TaxTMI 
TaxTMI 
2017 (4) TMI 731
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...., the Assistant Commissioner proceeded to pass the impugned order dated 03.01.2007. 4.Aggrieved by the same, the petitioner invoked the writ jurisdiction of this Court by filing the instant petition under Article 226 of the Constitution. Since, the writ jurisdiction of this Court was invoked, the petitioner apart from the merits of the matter, made an assertion that the impugned order was without jurisdiction as it had been passed in disregard of the fact that in AY 1998-1999, the similar queries had been raised in the pre-assessment notices, qua which, findings had been returned in favour of the petitioner, which also, included the grant of exemptions in favour of the petitioner. 5. Based on the assertions made in the instant petition, notice was issued, whereupon, a counter affidavit was filed on behalf of the respondent. It is a common ground before us, that, two principal issues arose for consideration before the Assistant Commissioner/ Assessing Officer. 6. The first issue pertained to ascertainment of the veracity of the stand taken by the petitioner that the Central Air Conditioning Plant (CAP) and the Packaged Air Conditioning Plant (PAP) were indivisible wor....
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....e site and not needing any extraordinary or technological skill or prowess. But this incidental activity integrates the factory produced components transferred and erected at the designated spots in the site and brings about a workable machinery, the subject matter of contract. The bargain in all the contracts, copies of which were obtained and filed, is for supply and erection of packaged air conditioners of various capacities called TRs. The predominant intention of the contracting parties has been to supply packaged air conditioners and pay the price for otheir erection. Whatever erection work that has taken place at the site is only nominal. The gargantuan labour charges portrayed by the dealer to make up an imaginary picture of works contract does not have any accounting basis. The artificial split up of the cost of manufacture of ducts or insulations does not qualify for the term labour or other like charges. In the case of state of Andhra Pradesh Vs Kone Elevators (India) Limited, reported in 140 STC 22 the Supreme Court lays down the following test to decide on whether a transactions is a contract to sell or works contract. It can be treated as well settled t....
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....vered has any individual existence before the delivery as the sole property of the party who is to deliver it, then it is a sale. If the bulk of material used in construction belongs to the manufacturer who sells the end product for a price, then it is a strong pointer to the conclusion that the contract is in substance one for the sale of goods and not one for labour. However, the test is not decisive. It is not the bulk of the material alone but the relative importance of the material qua the work, skill and labour of the payee which also has to be seen. If the major component of the end-product is the material consumed in producing the chattel to be delivered and the skill and labour are employed for converting the main components into the end products, the skill and labour are only incidentally used, the delivery of the end product by the seller to the buyer would constitute a sale. On the other hand, if the main object of the contract is to avail the skill and labour of the seller though some material or components may be incidentally used during the process of the end product being brought into existence by the investment of skill and labour of the supplier, the t....
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....cer came to the conclusion that the transaction in issue involved outright sale and was thus, amenable to tax at the rate of 20%. It however transpires that the Judgment rendered by the three judge bench of the Supreme Court in Kone-I has been overruled by the Constitution Bench of the Supreme Court vide Judgment dated 06.05.2014. This Judgment is reported in (2014) 71 VST 1 (SC) and, is titled as KONE ELEVATOR INDIA PVT.LTD. V. STATE OF TAMIL NADU AND OTHERS (in short 'KONE-II'). In the later judgment, the Supreme Court has made the following pertinent observations : ''65. Considered on the touchstone of the aforesaid two Constitution Bench decisions, we are of the convinced opinion that the principles stated in Larsen and Toubro (supra) as reproduced by us hereinabove, do correctly enunciate the legal position. Therefore, the dominant nature test or overwhelming component test or the degree of labour and service test are really not applicable. If the contract is a composite one which falls under the definition of works contracts as engrafted under clause (29A)(b) of Article 366 of the Constitution, the incidental ....
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.... at the site, it becomes a permanent fixture of the building. Involvement of the skill has been elaborately dealt with by the High Court of Bombay in Otis Elevator (supra) and the factual position is undisputable and irrespective of whether installation is regulated by statutory law or not, the result would be the same. We may hasten to add that this position is stated in respect of a composite contract which requires the contractor to install a lift in a building. It is necessary to state here that if there are two contracts, namely, purchase of the components of the lift from a dealer, it would be a contract for sale and similarly, if separate contract is entered into for installation, that would be a contract for labour and service. But, a pregnant one, once there is a composite contract for supply and installation, it has to be treated as a works contract, for it is not a sale of goods/chattel simpliciter. It is not chattel sold as chattel or, for that matter, a chattel being attached to another chattel. Therefore, it would not be appropriate to term it as a contract for sale on the bedrock that the components are brought to the site, i.e., building, and prepared for delivery. ....