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31 Jul 2015

Putting Safety barriers on National Highway are relatable to "roads", hence exemption under RVAT available

Recently, on 9th July 2015 Rajasthan High Court in the case of Commercial Taxes Officer vs Penar Industries Ltd (TS-333-HC-2015(RAJ)-VAT) held that exemption applicable to “execution of works contracts relating to buildings, bridges, roads and canals” under Rajasthan Sales Tax Act, also extends to fixing profile safety steel barriers at hazardous locations on National Highway, as the same are relatable to roads itself.

The major issue before Rajasthan HC in this case was whether fixing and providing of Works Profile Safety Barrier on a National Highway would be part and parcel of ‘road’, so as to avail exemption applicable to “execution of works contract relating to buildings, bridges, roads and canals”.

Assessee, Penar Industries Ltd, was awarded contract by Rajasthan State Bridge Construction Corporation Ltd., Jaipur (RSBCCL) for fixing of Works-Profile Safety Barrier at Toll Plaza, NH-8. On an application, Assistant Commissioner granted certificate of exemption in Form ST-2, directing that fixing of Works Profile Safety Barrier at Toll Plaza, NH-8 would entail exemption fee @ 1% with 12% surcharge and same was required to be paid by assessee. However, Assessing Officer (AO), denied the exemption on the ground that fixing and providing of Works Profile Safety Barrier could not be said to be relating to roads but these were safety steel barriers which could be used for other purposes. On an appeal, DC(A) allowed assessee's claim. Revenue filed an appeal before the Tax Board, who also held in favour of assessee. Aggrieved thereby, Revenue filed an appeal before HC.

HC observed that, as per Notification dated April 28, 1993, Exemption fee @1% was chargeable on ‘entire work related to Roads and notification stated that exemption fee was to be charged @1%, relating to safety work of road. HC further stated that, though providing and fixing, may be at Toll Plaza but it is certainly part of a road. Further, the word ‘Road’ as per Chambers Dictionary means ‘A Highway, A roadway, A way of approach’. HC observed that merely putting concrete, grit, cannot be said to be a road and as in the present case which is related to National Highway, safety measures are to be taken and they are a part and parcel of roads.

HC further stated that on National Highway heavy vehicles such as Trucks, Trailers etc. also travel and safety measures are to be taken to avoid accidents, hence, assessee was awarded contract of fixing safety barrier which was used for safety purposes. Further, developing or constructing a road includes not only putting concrete, grit, coal tar, etc. but also many more things and includes everything relating to road. HC observed that "The expression such as “arising out of“ or “in respect of the” or “in connection with” or “in relation to” or “in consequence of” or “concerning” or “relating to” the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope).”

Accordingly, Rajasthan High Court held that, assessee was eligible for exemption and rejected Revenue's appeal.