Kerala High Court
M/S.Floatles India Pvt. Ltd vs The Commercial Tax Officer on 11 June, 2013
Author: Manjula Chellur
Bench: Manjula Chellur, A.M.Shaffique
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR
&
THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE
WEDNESDAY, THE 30TH DAY OF OCTOBER 2013/8TH KARTHIKA, 1935
WA.No. 1079 of 2013 IN WP(C).14717/2013
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AGAINST THE JUDGMENT IN WP(C) 14717/2013 DATED 11/06/2013
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APPELLANT/PETITIONER :
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M/S.FLOATLES INDIA PVT. LTD
FLOATELS CHAMBERS, T.C.NO.16/1859, DPI ROAD
JAGATHY,THIRUVANANTHAPURAM-695 014
(REGISTERED OFFICE AT KP 7/911
POZHIYOOR P.O., KULATHUR VILLAGE, NEYYATTINKARA TALUK
THIRUVANANTHAPURAM-695 513) - REPRESENTED BY ITS MANAGING
DIRECTOR SHRI.M.R.NARAYANAN.
BY ADVS.SRI.T.M.SREEDHARAN (SR.)
SRI.V.P.NARAYANAN
SMT.BOBY M.SEKHAR
SMT.DIVYA RAVINDRAN
RESPONDENTS/RESPONDENTS :
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1. THE COMMERCIAL TAX OFFICER
1ST CIRCLE, THIRUVANANTHAPURAM - 695 001.
2. THE INTELLIGENCE OFFICER (B)
OFFICE OF THE DY.COMMISSIONER (INT.)
DEPARTMENT OF COMMERCIAL TAXES, KARAMANA
THIRUVANANTHAPURAM - 695 002.
3. THE DEPUTY COMMISSIONER (INTELLIGENCE)
COMMERCIAL TAXES, TAX TOWERS, KARAMANA
THIRUVANANTHAPURAM - 695 002.
4. THE COMMISSIONER OF COMMERCIAL TAXES
TAX TOWERS, KARAMANA, THIRUVANANTHAPURAM-695 002.
BY GOVERNMENT PLEADER, SRI.BOBBY JOHN PULIKKAPARAMBIL
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 30-10-2013,
ALONG WITH ST.REV. Nos.36/2013 and 37/2013,THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
C.R.
Manjula Chellur, C.J. & A.M. Shaffique, J.
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
W.A. No. 1079 OF 2013
and
ST.Rev Nos.36 & 37 of 2013
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Dated this the 30th day of October, 2013
JUDGMENT
Manjula Chellur, C.J.
The above two Sales Tax Revision petitions pertain to penalty proceedings initiated by the Officer of Intelligence wing of the Department treating the construction of the "floating restaurant" as a 'regular sale' and not a 'work contract'. So far as W.A. No. 1079 of 2013, this was filed by the assessee complaining non refund of penalty amount subsequent to the disposal of the appeal before first appellate authority and also Tribunal. As the controversial issue involved in all the three matters being one and the same, all the three matters are disposed of together on merits.
2. The brief facts that lead to the filing of the present revisions are as under:
The respondent, a private limited company is known as "M/s.Floatels India Private Limited". It is not in dispute that it is the assessee on the file of Commercial Tax Officer, First WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:2:- Circle, Thiruvananthapuram. The Department of Tourism, Government of Kerala entrusted the construction of floating restaurant/jetty at "veli lake" in Thiruvananthapuram to the appellant. As a matter of fact, the impugned order of the Tribunal is the second round of litigation. In the first round, the Intelligence Officer was directed to refer to the terms of contract and then decide the controversial issue whether the transaction in question was an outright sale or a works contract. As a matter of fact, the respondent assessee sought permission for payment of tax at compounded rate as contemplated under Section 7(7) of the KGST Act. The amount of tax compounded is also paid by the assessee. Subsequently, the Intelligence Officer, Commercial Tax, Thiruvananthapuram based on certain details, opined that there was suppression of turn over resulting in tax evasion, therefore proceeded to initiate penalty proceedings for the assessment years 2003-04 and 2004-05 opining that the transaction in question was a sale and not a work contract. WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:3:-
3. While considering the matter by the Intelligence Officer, he again opined that the transaction in question was only an outright sale, therefore the assessee is liable to pay tax under Section 5(1). Accordingly for evasion of payment of tax, penalty was imposed.
