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VAT - Supply and Installation of Lifts, Elevators - Whether assessable as Works Contracts or Sale Contracts - Assessing Authority held as Sale contract - Revision allowed in view of the order in case of Kone Elevator India Pvt Ltd Vs. State of Tamil Nadu: HC

By TIOL News Service

ALLAHABAD, SEPT 04, 2014: THIS revision has been filed against the order of the Commercial Tax Tribunal dated 28.07.2014.

M/s Otis Elevators Company Ltd. is a Public Ltd. Company registered under the U.P. Vat Act, 2008 and is engaged in the business of manufacturing of parts and components of lifts and elevators in offices, residential buildings, government buildings etc. Assessment proceedings were initiated in respect of the Company for the year 2010-11. For purposes of carrying out the orders for supplying of lifts, elevators, the Head Office of the Company situate in Mumbai executes works contract for supply of parts and components of lifts/elevators and to provide services for erection, commissioning and installation of the same. The standard works followed by the revisionist company is that it is only after entering into an agreement with the customer, that the activity of manufacturing of parts/components of lifts/elevators is carried out by the Company at its factory situate in Karnataka.

The short point which, arises in the present revision for consideration of the Court is whether the works contract entered into between the revisionist company and a customer is a sale contract or a works contract. The assessing authority, Deputy Commissioner of Commercial Tax for the assessment year 2010-11 (VAT) relying upon a decision of the Supreme Court in the case of State of Andhra Pradesh Vs. Kone Elevators - 2005-TIOL-30-SC-CT-LB has held the works contract to be a sale contract on the ground that all the material utilized in the material and parts of a lift are assembled and kept in the godown and are transported to the site after the parties enter into a contract and it is not that the lift or its parts are manufactured after the execution of the contract. The assessing authority has therefore imposed a total demand of Rs. 5,64,76,626/-.

After Hearing both sides, the High Court held:

In my opinion, since the assessing authority has made the assessment relying exclusively on the earlier judgment of the Supreme Court in State of Andhra Pradesh Vs. M/S Kone Elevator - 2005-TIOL-30-SC-CT-LB which has now been overruled by the Constitution Bench of the Supreme Court in Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu - 2014-TIOL-57-SC-CT-CB, the revisionist is entitled to complete stay of the demand amount.

In this view of the matter the revision is allowed. The impugned order dated 28.7.2014 passed by the Tribunal is modified and a direction is issued to the Appellate Authority to decide the appeal of the revisionist expeditiously in accordance with law within a period of two months from the date of receipt of the certified copy of this order. Till then no recovery shall be made from the revisionist of the remaining amount of 20% of the tax for the assessment year 2010-11 in pursuance of the order of the Tribunal dated 28.7.2014.

(See 2014-TIOL-1500-HC-ALL-VAT)


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