The levy under the Construction Industry Development Board Act cannot be applied to offshore works that do not qualify as 'construction works' as defined, reaffirming strict statutory interpretation in taxation matters.

[1] This was an appeal against the decision of the High Court dated 25 November 2010 in an Order 14A application filed by the appellant as plaintiff that was dismissed by the High Court. The core issue was whether levy under the Construction Industry Development Board Act ("CIDB Act") and in the Construction Industry (Collection of Levy) Regulations 1996 ("1996 Regulations") had to be paid by the respondent for "offshore works" or "non-construction works" (engineering design, procurement, commissioning, management services) in respect of a project involving the construction of a liquefied natural gas plant in Sibu, Sarawak that was owned by Petronas. The full contract sum for the project was USD 1,481,254,000.00 plus Euro 59,640,000.00. Under s 34(2) of the CIDB Act, the CIDB ("Lembaga") is authorised to impose on every registered contractor before the commencement of any construction works having a contract sum of above 500,000 ringgit, a levy of a quarter percent of the contract sum. "Contract sum" is defined under sub-s (8) of s 34 as meaning "the consideration for a contract in respect of any construction works". "Construction works" is further defined in s 2 of the CIDB Act as follows:

"construction works" means the construction, extension, installation, repair, maintenance, renewal, removal, renovation, alteration, dismantling, or demolition of:

(a) any building, erection, edifice, structure, wall, fence or chimney, whether constructed wholly or partly above or below ground level;

(b) any road, harbour works, railway, cableway, canal or aerodrome;

(c) any drainage, irrigation or river control works;

(d) any electrical, mechanical, water, gas, petrochemical or telecommunication works; or

(e) any bridge, viaduct, dam, reservoir, earthworks, pipeline, sewer, aqueduct, culvert, drive, shaft, tunnel or reclamation works and includes any works which form an integral part of, or preparatory to or temporary for the works described in paragraphs (a) to (e), including site clearance, soil investigation and improvement, earthmoving, excavation, laying foundation, site restoration and landscaping."

[2] The definition of "construction works", as can be seen from the statutory wording, includes works forming "an integral part of", or "preparatory to", the list of activities described as "construction works". Section 1(2) of the CIDB Act provides that the Act "shall apply throughout Malaysia".

[3] Regulation 6 of the 1996 Regulations provides that the Lembaga shall determine the contract sum of the construction works for the purpose of determining the amount of the levy payable by the registered contractor.

The Issues Before The High Court

[4] The issues that were to be determined by the High Court was addressed by the learned judge in his judgment (which issues were agreed between the parties). As stated in his lordship's judgment, the issues were:

1. Whether the plaintiff has construed the CIDB Act and the relevant documents wrongly and determined and imposed an incorrect levy amount (according to Regulation 6 of the Construction Industry (Collection of Levy) Regulations 1996), in particular:

(i) Whether the offshore work falls outside the definition of "construction works" as found in s 2 of the CIDB Act (and hence are outside the ambit of s 34) given that such works are to be performed outside of Malaysia and that the CIDB Act only provides that it shall apply throughout Malaysia.

(ii) Whether the levy under s 34 of the CIDB Act is restricted to th