4. It is not in dispute that Department of Tourism, Government of Kerala, entrusted construction of floating restaurant to the assessee. It took almost three years for completion of the same. The first appellate authority in the second round also opined that construction of floating restaurant is only a contract work (civil work) and tax has to be compounded as per Section 7(7) of the Act. Several other issues also came to be discussed like whether there were sufficient grounds for invoking Section 45A of the Act. However, we are not concerned with other controversies that came to be disposed of as the revenue in these two revisions is mainly challenging the opinion of the authorities below opining that the work in question is a work contract on the ground that floating restaurant is WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:4:- nothing but a vessel like boat/ship, therefore it is a movable property and till the property is handed over to the beneficiary, it is the responsibility of the construction company/assessee before this Court to take care of the supervision. Therefore, it is nothing but an outright sale. In other words, according to the learned Government Pleader, the floating restaurant though tied to a coconut tree but concrete poles are built which are concealed under the water, hence virtually it is like a vessel which could float in water. Therefore, reliance is placed on Hindustan Shipyard Ltd. v. State of Andra Pradesh [(2000) 6 SCC 579]. Alternatively he also contends that even if it is treated as a civil contract it does not amount to contract of nature described under Section7(7) of the KGST Act. Therefore, once it goes out of purview of a civil work attracting explanation, automatically the tax liability has to be assessed under Section 5 of the Act hence penalty proceedings and imposition of penalty for evasion of tax is justified so far as the Intelligence Officer of the Commercial Tax Department.
WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:5:-
5. As against this learned counsel representing the respondent assessee contends that in order to ascertain the nature of the property in question, the property in question and also the nature of work carried on by the assessee has to be seen. The terms and conditions of contract between the parties are very relevant and based on said material found in terms of contract, the authority below has rightly concluded that it is only a work contract and not sale as contended by the revenue.
6. We have gone through the orders of appellate authorities. The terms of contract is between Department of Tourism, Government of Kerala and respondent assessee, M/s.Floatels India Pvt. Ltd. As per this document there is clear understanding that the respondent assessee has to provide a floating restaurant at Veli, Tourist village of Thiruvananthapuram, as the respondent became successful bidder. The details of work enumerated in the agreement refer to various aspects pertaining to the matter which includes articles of agreement, requirement of security deposit, issuance of selection notice, accepted WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:6:- schedule of quantities, costs of final bid dated 19.12.2003, and revised technical bid dated 12.12.2003 including the drawings, original final bid and enquiries demarcating the drawings etc. The pre-qualification proforma is also taken into consideration while calling for the final tender. This assessee was successful in pre-qualification tender because of the nature of construction that had to be put up by them and thus ultimately became successful in the final tender as well. The details of the agreement clearly indicates rate fixed for item wise, architectural drawings and details of design calculations, technical specifications, articles of agreement, tender documents contents etc. As a matter of fact, the entire tender document clearly indicates the opinion of the Department of Tourism that it decided to give execution of job on turnkey basis.
