M/S. Permasteelisa (India) ... vs State Of Maharashtra And 2 Ors
2016 Latest Caselaw 2381 Bom

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                IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                    ORDINARY ORIGINAL CIVIL JURISDICTION




                                                                                           
                       SALES TAX REFERENCE NO.55 OF 2014




                                                                   
                                      IN
                      REFERENCE APPLICATION NO.80 OF 2010
                                      IN
                         SECOND APPEAL NO.106 OF 2007




                                                                  
    M/s.Permasteelisa (India) Pvt.Ltd.
    at A-307, Boomrang Chandivali Farm Road,
    Near Chandivali Studio, Andheri,




                                                    
    Mumbai - 400 072.                                                 ..... Applicant
          V/s
    1.State of Maharashtra
      Department of Sales Tax
      Vikrikar Bhavan, Mazgaon,
                                 
      Mumbai - 400 010.
                                
    2. Assistant Commissioner of Sales-Tax (I-38)
       B-6, 2nd Floor, Vikrikar Bhavan, Mazgaon,
       Mumbai - 400 010.
      


    3. Deputy Commissioner of Sales-Tax
   



       (Appeals-VI), A Wing, 7th Floor,
       Suburban Vikrikar Bhavan,
       BKC, Bandra (E), Mumbai 400 051.                               ..... Respondents





    Mr.F.B.Andhyarujina,               Sr.Counsel     a/w       Mr.Ashish     Sodhan         i/b
    M/s.Nishith Desai Associates for the Applicant.
    Ms.Naira Jeejeebhoy, Spl.Counsel a/w Mr.B.B.Shrama, AGP for the





    State-Respondent.


                             CORAM                          :    S.C. DHARMADHIKARI &
                                                                 A.A. SAYED, JJ.

                             RESERVED ON                    :    15 MARCH 2016
                             PROUNOUNCED ON :                    06 MAY 2016






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    JUDGMENT: (PER A.A. SAYED, J.)




                                                                               
    1       This Sales Tax Reference arises out of an order dated 7 March




                                                       

2014 in a Reference Application under the Bombay Sales Tax Act passed

by the Maharashtra Sales Tax Tribunal.

2 The following question of law is referred to this Court under section

9(1) of the Maharashtra Sales Tax on the Transfer of Property in Goods

involved in 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 would they constitute

the contracts incidental or ancillary to the contracts mentioned in

paragraph 'A' of the Notification dated 8 March 2000 issued for the

purposes of section 6A (1) of the Works Contract Act."

3 It is the case of the Applicant that it is a registered dealer under the

Works Contract Act as well as under the Bombay Sales Tax Act. The

Reference Application was filed pursuant to the order dated 9 July 2010

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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

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 Sales Tax Act and the transaction in question was under the

Works Contract Act.

4 The Applicant is a Private Limited Company incorporated under

the Companies Act, 1956. It is also a registered dealer under the MVAT

Act. The Applicant is engaged in activity of fixation of glass walls. It is

the case of the Applicant that these glass walls also known as curtain

walls are used in the construction of modern buildings. These glass walls

are permanent walls and are constructed instead of usual brick walls. 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

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Work Contracts Act, the Applicant has relied upon the Notification dated

8 March 2000 in terms of which certain contracts specified therein are

identified as construction contract eligible for beneficial rate of tax.

According to the Applicant, the activities it undertakes are in respect of

construction contracts or contracts incidental or ancillary to the

construction contracts as set out in the Notification dated 8 March 2000

and it has raised invoices and filed returns accordingly.

In respect of certain contracts pertaining to the year l999 and 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 construction and the contracts undertaken by the Applicant are

not building construction contracts and would not be covered by the

Notification dated 8 March 2000. Aggrieved by the order of the Tribunal,

the Applicant preferred a Rectification Application which came to be

dismissed by an order passed in February 2013. Prior thereto, on or

about 9 October 2012, a search and seizure was conducted at the

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business premises of the Applicant and an attachment order was passed

and proceedings were initiated 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 Rs.14.17 crore (which includes penalty and

interest) was made on the Applicant against which the Applicant has paid

a sum of Rs.10.21 crore and a stay was granted to recovery.

