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Tuesday, May 13, 2014

Sales Tax - Works contracts - Lifts - The Constitutional Bench overruled the judgment of Kone Elevators- upheld the judgment of Larsen and Toubro -If the contract is a composite one which falls under the definition of works contracts as engrafted under clause (29A)(b) of Article 366 of the Constitution, the incidental part as regards labour and service pales into total insignificance for the purpose of determining the nature of the contract. - Quashed all reopened assessments etc., = M/S. Kone Elevator India Pvt. Ltd. … Petitioner Versus State of Tamil Nadu and Ors. … Respondents = 2014 ( May.Part) http://judis.nic.in/supremecourt/filename=41510

 Sales Tax - Works contracts - Lifts - The Constitutional Bench overruled the judgment of Kone Elevators- upheld the judgment of Larsen and Toubro -If the contract is a composite one which falls under the definition of works contracts as engrafted under clause (29A)(b) of  Article  366 of the Constitution, the incidental  part  as  regards  labour  and service  pales  into  total  insignificance  for  the  purpose   of determining the nature of the contract. - Quashed all reopened assessments etc., =
whether a contract for manufacture, supply and  installation  of
        lifts in a building is a “contract for sale of goods” or  a  “works
        contract”.  
Needless to say, in case of the former, the entire sale
        consideration would be taxable under the sales tax or  value  added
        tax enactments of the State legislatures,  
whereas  in  the  latter
        case, the consideration payable or paid for the labour and  service
        element would have to be  excluded  from  the  total  consideration
        received and sales tax or value added tax would be charged  on  the
        balance amount. =
The  petitioner  is
        engaged in  the  manufacture,  supply  and  installation  of  lifts
        involving civil construction.  For the Assessment Year 1995-96, the
        Sales Tax Appellate Tribunal, Andhra Pradesh, considering the  case
        of the petitioner, opined that the  nature  of  work  is  a  “works
        contract”, for the erection and commissioning  of  lift  cannot  be
        treated as “sale”.  - High court confirmed the same but apex court by  judgment  dated
        17.2.2005 in Kone Elevators (supra), the view of the High Court was
        overturned.  After the pronouncement in the said  case,  the  State
        Government called upon the petitioner to  submit  returns  treating
        the  transaction  as  sale.   =

Considered on the touchstone  of  the  aforesaid  two  Constitution
        Bench  decisions,  we  are  of  the  convinced  opinion  that   the
        principles stated in Larsen and Toubro (supra) as reproduced by  us
        hereinabove, do correctly enunciate the legal position.  Therefore,
        “the dominant nature test” or “overwhelming component test” or “the
        degree of labour and service test” are really not  applicable.   If
        the contract is a composite one which falls under the definition of
        works contracts as engrafted under clause (29A)(b) of  Article  366
        of the Constitution, the incidental  part  as  regards  labour  and
        service  pales  into  total  insignificance  for  the  purpose   of
        determining the nature of the contract.

    64. Coming back to Kone Elevators (supra), it is perceivable  that  the
        three-Judge Bench has referred to the statutory provisions  of  the
        1957 Act and thereafter  referred  to  the  decision  in  Hindustan
        Shipyard Ltd. (supra), and has further taken note of the customers’
        obligation to do the civil construction and the time  schedule  for
        delivery  and  thereafter  proceeded  to  state  about  the   major
        component  facet  and  how  the  skill  and  labour  employed   for
        converting the main  components  into  the  end  product  was  only
        incidental and arrived at the conclusion that it was a contract for
        sale.  The principal logic applied, i.e., the incidental  facet  of
        labour and service, according to us, is not  correct.   It  may  be
        noted here that in all the cases that have been brought before  us,
        there is a composite contract for the purchase and installation  of
        the lift.  The price quoted is a composite one for  both.   As  has
        been held by the High Court of Bombay  in  Otis  Elevator  (supra),
        various technical aspects go into the  installation  of  the  lift.
        There has to  be  a  safety  device.   In  certain  States,  it  is
        controlled by the legislative enactment and the rules.  In  certain
        States, it is not, but the fact remains that a lift is installed on
        certain norms and parameters keeping in view numerous factors.  The
        installation  requires  considerable  skill  and  experience.   The
        labour and service element is obvious.  What has been taken note of
        in Kone Elevators (supra) is that the  company  had  brochures  for
        various types of lifts and one is required to place  order,  regard
        being had to the building, and also make certain preparatory  work.
        But it is not in dispute that the preparatory work has to  be  done
        taking into consideration as  to  how  the  lift  is  going  to  be
        attached to the building.  The  nature  of  the  contracts  clearly
        exposit that they are contracts for supply and installation of  the
        lift where labour and service element  is  involved.   Individually
        manufactured goods such as lift car, motors, ropes, rails, etc. are
        the components of the lift which are eventually  installed  at  the
        site for the lift to operate in the  building.   In  constitutional
        terms, it is transfer either in goods or some other form.  In fact,
        after the goods are assembled and installed with skill  and  labour
        at the site, it  becomes  a  permanent  fixture  of  the  building.
        Involvement of the skill has been elaborately  dealt  with  by  the
        High Court of Bombay in  Otis  Elevator  (supra)  and  the  factual
        position is undisputable and irrespective of  whether  installation
        is regulated by statutory law or not, the result would be the same.
         We may hasten to add that this position is stated in respect of  a
        composite contract which requires the contractor to install a  lift
        in a building.  It is necessary to state here that if there are two
        contracts, namely, purchase of the components of the  lift  from  a
        dealer, it would be a contract for sale and similarly, if  separate
        contract is entered into for installation, that would be a contract
        for labour and service.  But, a  pregnant  one,  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.  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 conclusion, as  has  been
        reached in Kone Elevators (supra),  is  based  on  the  bedrock  of
        incidental service for delivery.  It would not be  legally  correct
        to make such a distinction in respect of  lift,  for  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.  Hence, the  fundamental
        characteristics of works contract are satisfied.  Thus analysed, we
        conclude and hold that the  decision  rendered  in  Kone  Elevators
        (supra) does not correctly lay down the law and it is, accordingly,
        overruled.