7. It is also seen from the records that it is a double decked floating restaurant to accommodate about 200 customers at a time. The components of design clearly indicates the very design of the floating restaurant is to ensure that it will remain WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:7:- stable and safe but floating in the lake under all weather conditions. They further say it should be lightweight, eco-friendly and anti corrosive materials alone has to be used for the construction. The specifications include even a condition to keep the kitchen as a separate building from the actual restaurant portion. So far as the entry to this main restaurant, it has to be through separate entrance and a connecting walkway is to be constructed between the kitchen and the main restaurant. Apart from giving specification of designs so far as architectural look the condition is that the decks should be made open to enable the occupants to have a clear and unobstructed view of the lake in question. So far as the safety of the construction which ultimately takes care of the safety of the customers and others, yet another condition was imposed that the detailed design and drawings have to be certified by a reputed structural engineer or a naval architect. The entire tender document especially the composite contract documents along with other papers would clearly indicate that it has to be put up under the supervision of WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:8:- the Consultant/Director of Tourism Department and it was an innovatory work done by the assessee. The entire execution of work is with reference to a sealing lump sum amount to be paid by the Tourism Department to the assessee as per the terms of contract.
8. So far as the actual construction is concerned, it is not a movable property constructed somewhere and brought to the lake. They have to first put up a dredge beneath the water and certain supporting concrete poles have to be erected which is clear from the drawings. In other words, instead of regular normal foundation for construction, dredge is to be put up so as to create a platform for the entire structure to float upon and in order to see that it does not move, it will be tied to certain poles apart from tying it to a coconut tree. In other words, as per the terms of contract, whatever design adopted by the assessee it should merge with the natural surroundings, therefore though the entire structure is placed on a dredge tied to poles beneath the water so far as visual scene, it is tied to a coconut tree, seen by WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:9:- the customers. This clearly indicates that specific architecture was indicated and how it should merge with the natural surroundings apart from looking aesthetic, how the floating restaurant should be are all clearly indicated in the documents. The total amount was 97,95,781/-.
9. The appellate authority having regard to the details of the terms of contract and the fact that at every point there has to be supervision of the work by Consultant contractor of Department of Tourism opined that the supervision of floating restaurant was to be done on the basis of composite extensive work contract entered into between the Tourism Department and the respondent assessee after due deliberations and complying with the procedure so far as tender is concerned. Therefore, the first appellate authority and the Tribunal opined that this cannot be treated as a sale as contended by the revenue and opined that the penalty proceedings initiated were not justified.
10. As already stated above the revenue has come before us again contending that the transaction in question WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:10:- though involves construction of floating restaurant, it is nothing but sale of a movable property, therefore, it is not a works contract. Learned Government Pleader refers to Hindustan Shipyard Ltd., v. State of A.P.[(2000) 6 SCC 579] in which paragraphs 6, 26 and 27 are relevant which read as under:
"6. The distinction between a contract of sale and a works contract is not free from difficulty and has been the subject-matter of several judicial decisions. No straitjacket formula can be made available nor can such quick-witted tests devised as would be infallible. It is all a question of determining the intention of the parties by culling out the same on an overall reading of the several terms and conditions of a contract. Xx xx
26. xx xx xx Though it is said that the things mentioned therein become the property of the owner simultaneously with the first payment of the instalment, other clauses of the contract generally, and Articles 16 and 17 immediately, go to show that for all practical purposes the property in the vessel continues to remain with the builder and passes to the owner only (i) on satisfactory completion of the work,
(ii) the vessel coming into existence in a deliverable state, and (iii) satisfaction of the owner as to the vessel being seaworthy and also having been built up WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:11:- to the satisfaction of the owner in accordance with the terms and conditions of the contract. It is not the meaning of an individual recital or the inference flowing from any term or condition of the contract read in isolation but an overview of the contract wherefrom the nature of the transaction covered thereby has to be determined.
27. xx xx When something remains to be done on the date of contract to bring the specific goods in a deliverable state the property does not pass until such thing is done and brought to the notice of the buyer. The risk in such case remains with the seller so long as the property therein is not transferred to the buyer though the delivery may be delayed."
