Home › GST Law › Kone Elevator India (P) Ltd. v. State of Tamil Nadu (2014) 7 SCC 1/(2014) 71VST9 (SC)/2014 (304) ELT 161 (SC)

Kone Elevator India (P) Ltd. v. State of Tamil Nadu (2014) 7 SCC 1/(2014) 71VST9 (SC)/2014 (304) ELT 161 (SC)

Madras General Sales tax Act , 1939
S.2(i): Works contract -Lift installation- Construction- Building products – Manufacture, supply and installation of lifts- A contract for manufacture, supply and installation of lifts is a works contract [ S. 4, 5 ,6 ,7 , Constitution of India ,Art, 366(29A)(b) ,Finance Act , 1994 , S, 65(29) , S. 2 , Maharashtra Lifts Act , 1939, S .3(e), Sale of Goods Act 1930 , S.21 ]

Facts

A three-judge bench of the Supreme Court in State of AP v. Kone Elevators (2005) 3 SCC 389 had taken the view that a  contract for  manufacture, supply  and installation of lifts is a “sale” and the entire value of the consideration can therefore be taxed under the sales tax law.  The decisions of the Supreme Court     in State of Rajasthan v. Man Industrial Corpn Ltd. (1969) 1 SCC 567, State of Rajasthan v. Nenu Ram (1970) 26 STC 268 and Vanguard Rolling Shutters and Steel Works v. CST (1977) 2 SCC 250 were however not noticed in the Kone Elevators 2005 judgment. Therefore, a reference was made to a larger bench of    five Hon’ble Judges to review the issue afresh.

 

Issue

Whether a contract for manufacture, supply and installation of lifts is a contract    of sale or a works contract?

 

View

The installation obligation in a contract for manufacture, supply and installation   of lift is not merely incidental, but is a profound partof the entire contract. Various components are assembled together and installed at site as a permanent fixture to the building. The goods, skill and labour elements are intimately connected with one another and the contract is not divisible. There is no chattel quachattel transfer. State of AP v. Kone Elevators (2005) 3 SCC 389 overruled.

 

Held

A contract for manufacture, supply and installation of lifts is a works contract. (WP(C) Nos. 232, 298, 487 and 528 of 2005 dt. 6-5-2014)

 

Editorial : The distinction between “sale” and “works contract” has diminished under the new GST regime, from the levy point of view. However, this decision  can still be used to understand what is a works contract for purposes of classification for rate of tax under GST law. Under the said Act the term “ works contract” have been defined under S. 2(119) and is pertaining to only immovable properties. Such supply has been treated as supply of services.

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