Inter-State works contract treatment for lift supply and installation upheld; local sale classification rejected.

Designing, manufacture, supply, erection, installation, testing and commissioning of lifts against customer orders was treated as an inter-State works contract where the goods were manufactured to specification at Ghaziabad and moved directly to the customer site outside the manufacturing State. The branch office's role was confined to installation and commissioning, and the delivery documents showed a clear nexus between the purchase order and inter-State movement. The view that the goods were first sold locally in Tamil Nadu was held erroneous. The disputed turnover was therefore not a local sale under the Tamil Nadu General Sales Tax Act, 1959, and the claimed deduction was allowed.

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Issues: Whether the transaction involving designing, manufacture, supply, erection, installation, testing and commissioning of lifts pursuant to customer orders was an inter-State works contract eligible for deduction, or a local sale taxable under the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The goods were manufactured at Ghaziabad according to customer specifications received through the Tamil Nadu branch, and the finished goods were despatched directly to the customer site outside the manufacturing State. The delivery documents and movement of goods showed a clear nexus between the purchase order and the inter-State movement. The branch's role was confined to installation, erection, testing and commissioning at site. On these facts, the transaction could not be treated as a subsequent local sale by the branch office. The reasoning that the goods were first sold locally in Tamil Nadu was found to be erroneous. The transaction answered the description of an inter-State works contract, and the assessee was entitled to the claimed deduction.

Conclusion: The disputed turnover was not a local sale; it was an inter-State works contract, and the assessee succeeded.

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