AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 84
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....s supplied and installed at the customer's premises for a period of twelve months. The agreement/contract has been split into two components i.e., [a] supply of elevator and other spare parts [b] installation, testing and commissioning of elevators. Prescribed Authority concluded the re-assessment proceeding, rejecting the returns filed by the petitioner for the tax periods in question and levied tax along with consequential penalty and interest treating the transaction as works contract exigible to tax under the Karnataka Value Added Tax Act, 2003 ['KVAT Act', for short]. Aggrieved by the same, these petitions are filed. 3. Learned Senior counsel representing the learned Counsel for petitioner contended that the petitioner's central procurement division is located in Thane, Maharashtra, and caters to the requirements all over the country including Karnataka. Elevators components are imported from outside India or domestically and stored in central procurement division in Thane. Elevators are not standard items but are manufactured entirely in accordance with the design and specifications of the customer. The components of elevators are tested and dispatched directly to the custom....
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....t of this court in the case of 'STATE OF KARNATAKA AND OTHERS v. ECE INDUSTRIES LTD' reported in [2006] 144 STC 605 wherein the issue involved was whether elevators manufactured by ECE Industries Limited at Ghaziabad, stock transferred to the branch at Bangalore, installed, tested and commissioned by the said branch at the customer's site gave rise to liability under the KST Act, 1957, the Division Bench of this Hon'ble Court dealt with the same and held that the job amounted to a works contract and there was transfer of property in the elevators in executing such contract resulting in a sale of elevator, such sale took place in the course of inter-state trade and commerce and as such an inter-state sale was not liable to KST. Being an inter-state sale, it mattered very little as to in which State the transfer of property took place. The said issue has been accepted by the revenue and the same has been followed by the other courts as well as this court. Learned Senior counsel would contend that the petitioner company has acquired the said business of ECE Industries Limited and continued the business on the same business module except the stock transfer of elevators to the branches ....
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....of the same, the re- assessment order passed by respondent No.2 is within the framework of the provisions of the KVAT Act and the same cannot be held to be without jurisdiction. It was further submitted that Constitution Bench of the Hon'ble Apex Court in the case of 'M/s. KONE ELEVATOR INDIA PVT. LTD. V. STATE OF TAMIL NADU AND OTHERS' reported in [2014] 7 SCC 1 has ruled that the nature of the transactions in the installation and commissioning of lifts and elevators constitute works contract and not sales. Thus, learned counsel seeks for dismissal of the writ petitions. 6. Heard the learned Counsel appearing for the parties and perused the material on record. 7. The questions that arise for consideration in this proceeding are, [a] Whether the reassessment order passed under Section 39[1] of the KVAT Act is without jurisdiction? [b] Whether the movement of goods occasioned from Thane, Maharashtra for executing the works contract in the State of Karnataka would be construed as local sale exigible to levy of tax under the KVAT Act? 8. As regards the maintainability of the writ petition, it is now well settled that alternative remedy is no bar for entertaining the writ petition....
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....ccepting the returns filed by the Assessee. After receipt of the report from the Intelligence Wing of the Department, wherein it was reported that there existed a large quantity of turnover which was exigible to tax, but which had not been declared in the turnover of the assessee, the assessing authority has re- opened the completed assessments and reassessment orders were passed, rejecting the returns filed by the Assessee, which was carried in appeal before the Appellate Authority and the Tribunal. Thereafter, a statutory appeal was preferred before this Court. In such circumstances, placing reliance on the Judgment of the Hon'ble Apex Court in the case of 'BUILDERS' ASSOCIATION OF INDIA v. STATE OF KARNATAKA' reported in [1993] 88 STC 248 and in the case of 'GANNON DUNKERLEY & CO. v. STATE OF RAJASTHAN' reported in [1993] 88 STC 204, it was held that it can be safely concluded that the principles for determining when a sale takes place in the course of inter-State trade or commerce laid down in Section 3 of the CST Act, 1956 would apply equally to transfer of property in goods involved in the execution of works contract. Alternatively, it is a transaction to be of inter-Stat....
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....d similarly, if separate contract is entered into for installation, that would be a contract for labour and service. But, 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 or 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. Also it cannot be termed as contract for sale based on the bedrock of incidental service for delivery. It would not be legally correct to make such a distinction in respect of lifts, for the contract itself profoundly speaks of obligation to supply goods and materials as well as installation of the lift which obviously conveys performance of labour and service. Hence, the fundamental characteristics of works contract are satisfied. 11. In the light of the said Judgment, it is clear that once there is a composite contract for supply and installation, it has to be treated as a works contract, it is not a sale of goods or chattel simpli....
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....tion [Per Unit] Qty Total Value 1. BP/1.00MPS/7S/7L/MSCAR/ACO/SCS/IRS/ EL/FS 1,55,032/- 15,968/- 1,71,000/- 1 1,71,000/- 14. Clause 3.1 of Section VI deals with general terms of conditions relevant to purchase and work order. It is stipulated that the purchaser shall place a purchase order for the supply of product[s] as per respective price schedule with the company along with all the specifications and requirements of the product[s] and the layout drawing of the building or the structure where the product[s] is to be installed. The drawings shall be duly certified by the Architect or Consultant as authorized person of the Purchaser. The Company may help in giving the specification of the product as per the requirement and feasibility. The Purchaser shall place a Work Order for installation, testing and commissioning of the product[s] as per respective price schedule. 'Company', is defined under Clause 2 of Section VI as under: "Company means ThyssenKrupp Elevator [India} Pvt. Ltd., Functional Industrial Estate, Parparganj, Delhi - 110 092.". 15. Accordingly, tax invoice has been raised by the manufacturing unit at Thane in respect of the sale of elevator and component....
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....ment of goods from one State to another. If so, such inter-State sales are beyond the competence of the State VAT Authorities, or in other words against the spirit of Articles 265 and 286 of the Constitution of India. 17. In 'English Electric Company of India Ltd. v. Deputy Commercial Tax Officer' [1976] 38 STC 475, the Apex Court has observed thus: "When the movement of goods from one State to another is an incident of the contract of sale, it is a sale in the course of inter-State trade falling under Section 3(a) of the Central Sales Tax Act, 1956. It does not matter in which State the property in the goods passes. What is decisive is whether the sale is one, which occasions the movement of goods from one State to another. The inter-State movement must be the result of the covenant, express or implied, in the contract of sale or an incident of the contract. It is not necessary that the sale must precede the inter-State movement in order that the sale may be deemed to have occasioned such movement. It is also not necessary for a sale to be deemed to have taken place in the course of inter-State trade or commerce, that the covenant regarding inter-State movement must be specified....