Supreme Court Redefines Lift Contracts as "Works Contract," Overrules Previous Decision; Impacts Pending Assessments.

The SC held that the manufacture, supply, and installation of lifts constitute a "works contract," overruling its previous decision in Kone Elevators. The Court determined that such contracts involve a composite nature of supply and installation, aligning with the constitutional definition under Article 366(29A)(b). Consequently, show-cause notices and assessment orders based on the earlier decision were quashed, and pending assessments were directed to align with this ruling. Justice Kalifulla dissented, arguing the contract should be treated as a sale, emphasizing the primary intent was the sale of the lift, with installation being incidental.

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Issues: Whether the manufacture, supply and installation of lifts/elevators under the standard contract constituted a contract of sale or a works contract.

Analysis: The majority held that the governing question must be answered from the true terms of the bargain. The contract showed a composite arrangement in which supply of lift components and installation were inseparably linked, with the contractor undertaking supply, assembly, commissioning and installation of the lift at site. The Court held that after the Forty-sixth Amendment, Article 366(29A)(b) permits taxation of the transfer of property in goods involved in execution of a works contract, and that the dominant nature test no longer controls such composite contracts. It concluded that the reasoning in the earlier view treating the transaction as a sale was incorrect because the installation activity was not merely incidental but formed part of the composite works contract.

Conclusion: The transaction was held to be a works contract and not a mere sale of goods, and the earlier contrary view was overruled.

Concurring Opinion: The majority outcome was opposed by a separate opinion which held that the contractual terms disclosed a sale of lifts and not a works contract, emphasizing that the essential object was supply of the elevator and that the installation element was insufficient to change the character of the bargain.

Final Conclusion: The legal position was settled in favour of treating such lift supply-and-installation arrangements as works contracts for tax purposes, with the earlier contrary precedent displaced.

Ratio Decidendi: After the Forty-sixth Amendment, a contract for supply and installation of lifts is taxable as a works contract where the contractual terms disclose a composite arrangement for transfer of property in goods involved in execution of the work, and the dominant nature test is not determinative.

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