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Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu

Writ Petition (Civil) · Neutral citation not assigned (Writ Petition (Civil) No. 232 of 2005)Decided 6 May 2014
Writ Petition (Civil) No. 232 of 2005
Chief Justice R.M. Lodha · Justice A.K. Patnaik · Justice Sudhansu Jyoti Mukhopadhaya · Justice Dipak Misra · Justice F.M. Ibrahim Kalifulla

Background

Lift suppliers disputed whether a combined supply-and-installation contract was a sale of goods or a works contract. The distinction affected whether sales tax could cover the entire price or only the goods component after excluding labour and services. Following a 2005 decision treating such transactions as sales, authorities had reopened assessments or made demands on that basis.

Decision Breakdown

By a 4-1 majority, the Court held that a composite lift supply-and-installation contract was a works contract and overruled the 2005 decision. Installation involved substantial skill, with separate components becoming an operational fixture of the building, and the relative size of the goods component did not turn the composite transaction into a pure sale. The Court quashed reopening notices and set aside challenged assessments, while protecting assessments already final and directing pending appeals or revisions to follow the new ruling. Kalifulla, J. dissented, interpreting the contractual terms as an outright sale. The majority distinguished separate contracts for purchasing components and obtaining installation services.

Lesson Learnt

Under the sales-tax framework considered in this 2014 judgment, a combined lift contract required separation of goods from labour and services for taxation. The ruling did not reopen completed assessments that had already attained finality.

Official source (sci.gov.in)View Judgment (PDF)

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