11. On a reading of the above three paragraphs what is stated by their Lordships is that there cannot be any straight jacket formula that can be made available in order to ascertain that a particular transaction is sale or works contract. In the said case the subject matter was construction of a vessel. While referring to Sale of Goods Act, their Lordships opined that when a movable property is sold, the delivery of the same makes a contract and it need not always be treated as sale. Therefore, WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:12:- according to them, the thing to be delivered has never in existence before delivery as the same is the property of the party who has to deliver it. Based on this principle, paragraphs 26 and 27 after referring to the terms of contract pertaining to the mode of payment, refund of consideration partly or fully, Lordships opined that if the party was not satisfied with the quality of the property, payment of interest for delayed payment etc, can be claimed and opined that the terms of contract clearly indicates that it was never a work contract but a sale. They further opined that till the property is brought to the buyer and delivered to the buyer, the property remains with the seller, therefore it is not transferred to the buyer till it is delivered, thus it becomes a sale.
12. So far as the facts of the present case, though it is named as floating restaurant it is not constructed somewhere else and brought to the lake in question. After putting up a dredge, the entire two storeyed construction; a deck for the purpose of restaurant and the separate kitchen is put up on the dredge. They cannot be taken away from that place to any other WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:13:- place for delivering the same to the buyer. Though it floats and not fixed to the ground as a regular building, it cannot be treated as a vessel as the purpose of this floating restaurant is not to make use of the same as a carrier for transporting persons from one place to another place fixed with an engine and other mechanical equipment. It is nothing short of a building except for the fact that instead of the building embedded to the earth, it floats on a platform and therefore it is called a floating restaurant. The mere nomenclature cannot lead us to any conclusion that it is the nature of the property which has to be equated with the transfer of a vessel which is brought from one place to another place and till it is delivered to the buyer, it does not become the property of the buyer. The site where it has to be put up is indicated. The entire construction work is taken at that site for having a floating restaurant. The entire work as per the tender document and subsequent terms of contract entered into between the parties has to be completed at the site itself under regular supervision of the Tourism Department. WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:14:-
13. Government Pleader also refers to Union of India v. The Central India Machinery Manufacturing Company Ltd. & others [(1977) 2 SCC 847]. In this case the property was goods wagons/coaches sold to the Railway Department. While considering and distinguishing between the two types of contract i.e. contract for sale of goods and contract for work and services, their Lordships at paragraph 17 opined as under:
"17.Clause (o) of Section 2 of the Rajasthan Sales Tax Act, 1954, defines "sale". It says:
'Sale' with all its grammatical variations and cognate explanations, means any transfer of property in goods for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments. . . .
Thus, transfer of property in goods for a price is the linchpin of the definition. Under Section 4 of the Sale of Goods Act, 1930, also, in the definition of the term "sale"
stress is laid on the element of transfer of property in the goods. According to the Roman jurists, also, the purport of a contract of sale is that the seller divests himself of all proprietary right in the thing sold in favour of the WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:15:- buyer. It is this requisite which often distinguishes a contract of sale of goods from a contract for work and services. Even so, the difficulty of distinguishing between these two types of contracts is an age old one. It was much debated even by the Roman jurists (see Inst. III, 24, 4 and De Zuluete, The Roman Law of Sale, pp. 15,
16). Difficulty has also been felt in England and other common law jurisdictions to the effect of a contract to make a chattel and deliver it when made. Generally, such a contract is one of sale of chattel, but not always. Jurists have differed much and striven much about the test for distinguishing between these two types of contracts. Since each contract presents its own features and imponderables, it has not been possible to devise an infallible test of universal application. According to Pollock & Mulla, "the test would seem to be whether the thing to be delivered has any individual existence before delivery as the sole property of the party who is to deliver it". If the answer is in the affirmative, it is a 'sale' of the thing, otherwise not. Another learned author enunciates that "the general rule deducible from the cases seems to be that if the main object of the contract is the transfer from A to B, for a price, of the property in a thing in which B had no previous property, then the contract is a contract of sale". (See Chalmers' Sale of Goods, 16th Edn., page 52.) The broad criteria for distinguishing between these two types of contracts have WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:16:- been neatly summed up in Halsbury's Laws of England, (3rd Edn., Vol.34, page 6) thus:
