Supply of Goods from Mumbai to Delhi to execute Works Contract not Inter-State Sales: Delhi HC [Read Judgment]

Works Contract - AAR -NCBS - Taxscan

The Delhi High Court has held that the supply of the goods from Mumbai to Delhi to execute the works contract not Inter-State Sales under the provisions of the Central Sales Tax Act, 1956.

The Assessee is engaged in the business of supply, erection, commissioning and installation of lifts/elevators in various classes of places including residential buildings, government offices, and hospitals. The appellants have its manufacturing facilities at Mumbai, where its components are produced. The VAT department held that the contracts were indivisible work contracts, the title of each of the elevators passed onto the customer upon payment, and that for the purposes of dispute resolution, the Courts of Delhi had exclusive jurisdiction.

On appeal, the VAT Tribunal held that the supply of the goods from Mumbai to Delhi to execute the works contract did not constitute inter-state sales within the meaning of the expression under the Central Sales Tax Act, 1956.

The Revenue approached the High Court against the order of the VAT Tribunal

Dismissing the appeal, Justices Ravindra Bhatt and Prateek Jain observed that the appreciation of the law by the Tribunal, in this case, is sound and unexceptionable.

“The placement of an order by the agent for procurement of the lifts, in this case, was merely an offer. It is only upon its acceptance and further steps taken by the supplier that an offer crystallizes into a binding promise or contract. That took place in Mumbai. It is now too far well settled that the incidence of Central Sales Tax or even sale of goods, occurs where the goods are appropriated to the contract. In this case, the place where the appropriation took place, is undoubtedly Mumbai. This Court’s conclusion is also supported by a similar reasoning adopted in Thyseenkrupp Elevator (India) Private Ltd. Vs. Assistant Commissioner of Commercial Taxes & Anr. [W.P.No. 13607/2017], decided by the Karnataka High Court on 24th April 2018.”

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