Composite works contract classification under notification upheld for sewage treatment plant project and exemption fee liability

A composite works contract for design, construction, supply, erection, testing, commissioning, and five years' operation and maintenance of a sewage treatment plant was classified under item/category 3 of Notification No.12(63)FD/Tax/2005-80 for levy of exemption fee. The classification turned on the dominant components of the contract, including installation of plant and machinery, sewage treatment work, and laying of pipelines with material. Concurrent factual findings by the assessing authority, appellate authority, and Tax Board were upheld because no segregation of activities or separate value allocation was shown, and no perversity, illegality, or impropriety was established. Exemption fee was therefore chargeable at 2.25%.

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Issues: Whether the assessee's works contract for design, construction, supply, erection, testing, commissioning and five years' operation and maintenance of a sewage treatment plant fell under item/category 2 or item/category 3 of Notification No.12(63)FD/Tax/2005-80 dated 11/08/2006 for the purpose of levy of exemption fee.

Analysis: The contract was found to be composite in nature and the main components were installation of plant and machinery, sewage treatment plant work and laying of pipelines with material. The concurrent findings of the assessing authority, appellate authority and Tax Board were based on the terms of the contract and appreciation of evidence. No segregation of different activities or separate allocation of value was shown. The Court found no perversity, illegality or impropriety in those factual findings and held that the cited authorities were distinguishable on the facts.

Conclusion: The works contract fell under item/category 3 of the notification and exemption fee was chargeable at 2.25%, against the assessee.

Ratio Decidendi: Where a works contract is composite and its dominant components bring it within a specific notification category, concurrent factual findings on classification will not give rise to a question of law unless shown to be perverse.

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