A contract of sale of goods must be distinguished from a contract for work and labour. The distinction is often a fine one. A contract of sale is a contract whose main object is the transfer of the property in and the delivery of the possession of, a chattel as a chattel to the buyer. Where the main object of work undertaken by the payee of the price is not the transfer of a chattel qua chattel, the contract is one for work and labour. The test is whether or not the work and labour bestowed end in anything that can properly become the subject of sale; neither the ownership of materials, nor the value of the skill and labour as compared with the value of the materials is conclusive, although such matters may be taken into consideration in determining in the circumstances of a particular case whether the contract is in substance one for work and labour or one for the sale of a chattel. Let us now apply the above criteria to the contract in question. The contract is expressly one for the manufacture and supply of wagons for a price. Price has been fixed taking the wagon as a unit. Payment of the price is made for each vehicle on its completion and delivery by the contractor to the purchaser, who is described as the Union of India acting through the Railway Board. Such payment is made in two instalments, viz., 90 per cent of the value of the vehicle on completion against an 'On Account' bill, together with WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:17:- the Completion Certificate from the Inspecting Officer appointed by the Railway Board, and the balance of 10 per cent after delivery. If clause (1) of the Standard Condition 15 is not inconsistent with anything in the Special Conditions, - and as we shall presently notice it is not so - it clinches the issue in as much as it declares in unequivocal terms the intention of the contracting parties that on payment of the 90 per cent of the value, "the vehicles in question will become the property of the purchaser". Prima facie, the contract in question has all the essential attributes of a contract of sale of moveable. That is to say, here is an agreement to sell finished goods manufactured by the Seller (Company) for a price, the property in the goods passing to the Purchaser, on completion and delivery pursuant to the agreement." Ultimately, according to them, depending upon the terms of contract including the nature of obligations to be discharged therein and other surrounding circumstances, one has to conclude whether it is a contract of sale of goods or a contract for work and other services.
14. The other decision referred to is Patnaik and Company v. State of Orissa [(1965) 16 STC 364]. This was construction of bus body on chassis supplied by State of Orissa. WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:18:- The question was whether it was a contract of sale or contract of work. Again their Lordships held that depending upon the terms of contract and the nature of the property how it has to be delivered, one has to decide whether it is a contract of sale or works contract.
15. By majority judgment their Lordships held that the contract as a whole was a contract for sale of goods and therefore the appellants were liable to sales tax on the amounts received from the State of Orissa for the construction of the bus body. Dissenting with the said majority opinion Justice Shah opined that the contract was one for work and not a contract for sale. Ultimately the basis upon which the majority judgment pronounced was the terms of contract especially with regard to the stipulated period of contract within which the work had to be completed failing which an indication of payment of damages was one of the terms.
16. So far as nature of claim that is the classification of the contract declared by the assessee, according to the WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:19:- Government Pleader, if there is misclassification of the work in their returns intentionally to evade payment of tax, then also assessee is liable for penalty. He places reliance on 2013 21 KTR 261 in the case of Sureshlal v. State of Kerala. So far as the intention of the assessee herein right from the initiation of penalty proceedings, consistent stand of the assessee is the entire amounts received and the work done by them is reflected in the books of accounts and also in the returns. There is no intention to evade payment of tax by concealing any amounts received by them. The nature of claim depends upon the intention of the parties which can be reflected in the returns. Here the nature of contract cannot be decided on any set of principles as the factual issue is the challenge against the very nature of contract, i.e., it depends upon the terms of contract, whether it can be a work contract or contract of sale. Therefore, mere misclassification in the returns as contended by the revenue cannot be a ground to consider that there was intention to evade payment of tax as in all the relevant documents the amounts WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:20:- received pertaining to this particular contract are indicated and as a matter of fact the assessee came forward to compound the tax as provided under Section 7(7) of the Act. Section 7(7) was modified slightly with an amendment brought into force in 2000, apart from the introduction of Explanation to Section 7(7).
