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2017 Supreme(Bom) 1013
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ANOOP V. MOHTA AND ANUJA PRABHUDESSAI, JJ.
Painterior (India) - Appellant.
Vs.
The State of Maharashtra, through Commissioner of Sales Tax - Respondent
MAHARASHTRA VAT APPEAL NO. 22 OF 2017 IN VAT SECOND APPEAL NO. 952 OF 2014
Decided On : 25-07-2017
For the Appellant : Mr. Vinayak Patkar a/w Mr. Ishaan Patkar i/by roshni Naik
For the Respondent: Ms. Jyoti Chavan, AGP
The main legal point established in the judgment is that repairs and reconstruction of buildings are considered 'Construction Contracts' under the MVAT Act, entitling the appellant to the lower tax rate of 5%.
Headnote:
MVAT Act - Construction Contract - Section 42(3) - [Section 42(3)]
Fact of the Case:
The appellant, a registered partnership firm, filed an application for determination of the tax rate applicable to a contract for repairs of a building under the MVAT Act. The Commissioner rejected the contention and determined the contract as not a 'Construction Contract', attracting a higher tax rate of 8%.
Finding of the Court:
The court found that the repairs and reconstruction of buildings fell within the ambit of 'Construction Contract' under the MVAT Act, based on the interpretation of relevant provisions, notifications, and circulars. The court held in favor of the appellant, allowing the appeal and answering the questions in favor of the appellant.
Issues: 1. Whether a contract for repairs or reconstruction of a building is a 'Construction contract' as contemplated by Section 42(3) of the MVAT Act? 2. Whether the Tribunal is justified in upholding the decision of the Commissioner of rejecting the prayer for prospective effect?
Ratio Decidendi: The court interpreted the provisions, notifications, and circulars to conclude that repairs and reconstruction of buildings fell within the ambit of 'Construction Contract' under the MVAT Act, and the appellant was entitled to the lower tax rate of 5%.
Final Decision: The appeal was allowed, and the questions were answered in favor of the appellant.
ANOOP V. MOHTA, J.
1. Admit. Heard finally by consent of the parties.
2. This Appeal is filed under Section 42(3) of the Maharashtra Value Added Tax, Act 2002 (for short, “MVAT Act”). The following are the basic backgrounds, leading to this Appeal.
Background of the Appeal:-
3. The Appellant is a registered partnership firm registered under the MVAT Act. The Appellant is in the business of repairs/reconstruction of buildings. Application dated 14 June 2010, was filed by the Appellant before the Commissioner of Sales Tax, Maharashtra State (for short, “The Commissioner”) under Section 56 of the MVAT Act, for determination of the rate of tax applicable to a contract for repairs of a building, as the repairs/reconstruction contracts are covered by the expression “construction contracts”, which is used in Section 42(3) of the MVAT Act read with Notification No. VAT.1506/CR134/Taxation/1 dated 30 November 2006. The rate of tax applicable thereto, would be 5% as notified under the Act. The Appellant had forwarded along with the Application to the Commissioner such type of contract with the Sangam Bhavan Building.
4. The Appellant also prayed for the direction that the determination of the Commissioner should not affect the liability of the Appellant under the Act in respect of any sale effected prior to the determination. The Commissioner by order dated 25 July 2014, rejected the contention of the Appellant and made a determination that the contract is not a “Construction Contract”, thus attracting the rate of tax at 8%. Being aggrieved by the order passed by the Commissioner, the Appellant approached the Maharashtra Sales Tax Tribunal (for short, “the Tribunal”) in Appeal. The Tribunal by Judgment and order dated 15 December 2016, confirmed the order passed by the Commissioner. Hence, the Appeal.
5 Following substantial questions of law are raised.
(a) Whether a contract for repairs or reconstruction of building is a “Construction contract” as contemplated by Section 42(3) of the MVAT Act?
(b) Whether the Tribunal is justified in upholding the decision of the Commissioner of rejecting the prayer for prospective effect?
6. The Appellant who is a Building Contractor entered into an agreement of construction contract for substantial repairing of the buildings “Sarang” and “Sangam Bhavan”. The dispute arose as to the classification of the contract executed by the Appellant as “Construction Contract”. The Appellant's case is that the terms “construction” includes “Repairs and Reconstruction”. The nature of repairs of “Sangam Bhavan” Colaba, Mumbai” were external repairs and painting, internal structural damage, replacement of water supply and drainage pipeline, extra items of plumbing works, extra items of civil works, Addendum items of civil works.
The Commissioner's determination:
7. The following question for determination was agitated before the Commissioner of Sales Tax, Maharashtra State under Section 56 of MVAT Act on the basis of Appellant's Application dated 12 June 2010. The question for determination was “What is the rate of tax payable under Section42(3) Expl. (i) Read with Notification No. VAT1506/ CR134/ Taxation1 dated 30112006 on the sales effected by the applicant vide Invoice No.220 dated January 01, 2013 raised on Sangam Bhavan C.H.S. Ltd.?
8. The Appellant submitted a bill along with the Application for determination. It is further submitted that the “Repairs Contract” is a “Construction Contract” as covered under Section 42 (3) Expl. (i) with notification dated 30 November 2006. The Explanation given by the Commissioner of Sales Tax under the erstwhile Bombay Sales Tax Act, 1959 (Circulars dated 6 January 2000 and 31 August 1999) clarifying that “Construction” includes “Repairs and Reconstruction”. The Judgments were cited in this support. Alternatively, it is submitted that the order be given prospective effect (under Section 56(2). A written submission of 20 June 2014, was tendered with the bill for an unassessed pe