We have heard learned Senior Counsel for the Applicant and the

learned Special Counsel for the Respondent/State.

7 Learned Senior Counsel for the Applicant submitted that the

contracts entered into by the Applicant are essentially contracts for

building and the Applicant would be covered by the composition scheme

at the rate applicable to construction contracts in terms of the Notification

issued by the Government under the Works Contract Act dated 8 March

2000 wherein "building contract" has been specifically included. It is

submitted that apart from brick walls, glass walls are erected in the 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

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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. It is submitted that glass wall is a technological

advancement for walls in general constructed with bricks, sand, and

cement, making its utility not only as a wall but for protecting the building

from noise pollution, illumination, 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 platforms;

(ii) verandahs, blaconies, cornices, projections;

(iii) part of a building or anything affixed thereto;

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(iv) any wall enclosing or intended to enclose any land or

space, signs and outdoor display structures;

(v) tanks constructed for storage of chemicals or chemicals

in liquid form;

(vi) all types of buildings defined in (a) to (p) below, but

tents, shamianas and tarpaulin shelters erected for

temporary purposes for ceremonial occasions, with the

permission of the Commissioner, shall not 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 nonbearing wall of glass, metal, or masonry

attached to a building's exterior structural frame 1. A curtain wall is defined as thin, usually aluminum-framed wall, containing in-fills of glass, metal panels, or thin stone. The framing is attached to the building structure and does not carry the floor or roof loads of the building. The wind and gravity loads of the certain wall are transferred to the building structure,typically at the floor line 2.

1 Encyclopedia Britannica,2014.

2 Building Envelope Design Guide- Curtain Walls by Nik Vigener, PE and Mark A. Brown, Revised by

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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, the curtain wall

is a non-load-bearing wall3.

The American Architectural Manufacturers Association, the most

widely referenced industry source with respect to metal walls, provides the following definitions in their Aluminum Curtain Wall Design Guide Manual: Metal Curtain Wall- An exterior curtain wall which may consist entirely or principally of metal, or may be a

combination of metal, glass and 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 wall4.

After World War II, low energy costs gave impetus to the concept of the tall building as a glass prism, an idea originally put forth by Le Corbusier and Ludwig Mies van der Rohe in their visionary projects of the 1920s. The UN's Secretariat Building (1949), with its green-tinted

glass walls, helped set a worldwide standard for skyscrapers, still more elegantly revealed in the iconic Seagram Building by Mies van der Rohe and Phillip Johson."

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. 3 Glass and Metal Curtain Walls, Best Practice Curtain Walls, Public Works of Government Services Canada 4 Structural Design of a Glass Facade, Pallavi Taywade, Santosh Shejwal, Intenational Journal of Scientific and Research Publications, Volume 5. Issue 3 March 2015.

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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 contracts undertaken by the Applicant cannot be

termed as 'construction contracts' but they have to be treated as

'non-construction contracts'. She submitted that the contracts

enumerated in the Notification dated 8 March 2000 are contracts for

construction of buildings, roads, buildings, runways, etc. These contracts

are illustrative in nature. The contracts for 'construction of building' are

required to be construed strictly and not liberally since the provision

contained in 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. vs. Fayazoddin, AIR 1924 Lah. 172.

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11 We have considered the rival contentions and perused the material

on record. At the outset, it would be necessary to reproduce the extract

of the Notification dated 8 March 2000. It reads as under:

"Notification No.WCA-25.00/C.R.-39/Taxation-1 dated the 8 th March,

2000.

In exercise of the powers conferred by sub-section (1) of Section 6A of the Maharashtra Sales Tax on the Transfer of Property in Goods involved in the Execution of Works Contracts (Re-enacted) 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, (14) Drainage

works, (15) Swimming pools, (16) Water purification plants. B. Any contract incidental or ancillary to the contracts mentioned in paragraph A above, if such contracts are awarded and executed before

the completion of the said contracts mentioned in A above.

            ....       ....       ...."