17. Placing reliance on Explanation to Section 7(7), learned Government Pleader contends that the nature of work undertaken either construction or repair with reference to the kinds of work indicated in the Explanation has to be understood by placing the punctuation 'coma' after each work. According to him, so far as construction of culvert including any masonry work or any other works of the like nature to be notified by the Government would refer only to wells, water tanks or culvert and therefore in the absence of floating restaurant specifically being notified, the contract in question would not fall within the Explanation to Section 7(7). To substantiate this argument reliance is placed on 2008 16 KTR 55(SC) in the case of Sree Durga Distributors v. State of Karnataka. It was with regard WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:21:- to Entry 5 of First schedule under the Karnataka Value Added Tax with reference to animal feed and feed supplements. The question that arose for consideration was whether the above classification includes dog feed and cat feed as well. Their Lordships held ultimately that it does not include dog feed and cat feed. There is a reference to the fact that cat feed carries a fishy smell on account of processing, but, however, it is not put in Entry 5 and similarly dog feed is excluded from Entry 5, therefore, according to their Lordships both dog feed and cat feed sold by the appellant assessee will attract nil rate of tax under Entry 5 of the First Schedule of Karnataka Value Added Tax. Paragraph 5 was relied upon by the learned Government Pleader to insist that the punctuation-coma can lead to different meaning which is explained at paragraph 5 which reads as under:
"5. We do not find any merit in the arguments. The above quoted entry 5 shows that animal feed and feed supplements is one category. It is after the expression "animal feed and feed supplements" that the Legislature has inserted the comma, therefore, animal feed and feed supplements constitute one class of WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:22:- products they do not constitute two separate classes. Further, the expression "animal feed and fee supplements" is not only followed by the comma, it is followed by the word "namely" which indicates that the items mentioned after the words "namely" like poultry feed, cattle feed, pig feed, fish feed, etc., are specific instances of animal fed and feed supplements, which would fall in entry 5. that list is exhaustive. In that list, the Legislature has not included dog feed/cat feed, therefore, the products of the appellant do not fall under entry 5 of the First Schedule to the Act. In our view, the basic premise on which the argument of the assessee proceeds is the entry 5 covers three categories of goods, namely, animal feed, feed supplements and feed supplements and mineral mixtures. This premise is wrong. A bare reading of the said entry indicates "animal feed and feed supplements" as constituting one category. They are not two separate categories. The punctuation mark "comma" has been used expressly after the words "animal feed and feed supplements", which indicates that the Legislature intended to classify these two items as one class/category. Further, the Legislature intended to restrict that category by confining that category to processed commodity alone and that too for certain named animals. In the present case, we are concerned with cat feed and dog feed. Cat feed carries a fishy smell on account of processing. WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:23:- However, cat feed though processed is not put in entry
5. Similarly, dog feed s also excluded from entry 5. In the circumstances, we do not find any merit in the arguments advanced on behalf of the assessee."
18. As the punctuation, coma, was used expressly after words animal feed and feed supplements, their Lordships opined that dog feed and cat feed do not fit into the said category. He also places reliance on 2009(4) KHC 128(DB) in the case of Govindankutty v. State of Kerala. This is with reference to Section 7(7) pertaining to supply of track ballast for railways. In the course of judgment with reference to the nature of transaction, their Lordships were of the opinion that the work given to the petitioner is loading the stone ballast stacked at the railway station in the railway wagons and hoppers supplied by the railways and deliver it on either side of the railway track specified in the supply order in terms of the instructions of the site engineer. Therefore, looking at the nature of terms of contract, their Lordships opined that it was a sale, as for every cubic meter, a separate rate was fixed for delivery charges. WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:24:-
19. So far as the last two citations referred to above with regard to the punctuation and also words used in the documents pertaining to contract, with reference to Section 7(7), it is relevant to re-produce explanation to Section7(7), in order to understand what exactly civil works would mean for the purpose of Section 7(7). Section 7(7) reads as under:
"(ii) for sub-section (7), the following sub-
section shall be substituted, namely:-
(7) Notwithstanding anything contained in sub-
section(1) of Section 5, every contractor in civil works may, at his option, instead of paying tax in accordance with clause (iv) of that sub-section, pay tax at the rate of two per cent on the whole amount of contract.
