IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN & THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM THURSDAY, THE 2ND JULY 2009 / 11TH ASHADHA 1931 ST.Rev..No. 244 of 2006() ------------------------- (TA.2/2005 of SALES TAX APPELLATE TRIBUNAL, ADDL. BENCH, KOZHIKODE.) .................... PETITIONER/ASSESSEE: ---------------------------------------- B.U. ABDULRAHIMAN, S/O. UMMER, P.W.D. CONTRACTOR, BENDICHAL, P.O. THAKKAIL. BY ADV. SRI.T.M.SREEDHARAN SMT.C.K.SHERIN RESPONDENT(S): REVENUE: ----------------------- STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT, SECRETARIAT, THIRUVANANTHAPURAM. BY SPL. G.P. SRI.VINOD CHANDRAN THIS SALES TAX REVISION HAVING BEEN FINALLY HEARD ON 02/07/2009, ALONG WITH STRV NO. 360 OF 2006 & STRV NO.354 OF 2004, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.R. C.N.RAMACHANDRAN NAIR V.K.MOHANAN & C.K.ABDUL REHIM, JJ. .................................................................... S.T. Rev. Nos.244 & 360 of 2006 & 354 of 2004 .................................................................... Dated this the 2nd day of July, 2009. ORDER Ramachandran Nair, J. The question referred by the Division Bench for our decision is whether petitioners are entitled to payment of tax at compounded rate under Section 7(7) of the KGST Act on the construction of culverts in the case of two petitioners (S.T.Rev. Nos.244 & 360/2006) and boat jetty in the case of the other petitioner (S.T.Rev. No.354/2004). Another Division Bench in the decision in ABDUL MAJEED V. STATE OF KERALA (2006(3) KLT 548) held that culvert is not a civil work entitling the contractor for payment of tax at compounded rate under Section 7(7) of the KGST Act. However, the Division Bench which referred the matter to us felt that a culvert is nothing but a 2 mini bridge, which work is a civil work under the definition clause prior to the introduction of Explanation to Section 7(7) by Finance Act, 2004. We have heard counsel appearing for the petitioners and Special Government Pleader appearing for the respondent. 2. Section 7(7) as it stood prior to the amendment by Finance Act, 2004, provided for payment of tax at compounded rate for civil works of construction of buildings, bridges, roads etc. and culvert was not specifically covered in the provision. However, Section 7(7) was amended by Finance Act, 2004 introducing an Explanation to it. The Section as amended is extracted hereunder with the Explanation: "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 work of the like nature as may be 3 notified by Government in this behalf, from time ot time, but shall not include any improvement or upgradation of such civil work by means of fixing or laying of all kinds of floor tiles, mosaic tiles, slabs, stones, marbles, glazed tiles, painting, polishing, partitioning, wall panelling, interior decoration, false sealing, carpeting, electrification, air conditioning, or any other improvement on an existing structure." 3. The question to be considered is whether construction of culvert and construction of boat jetty are works of civil nature entitling the contractors for payment of tax at compounded rate under Section 7 (7) of the KGST Act. So far as boat jetty is concerned, Division Bench of this court in STATE OF KERALA V. RADHESYAM KHANDENWALL (2009(2) KLT SN 55(C. NO.60)) held that boat jetty is a civil work as it answers the description of "building" under Section 7(7) entitling the contractor for payment of tax at compounded rate. We are in agreement with the view expressed by the Division Bench and we hold that petitioner in S.T.Rev. No.354/2004 is eligible for payment of tax at compounded rate on construction of boat jetty. 4 4. So far as culvert is concerned, it is specifically brought under the Explanation to Section 7(7) with effect from 1.4.2004. On going through the Annexure to the Finance Bill, we find that the Explanation was brought to remove ambiguity regarding compounding of tax in respect of civil works. Since the purpose of amendment is to clear the ambiguity, the amendment itself is clarificatory and so much so, culvert should be taken to have been covered by Section 7(7) even prior to the introduction of the Explanation. Besides this, as observed by the Division Bench in the reference order, we are of the view that there is hardly any difference between a bridge and a culvert and the difference is only in dimension and size. A culvert is nothing but a mini or a small bridge over a channel mostly providing for flow of water beneath it across the road. Therefore, in our view, even prior to the introduction of Explanation, culvert falls within the meaning of "bridge" under Section 7(7) entitling the contractors for payment of tax at compounded rate under Section 7(7) of the Act. We, therefore, 5 overrule the decision of this court in ABDUL MAJEED'S case abovementioned. The S.T. Revision cases are accordingly allowed reversing the orders of the Tribunal and that of the first appellate authority with direction to the Assessing Officer to complete assessment at compounded rate on civil construction work for construction of culvert and boat jetty. C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge C.K.ABDUL REHIM Judge pms