2010 (9) TMI 1000 - HC - VAT and Sales Tax

Interpretation of Pipe Laying Contracts under Kerala Sales Tax Act: Construction vs. Civil Works

The Court clarified that pipe laying contracts for pumping water fall under entry 15 of the Kerala General Sales Tax Act, not the residuary entry 22. It ... Whether the Tribunal was justified in holding that pipe laying contracts executed by the assessees in all these cases fall under the residuary entry 22 of Schedule IV of the Kerala General Sales Tax Act, 1963 which provides for assessment of works contracts not specifically mentioned in items 1 to 21 of the Schedule? Held that:- The issue is squarely covered by our decision in the case of S. Philipose [2001 (12) TMI 851 - KERALA HIGH COURT] .Even though the counsel for the assessees contended that pipe laying work for the water authority involves digging of canals and laying of pipelines on stable bed of land and both pipes and canals are used for flow of water, we do not think the contention is acceptable because the entry as stated above specifically covers pipe laying work irrespective of whether pipes laid are used for flow of drinking water or for drainage or sewage purposes. What is clear from the entry is that pipes laying done for pumping, drainage, sewage, etc., are covered thereunder. Pumping, necessarily requires installation of pump and laying of pipeline to take water to the destination. Without laying pipeline, water cannot be pumped to the destination. So much so, pipe laying done for pumping water falls within the ambit of entry 15. Revisions allowed reversing the orders of the Tribunal and by confirming the assessments. Issues:1. Classification of pipe laying contracts under the Kerala General Sales Tax Act, 1963.2. Interpretation of residuary entry 22 of Schedule IV.3. Comparison of entry 15 with pipe laying work for water authority.4. Applicability of entry 15 to pipe laying work for pumping water.5. Consideration of construction of pump house and water tanks as separate works.Analysis:1. The primary issue in this judgment revolves around the classification of pipe laying contracts under the Kerala General Sales Tax Act, 1963. The Tribunal had initially classified the contracts under the residuary entry 22 of Schedule IV, which covers works contracts not specifically mentioned in other entries. The assessees claimed the work to be civil in nature, specifically pipe laying works for the Kerala Water Authority. However, the assessments treated the work under entry 15 of the Fourth Schedule, which pertains to the supply and erection of sanitary fittings and articles for pumping, drainage, sewages, etc.2. The Court analyzed the interpretation of the residuary entry 22 and compared it with the specific entry 15, which deals with supply and erection of sanitary fittings. The Tribunal's decision to classify the work under the residuary entry was challenged by both the assessees and the Department. The Court noted that the residuary entry applies only to cases not covered by specific entries, emphasizing the need for a precise classification based on the nature of the work.3. Regarding the comparison of entry 15 with pipe laying work for the water authority, the Court referred to a previous decision and highlighted that entry 15 specifically covers pipe laying work for pumping, drainage, sewage, etc. The Court rejected the argument that pipe laying work for water authority should be treated as canal work, emphasizing that the entry encompasses all types of sanitary, drainage, sewage, and water supply work involving laying and fixing of pipes and pipe fittings.4. The Court further clarified that pipe laying work for pumping water falls within the ambit of entry 15, as it involves laying pipelines for carrying water to the destination. The civil construction work associated with making trenches for laying pipelines was considered incidental to the pipe laying work. The Court emphasized that the purpose of entry 15 is to cover pipe laying work for various purposes, including pumping water to consumers.5. Lastly, the Court addressed the contention regarding the construction of pump house and water tanks as separate works. While acknowledging that such construction works may be assessable as civil works if done with bricks and concrete, the Court found no specific findings on this matter in the Tribunal's order or in the revisions filed. As a result, the Court allowed the revisions filed by the State, reversing the Tribunal's orders and confirming the assessments, while dismissing the revisions filed by the assessees.