    12       We are of the view that the contracts for construction of glass walls

executed by the Applicant would not constitute 'contracts for construction

of buildings' as mentioned in paragraph '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

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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 carried out as under:

"i) Contract for structural glazing is entered into on completion of foundation and plinth.

ii) On signing of the contracts intensive planning and designing is undertaken by Architect and Structural Engineers.

iii) Aluminum, silicon and glass of the desired prescription is ordered.

iv) Upon completion of 5th Slab, structural glazing commences from the bottom i.e. first slab.

v) Structural glazing gets completed alongwith concrete

construction.

vi) Instead of convention brick wall, 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 by the

Assessment Order passed by the Sales Tax Officer, the Applicant had

filed an Appeal before the Deputy Sales Tax Commissioner (Appeals)

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and in the order dated 1 November 2006, the Commissioner of Sales Tax

(Appeals) has recorded that the Applicant contended that "he is a dealer

dealing in structural glazing aluminum cladding, doors and windows and

doors of buildings in Corporate Offices."

13 We have perused the Additional Paperbook Compilation produced

by the Applicant, to which are annexed 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 glazing is dependent on factors such

as: (i) your decision on the glass, (ii) your schedule for civil work and

period for handing over the building to us for receiving the glazing. For

the best performance of the unutilised curtain wall system it is imperative

that civil jobs such as RCC, flooring, ceiling and all wetwork of cement or

POP should be completed prior to the fixing of the curtain wall so as not

to damage the curtain wall system". It is further stated in the said letter

that "we confirm that it will be our responsibility to procure the glass in

consultation with the architects and clients, however some paper

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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 floors each

3.3m. high and column spacing is generally 5.565m. Module will be so worked out that the wastage of glass is minimum.

Aluminium sections/extrusions will be designed and provided accordingly. Contractor will furnish detailed sketches/drawings showing mode of fixing and fixtures, aluminium

sections/extrusions with profile and sectional weight and detailed calculations for weight of aluminum per Sm. for each

tender item. Total aluminium weight will be worked out for all tender items and procurement 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 and will be achieve at site.

He will also furnish details of brackets, inserts and sub-frame

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to be embedded in concrete during execution or by dash

fasteners.

9. It is proposed to have structural glazing by unitised system with double glazing (6+12+6) for window area with 6mm heat reflective glass with soft coat and heat strengthed

glass of approved make and shade for outside and 6 mm thick plain clear Modi/Asahi float glass for inside. For spandrel area, 8mm/6mm. heat reflective glass with soft 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 fixing will be done with imported structural silicon sealant and guarantee the proper bond and water tightness. Contractor will clearly state in his tender letter the

detailed methodology to be adopted for procurement, fabrication and erection of structural glazing.

11 The Contract will be awarded jointly to Indian contractor and foreign collaborator. The design and system, procurement of aluminium sections and glazing, method of fixing, water tightness completing the work in time and in line and level 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

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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 fixing/bonding arrangements in an approved design and pattern.

13 Contractor will make a mock up at site with different

materials and showing fixing arrangements and get it approved before going ahead with work of procurement. The elevations will be finalised only after approval of mock up at

site."

15 The Notification dated 8 March 2000 clearly mentions the contract

for "construction of buildings". In our view 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 (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

March 2000.

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16 Pertinently, the Applicant had also sought advance ruling under

section 60 of the Karnataka Value Added Tax Act. The observations

made in order dated 21.08.2006 are relevant insofar as the nature of

work undertaken by the Applicant. They are reproduced hereunder:

"The transaction of the applicant comprises of entering into contract with his client for design, fabrication, supply and installation of "structural glazing works" (known as curtain walls).

"Structural glazing works" or "Curtain 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 structure" are not defined under the Act and therefore they will assume the general meaning. The contract entered by the

applicant comprises i) fabrication, means framing, constructing, manufacturing etc. ii) erection means construction by assembling parts or fixing something in upright position, iii) structure means,

something which is constructed, such as building."

... ... ... "The process involves fabrication and assembly of specially designed extruded powder coated aluminium sections into a frame on which glazed panels are bounded. These structures are then erected onto the building."

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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 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

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context and purposes of DCR and cannot be imported and applied in the

facts and circumstances of the present case.

18 All the aforesaid reasons, the question of law referred by the

Tribunal is answered as under:

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.

19 The Reference to stand disposed of accordingly.

                        (A.A. SAYED, J.)             (S.C. DHARMADHIKARI, J.)
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