Regarding applicability of bocw on pipes used in execution of pipeline contract.
gilgonde
(Querist) 03 January 2012
This query is : Resolved
The pipes are moved from one state to another state under the payment of Central Sales Tax for which the buyer has issued ‘C’ form. The renowned lawyer has opinioned that ince the pipes are manufactured in factory covered under Factories Act and used by the same contractor i.e. the pipe manufacturer for executing pipeline contract in another state, the value only attributable to Lowering, Laying, Jointing, Testing of the pipeline will cover under BOCW Act and hence, the BOCW is not applicable on pipes supplied from one state to another state, even if, they are used by the same manufacturer of pipes for Lowering, Laying, Jointing and Testing contract undertaken though it is indivisible contract. The owner of the contract has accepted this and asked the manufacturer cum contractor to submit an undertaking for any eventuality of the contention being not accepted by BOCW Authorities and the liability to settle the issue remains with the manufacturer cum contractor. They have provided such undertaking to the owner. After some time, owner has obtained another opinion from a Lawyer which is attached herewith as Annexure 2 and hence, the matter is still unresolved. The manufacturer cum contractor has again approached the Lawyer who has given his earlier opinion which is attached herewith as Annexure 1 and according to his conversation, he has reiterated his position and even further added that since this pipeline is forming part of plant and machinery for power generation and being an essential part of the total power generation project, the BOCW Act is not applicable on the same. He being retainer with the owner who was restrained him for giving any such opinion to the manufacturer cum contractor and hence, we seek your advise as follows :
1)Is the BOCW Act is applicable to the pipeline contract?
2)If yes, is it applicable only on the civil portion of the pipeline contract i.e. Lowering, Laying, Jointing, Testing etc.?
3)Is the pipe value from the contract is deductable while arriving at BOCW applicable amount? If yes, kindly give us your valuable inputs on this. If No, what are the reasons?
Raj Kumar Makkad
(Expert) 04 January 2012
As you have raised purely a commercial query so it is better for you to have services of local lawyer or a CA. You may also post your query at www.caclubindia.com
prabhakar singh
(Expert) 04 January 2012
Rightly advised by Mr. raj kumar makkad.
gilgonde
(Querist) 06 January 2012
As we look at it, this is basically a legal question to determine the applicable value of contract for ariving at BOCW applicable amount since, the use of pipes for construction of pipeline made as per the exclusions applicable as per BOCW Act i.e. pipes made at factory covered under Factories Act, 1948. Kindly relook into this and advise.
Jacob Pratap
(Expert) 11 March 2012
I respectfully differ with advise given to you that the pipes are not covered since manufactured in a factory which is covered under the Factories Act, 1948. For that matter, the bricks are also manufactured in the brick-kilns which are covered under the Factories Act; so is the case of cement and iron. If you minus these items then only labour cost remains. But BOCW does not impose cess on labour cost alone. Cess is on 'cost of construction'. Look what is stated in Rule 3 of the BOCW Cess Rules, 1998. It reads as under:-
"3. Levy of cess.- For the purpose of levy of cess under sub-section (1) of section 3 of the Act, cost of construction shall include all expenditure incurred by an employer in connection with the building or other construction work but shall not include-
-cost of land;
-any compensation paid or payable to a worker or his kin under the Workmen's Compensation Act. 1923."
Think again. Best wishes.
Jacob Pratap