Explanation:- For the purpose of this section "civil works" means construction or repair or maintenance of buildings, bridges, roads, runways, dams, canals, wells, ponds, swimming pools, water tanks or culvert including any masonry work or any other works of the like nature as may be notified Government in this behalf, from time to time, but shall not include any improvement or upgradation of such civil work by means of fixing, or laying of all WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:25:- kinds of floor tiles, mosaic tiles, slabs, stones, marbles, glazed tiles, painting, polishing, partitioning, wall paneling, interior decoration false sealing, carpeting, electrification, air conditioning or any other improvement on an existing structure."
Reading of Section 7(7) clearly indicates that a concession given to the assessee is, notwithstanding anything contained in Section 5(1) if the contract in question involves civil work, the assessee at his option has the benefit of paying tax in accordance with Clause 4 of Section 5 at the rate of 2% on the whole amount of contract. In order to get this benefit under Section 7(7) the contractor must do civil works and what civil works is explained in the explanation. Civil works includes as per the Explanation, construction or repair or maintenance of buildings, bridges, roads, runways, dams, canals, wells, ponds, swimming pools, water tanks or culvert including any masonry work or any other work of the like nature to be notified by the Government in that behalf.
20. According to the Government Pleader, any masonry work or any other work of the like nature has to be read only with reference to water tanks or cistern and not other types WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:26:- of work. Therefore, if floating restaurant comes within the description of work of building construction, one need not look further to understand whether it involves any masonry work or other work of like nature as there is no floating restaurant being mentioned as one of the civil works described in the explanation. So one has to verify whether the work in question comes under water tank or culvert with reference to inclusion of any masonry work or any other work of like nature. As already stated above, the contract involves construction of floating restaurant. In this case it cannot be equivated with a building of a ship or a boat i.e. a vessel which would float on water. Every floating object on the water cannot become a vessel. The Tourism Department permitted this kind of restaurant in order to attract the tourists thinking it is a novel idea. It was not definitely meant to carry customers, coming to the restaurant, to travel some distance in the lake as well as have the facilities of restaurant. In other words, restaurant is stable and fixed to concrete poles and it would not move from the place where it floats. Except floating in WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:27:- the water with the support of a dredge underneath the water, the two storeyed decks of the restaurant, has no mechanism which takes it forward. It is as good as a building constructed which is nothing short of a regular building constructed with all the facilities of a restaurant including a kitchen. It accommodates 200 people having ground and first floor. Even if we take into consideration the argument of Government Pleader that punctuation 'coma' has to be understood with reference to the nature of work referred to in explanation, once we bring the nature of work involved in this as construction of a building, we need not further look for support of masonry work or any other work of like nature.
Therefore, we are of the opinion, the construction of floating restaurant involving in these revision petitions is a civil work and not a contract of sale. In that view of the matter, both revision petitions are dismissed and so far as Writ appeal is concerned, it is allowed. So far as the penalty amounts, 50% of the penalty imposed was deposited way back in 2007. As we WANo. 1079 of 2013 and ST.Rev Nos. 36 & 37 of 2013 -:28:- have ordered refund of 50% of penalty amount paid by the appellant assessee, they are also entitled for interest, if any, in accordance with the provisions of the Act.
Manjula Chellur, Chief Justice.
A.M. Shaffique, Judge.
ttb