106 of 2007 under the Works Contract Act in respect of the period 1.04.1999 to 31.04.2000 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 8th March 2000. The appeal arose out of assessment under the Bombay Sales Tax Act and the transaction in question was under the Works Contract Act.
The main contention of the Applicant was that the contracts entered into by the Applicant are essentially contracts for building and the Applicant would be covered by the compensation scheme, at the rate applicable to construction contracts in terms of the Notification issued by the Government under the Works Contract Act. Apart from brick walls, glass walls are erected in the entire building. It was also submitted that aluminum glazing contract is nothing but a contraction contract of a building and would, therefore, qualify as ‘construction contract’ made for building liable to composition rate at the relevant rate i.e, 2%. 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 building contracts. It is submitted in the alternative that the contract would be covered by paragraph ‘B’ of the Notification dated 8 March 2000 as an incidental or ancillary contract to the contract for construction mentioned in paragraph ‘A’ of the Notification.
The Respondents, on the other hand, contended that the contracts undertaken by the Applicant cannot be termed as ‘construction contracts’ but they have to be treated as ‘non-construction contracts’. It was submitted that the contracts enumerated in the relevant Notification are contracts for the construction of buildings, roads, buildings, roadways, etc. these contracts illustrative in nature. The contracts for ‘construction of building’ are required to be construed strictly and not liberally since the provision contains in section 6A of the Works Contracts 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 constructed strictly.
The Division Bench comprised Justices S.C. Dharmadhikari and A.A. Sayed held that the contracts for construction of glass walls executed by the Applicants would not constitute ‘contracts for construction of building’ as mentioned in paragraph ‘A’ of the Notification dated 8th March 2000 nor would they constitute contracts incidental or ancillary to any contract mentioned in paragraph ‘B’ of this notification issued under section 6A(I)of the Works Contract Act and would not be covered by the said Notification. While dismissing the appeal, it was observed that the reliance placed on the definition of ‘building’ in the regulation 2(3)(11) of DCR is misplaced and would not assist the applicant in any manner. The definition is in the context and the purposes of DCR and cannot be imported and applied in the facts and circumstances of the case.
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