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DEPUTY COMMISSIONER OF SALES TAX v. M/S.AVERY INDIA LTD - TRC No. 520 of 2001 [2007] RD-KL 10435 (18 June 2007)


TRC No. 520 of 2001()

... Petitioner


... Respondent



The Hon'ble the Chief Justice MR.H.L.DATTU The Hon'ble MR. Justice K.T.SANKARAN

Dated :18/06/2007



T.R.C.Nos.520, 595, 596, 597 & 598 of 2001

Dated, this the 18th day of June, 2007


H.L.Dattu, C.J. In all these revision petitions the assessee is the same. Therefore, they are clubbed, heard and disposed of by this common order.

2. These revision petitions pertain to the assessment years 1985-86 to 1989-90.

3. The respondent herein is a public limited company, engaged in the manufacture and sale of weighing machines and weigh bridges having its factories at Ballabgarh in Hariyana and at Calcutta in West Bengal. It is their specific case that weigh bridges are manufactured, supplied and installed against the specific orders of the customer. According to them, their branch office at Ernakulam used to receive orders from the customers for erecting weigh bridges and accordingly weigh bridges are erected as works contract. It is their further case that as per the specific orders from the customers, materials are brought from their factory outside Kerala and such materials brought to the branch offices are supplied to the customers.

4. Before the assessing authority, it was the case of the assessee that the transaction between the assessee and the customer is pure and simple works contract involving transfer of property in goods within the State of Kerala. This stand of the assessee was not accepted by the assessing authority. The assessing authority was of the view that the transactions between the assessee and the customer is interstate sales and since the turnover is not supported by C Forms, the assessee has to pay turnover tax at the rate of 10%. TRC No.520/2001, etc. 2

5. Aggrieved by the orders of assessment so passed by the assessing authority, the assessee had unsuccessfully filed first appeals before the appellate authority.

6. Thereafter the assessee had carried the matter before the Tribunal in T.A.Nos.251, 252, 253, 254, 255 and 256 of 1997. The Tribunal by its order dated 7th March, 2001 has allowed the appeals and has granted the reliefs sought for by the assessee. While doing so, the Tribunal has observed as under:

"11. In this case the movement of goods commenced from Calcutta and Faridabad pursuant to a concluded contract of sale. Such sale occasioned the movement of goods from outside the State and hence it is an interstate sale within the meaning of section 3 of the CST Act. So also when the sale contract was concluded, the goods were outside the State. Hence as per Section 4(1) of the Act sale shall be deemed to have taken place outside the State. In this factual situation, as claimed by the assessee the disputed sales are to be treated as interstate sales assessable in the State from which the movement of goods commenced. It follows that the assessment of the disputed turnover on interstate sale of weigh bridges under the KGST Act treating it as pertaining to works contract or local sale cannot be sustained. The appeals filed by the assessee have to be allowed to the extent stated above."

7. The revenue, being aggrieved by the orders so passed by the Tribunal is before us in these tax revision cases. The revenue has raised the following questions of law for our consideration and decision. They are as under: "1. Whether the appellate Tribunal was justified in holding

that the transaction involved is interstate sale without considering the scope of the agreement between the assessee and customers and also the fact that assessee had obtained 'C' Forms from its customers and that they had raised invoices in favour of the customers indicating that a sale had taken place within the state, after receiving the goods at the branch office from outside the State. TRC No.520/2001, etc. 3

2. Whether Item 'C' of explanation 4 of clause xxi of Section 2 of the Kerala General Sales Tax act 1963 is anyway repugnant to Article 186 of the Constitution of India and Section 3, 4 & 5 of the Central Sales Tax Act, in so far as the explanation deals with sales which have taken place within the State.

3. Whether the order of the Tribunal is perverse in so far as it has failed to consider the materials relevant to the issue in deciding the nature of the transaction so as to find as to whether the transaction is a Works contract involving transfer of property in goods within the State."

8. In our view, the questions of law raised by the revenue are no more res integra in view of the stand taken by the apex Court in the case of State of Andhra Pradesh v, Kone Elevators (India) Ltd. [(2005) 140 STC 22]. In the said judgment the Supreme Court has observed as under:

"On a careful study of the aforestated clause in the delivery schedule, it is clear that the customer was required to do the actual work at site for installation of lift. On reading the above clause, it may be observed that the entire onus of preparation and making ready of the site for installation of life was on the customer. It was agreed that under no circumstances, the assessee shall undertake installation of lift if the site is not kept ready by the customer. Under clause 4(g) of the "Customers' Contractual Obligations", the assessee reserved the right to charge the customer for delays in providing the required fac ilities. These facts clearly indicate that the assessee divided the execution of the contract into two parts, namely, "the work" to be initially done in accordance with the specifications laid down by the assessee and "the supply" of lift by the assessee. "The work" part in the contract was assigned to the customer and "the supply" part was assigned to the assessee. This "supply" part included installatioin of lift. Therefore, contractual obligation of the assessee was only to supply and install the lift, while the customer's obligation was to undertake the work connected in keeping the site ready for installation as per the drawings. In view of the contractual obligations of the customer and the fact that the assessee undertook exclusive installation of the lifts manufactured and brought to the site in knocked-down state to be assembled by the assessee, it is clear that the transaction in question was a contract of "sale" and not a "works contract". Moreover, on perusal of the brochure of the assessee- company, one finds that the assessee is in the business of manufacturing of various types of lifts, namely, passenger lifts, TRC No.520/2001, etc. 4 freight elevators, transport elevators and scenic lifts. A combined study of the above models, mentioned in the brochure, indicates that the assessee has been exhibiting various models of lifts for sale. These lifts are sold in various colours with various capacities and variable voltage. According to the brochure, it is open for a prospective buyer to place purchase order for supply of lifts as per his convenience and choice. Therefore, the assessee satisfies, on facts, the twin requirements to attract the charge of tax under the 1957 Act, namely, that it carries on business of selling the lifts and elevators and it has sold the lifts and elevators during the relevant period in the course of its business. In the present case, on facts, we find that the major component of the end-product is the material consumed in producing the lift to be delivered and the skill and labour employed for converting the main components into the end-product was only incidentally used and, therefore, the delivery of the end-product by the assessee to the customer constituted a "sale" and not a "works contract". Hence, transactions in question constitute "sale" in terms of entry 82 of the First Schedule to the said Act and, therefore, section 5G of the said Act was not applicable."

9. The learned counsel for the Revenue would submit that in view of the law declared by the Apex Court in the aforesaid decision, the Revenue will not be in a position to find fault with the reasoning and conclusion reached by the Tribunal. Therefore, in view of the law declared by the apex Court, the questions of law raised by the revenue requires to be answered against the revenue and in favour of the assessee. Ordered accordingly. H.L.DATTU CHIEF JUSTICE K.T.SANKARAN




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