| Headnote |
.CONSTITUTION OF INDIA, 1950:Art. 366(29A) (b) - Tax on sale and purchase of goods - 'Works contract'-Contract for manufacture, supply and installation of lifts in a building - Held: (Per majority)(Fakkir Mohamed Ibrahim Kalifulla,J. dissenting): Four concepts emerge as regards a 'works contract', viz., (i) the works contract is an indivisible contract but, by legal fiction, is divided into two parts, one for sale of goods, and the other for supply of labour and services; (ii) the concept of "dominant nature test" or, for that matter, the "degree of intention test" or "overwhelming component test" for treating a contract as a works contract is not applicable; (iii) the term "works contract" as used in Clause (29A) of Art. 366 takes in its sweep all genre of works contract and is not to be narrowly construed to cover one species of contract to provide for labour and service alone; and (iv) once the characteristics of works contract are met with in a contract entered into between the parties, any additional obligation incorporated in the contract would not change the nature of the contract - As far as installation of the lift is concerned, it has to be understood in the conceptual context of the manufacture and installation of a lift in a building - Without installation, lift cannot be mechanically functional because it is a permanent fixture of the building having been so designed - If there are two contracts: one, for purchase of the components of the lift from a dealer, it would be a contract for sale; and two, if a separate contract is entered into for installation, that would be a contract for labour and service - But, a pregnant one, as in the instant matters, 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/chattel simpliciter - It is not chattel sold as chattel or, for that matter, a chattel being attached to another chattel - In fact, after the goods are assembled and installed with skill and labour at the site, it becomes a permanent fixture of the building - 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 - 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 - Thus, the fundamental characteristics of works contract are satisfied - The decision rendered in Kone Elevators does not correctly lay down the law and it is, accordingly, overruled - Show cause notices and assessment orders challenged in the instant matters are set aside - Assessment orders which have attained finality and are not pending in appeal, shall be treated to have been closed and where assessments are challenged in appeal or revision, the same shall be decided in accordance with the judgment- Orissa Sales Tax Act, 1947 - s 2(jj) - Bombay Lifts Act, 1939 - Finance Act, 1994 - ss. 65(29), 65(39a) and 65(105) (zzd) and (zzzza) - Sale of Goods Act, 1930 - s.2(7). |
