Can the Construction Industry Development Board impose levy to offshore construction works?
The Construction Industry Development Board (“CIDB”) is a statutory body established under the CIDB Act 1994 (“the Act”). The Act empowers CIDB to be a one stop body to promote and stimulate the development of the construction industry in Malaysia.
Under Section 34(2) of the Act, CIDB is authorised to impose on every registered contractor (but before the commencement of any construction works having a contract sum of above RM500,000.00) a levy of a quarter per centum of the contract sum.
(1) How the Court Interpret Statutes involving Tax/Levy
Essentially, a levy is a tax and taxing statutes are to be interpreted in the same way as any other statute, that is taxing statutes must be given a purposive interpretation to fulfil the objective of the statute.
In the Federal Court case of LEMBAGA HASIL DALAM NEGERI MALAYSIA V ALAM MARITIM SDN BHD  2 MLJ 1, it was held that when interpreting provisions of a taxing statute, the intention of Parliament must be construed from the language used and the Court is to interpret it accordingly. If the language is clear, unambiguous and applies accurately to existing facts, the Court shall accept the ordinary meaning. If the words are not so explicit, it is incumbent upon the Court to undertake an exercise to seek out the purpose of Parliament, avoiding both injustice and absurdity.
The Act would be interpreted strictly by the Court within its four corners and the words used. However, if the words used are vague, it is upon the Court to discover the true intention and/or purpose of the Parliament in enacting the said statutes.
(2) Whether the Act applies to Offshore Construction Works
Section 34 spells out the obligations of a contractor under the Act. Those obligations are divided into two, firstly the contractor needs to declare and submit to the CIDB any contract (having a contract sum of above RM500,000.00) that has been awarded to the contractor. Secondly, there is a levy quarter per centum of the contract sum imposed to the said contractor.
Subsections (1) and (3) require a contractor to declare their contracts to the CIDB, failing which under subsection (10), the contractor shall be liable to a fine not exceeding RM50,000.00.
Subsections (2) and (4) provides for the contractor to pay the levy imposed on them by the CIDB, failing which subsection (9) provides for a fine not exceeding RM50,000.00 or four times the amount of such levy payable, whichever is higher.
In the Federal Court Case of LEMBAGA PEMBANGUNAN INDUSTRI PEMBINAAN MALAYSIA V KONSORTIUM JGC CORP & ORS  6 MLJ 612, the Court held that it is well settled that the language of a statute imposing a tax, duty, charge or levy must be strictly construed, with no intendment permitted. Words must be given their ordinary meaning. Nothing is to be read in or implied and once that meaning is clear, due regard must be given to it. Any ambiguity must be decided in favour of the taxpayer charged. These general principles of interpreting a tax imposing statute are still woven into the fabric of the principles of construction of taxing provisions despite the introduction of Section 17A of the Interpretation Acts 1948 and 1967.
The Federal Court was of the view that the consequential effect of the rapid economic growth in this country where mega projects and joint ventures by Malaysian based companies together with offshore entities are no more a rarity, makes it all the more imperative that the objective and purpose of the Act be implemented. This purposive and practical approach will surely assist and fulfil the task of the appellant, together with the levy mechanism, to manage, develop and regulate the construction industry tremendously.
Based on the above observation, it can be seen that offshore construction works falls under the purview of Section 34 of the Act and CIDB can impose levy accordingly.
- Mareva Injunction as a Preventive Relief – IIUM Journals
By Rahayu Partnership, Malaysia
Law Firm Website: www.rahayupartnership.com