2018 (12) TMI 230 - HC - VAT and Sales Tax

Inter-state Sales Tax: Mumbai to Delhi Works Contract Ruling

Commissioner of Value Added Tax, Delhi Versus M/s. Otis Elevator Company (India) Ltd.

Commissioner of Value Added Tax, Delhi Versus M/s. Otis Elevator Company (India) Ltd. - TMI Issues Involved:1. Interpretation of inter-state sales in relation to supply of goods for works contract.2. Applicability of Delhi Sales Tax Act, 1975 on transactions involving supply, erection, commissioning, and installation of lifts/elevators.3. Analysis of contracts, jurisdiction, and appropriation of goods in determining the place of sale.Issue 1: Interpretation of inter-state sales in relation to supply of goods for works contract:The appellant, the Government of NCT of Delhi, challenged the finding of the VAT Tribunal that the supply of goods from Mumbai to Delhi for executing works contracts did not constitute inter-state sales under the Central Sales Tax Act, 1956. The Tribunal held that the goods moved from outside the state constituted inter-state sales, emphasizing that the appropriation of goods to the contract occurred in Mumbai upon acceptance of the offer/placing orders. The Tribunal's decision was supported by legal precedents and the principle that the incidence of Central Sales Tax occurs where goods are appropriated to the contract. The Court concurred with the Tribunal's interpretation, citing a similar reasoning in a judgment by the Karnataka High Court.Issue 2: Applicability of Delhi Sales Tax Act, 1975 on transactions involving supply, erection, commissioning, and installation of lifts/elevators:The Assessee, engaged in the business of lift/elevator supply and installation, faced assessments by the Delhi Sales Tax Authorities for different periods. The Assessing Authority sought to levy local sales tax based on the contracts, deeming them indivisible work contracts where the title of elevators passed to customers upon payment. Despite the First Appellate Authority upholding the assessments, the VAT Tribunal set aside the orders, emphasizing that the goods' appropriation to the contract in Mumbai constituted inter-state sales, not subject to taxation under the Delhi Sales Tax Act, 1975.Issue 3: Analysis of contracts, jurisdiction, and appropriation of goods in determining the place of sale:The Court analyzed the contracts, jurisdiction clauses, and appropriation of goods to determine the place of sale. The contracts specified payment terms, transfer of title upon full payment, and the place of contract conclusion in New Delhi. The Court noted that the goods moved from outside Delhi for works contract execution constituted inter-state sales, as evidenced by the contract specifications and invoices showing delivery to the Delhi site. Legal precedents were cited to establish that a company with branches in multiple states constitutes one legal entity, and orders placed with a branch for goods supplied from another state qualify as inter-state sales.In conclusion, the Court upheld the Tribunal's decision, emphasizing that no question of law arose, and dismissed the appeal. The judgment provided a comprehensive analysis of the interpretation of inter-state sales, the applicability of the Delhi Sales Tax Act, and the significance of contract terms and goods appropriation in determining the place of sale for works contracts involving supply, erection, commissioning, and installation of lifts/elevators.