Sale versus works contract: lift supply and installation treated as taxable sale; maintenance deduction and penalty challenge also failed.

Supply, installation and commissioning of lifts/elevators was treated as a sale transaction, not a works contract, because the equipment was manufactured to specification, moved in semi-knocked down condition and installed at the customer's site; the binding Supreme Court ruling in Kone Elevators governed until displaced, so the transaction remained taxable as sale. The claim to exclude annual maintenance charges from turnover was not entertained because it had not been specifically pleaded or founded before the lower authorities as a distinct deduction. The penalty arising from reopening and reassessment was also sustained, since the reassessment stood on the sale characterisation and no separate ground justified interference.

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Issues: (i) Whether the supply, installation and commissioning of lifts/elevators in the facts of the case constituted a sale transaction or a works contract for the purposes of tax under the Karnataka Value Added Tax Act, 2003; (ii) whether the claim for exclusion of annual maintenance charges from turnover could be entertained in revision; and (iii) whether the levy of penalty arising from reopening and reassessment could be interfered with.

Issue (i): Whether the supply, installation and commissioning of lifts/elevators in the facts of the case constituted a sale transaction or a works contract for the purposes of tax under the Karnataka Value Added Tax Act, 2003.

Analysis: The transaction involved manufacture of lifts/elevators to customer specification, movement in semi-knocked down condition, and installation at the customer's site. The authorities found that the assessee did not undertake the civil works component and only supplied, installed and commissioned the equipment. The issue was held to be covered by the binding decision of the Supreme Court in Kone Elevators, and the reference of that view to a larger bench did not displace the law declared by the Supreme Court for the time being. By applying that precedent, the transaction was treated as sale and not works contract.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether the claim for exclusion of annual maintenance charges from turnover could be entertained in revision.

Analysis: The claim regarding annual maintenance charges was not specifically founded before the authorities as a distinct deduction claim; it was raised only in the broader context of the contention that the entire transaction was a works contract. In the absence of a proper foundation and specific issue before the lower authorities, the revision court declined to entertain the plea.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Issue (iii): Whether the levy of penalty arising from reopening and reassessment could be interfered with.

Analysis: Since the reopening and reassessment were sustained on the characterisation of the transaction as sale, the penalty resting on that reassessment was also found to be sustainable. No separate ground was made out for interference with the penalty.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The revision petitions failed because the governing precedent treated the lift supply and installation transaction as taxable sale, the additional claim regarding maintenance charges was not fit for interference, and the consequential penalty also survived.

Ratio Decidendi: Until overruled by a subsequent decision, a law declared by the Supreme Court remains binding under Article 141, and supply, installation and commissioning of lifts/elevators on the facts found constituted a sale transaction rather than a works contract.

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