HC holds that supply of elevators / lifts and components from assessee's Central Procurement Division in Maharashtra for executing works contract in Karnataka, constitutes an inter-state supply of goods falling within the ambit of Section 3(a) of CST Act; Notes that reassessment proceedings were concluded treating such contract as “works contract” exigible to VAT under Karnataka VAT Act on the basis of SC Constitution Bench ruling in Kone Elevator India Pvt. Ltd.; Observes, while it can be argued that assessee attempted to split composite contract into two viz.
Purchase Order (PO) for supply of materials and Work Order for installation, testing and commissioning, and both are intrinsically interlinked, however, POs are placed by contractee / purchaser with the manufacturing unit at Maharashtra, and all documentary evidence demonstrate movement of goods from one State to another in pursuance of such PO;
Hence, such sale shall fall outside competence of State VAT authorities, remarks HC while observing that, “divisibility of the contract would not empower the Authorities to subject the inter-state transaction to tax under the State Tax Act” on the ground that assessee employed dubious methods to avoid payment of tax to the State;
Even assuming indivisibility of contract, transfer of property in execution thereof amounting to a deemed sale is an inter-State sale irrespective of the fact that property in goods gets transferred at time of incorporation of goods in the contract or that it is necessary to employ skilled / experienced engineers for installation and commissioning.
The judgment was delivered by Justice S. Sujatha. Sr. Counsel K. P. Kumar along with Mr. Prashant Kumar appeared on behalf of the assessee, while Revenue was represented by Mr. T. K. Vedamurthy