    65. Ordinarily, after so stating, we would have directed the matter  to
        be listed before the appropriate Division Bench.   However,  it  is
        not necessary to do so in this batch of cases inasmuch as the  writ
        petitions have been filed either  against  the  show-cause  notices
        where cases have been reopened or against the orders of  assessment
        framed by the assessing officers and civil  appeals  filed  against
        certain assessment orders or affirmation thereof which are based on
        the decision of the  three-Judge  Bench  in  Kone  Elevators  case.
        Considering the factual  matrix,  we  direct  that  the  show-cause
        notices, which have been issued by taking recourse to reopening  of
        assessment, shall stand quashed. The assessment orders  which  have
        been framed and are under assail before this Court are  set  aside.
        It is necessary to state here that where the assessments have  been
        framed and have attained finality and are not  pending  in  appeal,
        they  shall  be  treated  to  have  been  closed,  and  where   the
        assessments are challenged in appeal or revision, the same shall be
        decided in accordance with the decision rendered by us.

    66. The writ petitions and the civil appeals are disposed  of  with  no
        order as to costs.
                      O R D E R



            Keeping in view the conclusions of the  majority,  expressed  in
      the judgment of Dipak Misra, J., it is held that the decision rendered
      in State of A.P. v. Kone Elevators[46] does not correctly lay down the
      law and it is accordingly overruled.

      2.    It is directed that the  show-cause  notices,  which  have  been
      issued by taking recourse to  reopening  of  assessment,  shall  stand
      quashed.  The assessment orders which have been framed and  are  under
      assail before this Court are set aside.  It is necessary to state here
      that where the assessments have been framed and have attained finality
      and are not pending in appeal, they shall  be  treated  to  have  been
      closed,  and  where  the  assessments  are  challenged  in  appeal  or
      revision, the same shall be decided in accordance  with  the  decision
      rendered by us.           
2014 ( May.Part) http://judis.nic.in/supremecourt/filename=41510
R.M. LODHA, A.K. PATNAIK, SUDHANSU JYOTI MUKHOPADHAYA, DIPAK MISRA, FAKKIR MOHAMED IBRAHIM KALIFULLA

            IN THE SUPREME COURT OF INDIA


                    CIVIL ORIGINAL/APPELLATE JURISDICTION


                      WRIT PETITION (C) NO. 232 OF 2005


      M/S. Kone Elevator India Pvt. Ltd.                … Petitioner


                                   Versus


      State of Tamil Nadu and Ors.                … Respondents


                                   WITH
      Writ Petition (Civil) Nos. 298/2005,     487/2005,
      528/2005,   67/2006,   511/2006,        75/2007,
      519/2008,   531/2008,  548/2008,      569/2008,
      186/2009,   23/2010,   62/2010,       232/2010,
      279/2010,   377/2010,  112/2011,      137/2011,
      181/2011,   207/2011,  278/2011,       243/2011,
      372/2011,   398/2011,  381/2011,      468/2011,
      547/2011,   107/2012,  125/2012,      196/2012,
      263/2012,   404/2012,  567/2012,      145/2013,
      241/2013,   454/2013,  404/2013,      723/2013,
      440/2012,   441/2012,  156/2013,      533/2013,
      403/2012,   824/2013,  428/2009,    1046/2013,
      1047/2013,  1048/2013, 1049/2013,  1050/2013,
      1051/2013   1052/2013, 1098/2013,


                                    WITH
                 Civil Appeal Nos. 5116-5121        of 2014
              (Arising out of SLP (C) Nos. 14148-14153/2005)
                                    WITH
                           Civil Appeal Nos.    5135-5141      of 2014
              (Arising out of SLP (C) Nos. 14961-14967/2005)
                                    WITH
                    Civil Appeal Nos. 5142-5147   of 2014
                [Arising out of SLP (C) Nos. 17842-17847/2005
                                    WITH
                       Civil Appeal No. 5152   of 2014
                    [Arising out of SLP (C) No. 5377/2006
                                    WITH
                       Civil Appeal No. 5153   of 2014
                    [Arising out of SLP (C) No. 7037/2006
                                    WITH
                     Civil Appeal No.       5154 of 2014
                   [Arising out of SLP (C) No. 30272/2008
                                    WITH
                     Civil Appeal No.       5156 of 2014
                   [Arising out of SLP (C) No. 30279/2008
                                    WITH
                       Civil Appeal No. 5157   of 2014
                    [Arising out of SLP (C) No. 5289/2009
                                    WITH
                    Civil Appeal Nos. 5159-5160   of 2014
                 [Arising out of SLP (C) Nos. 6520-6521/2009
                                    WITH
                    Civil Appeal Nos.5162-5164    of 2014
                 [Arising out of SLP (C) Nos. 4469-4471/2010
                                    WITH
                     Civil Appeal No.       5165 of 2014
                   [Arising out of SLP (C) No. 11258/2010
                                    WITH
                       Civil Appeal No. 5166   of 2014
                   [Arising out of SLP (C) No. 17228/2010
                                    WITH
                    Civil Appeal Nos.5167-5168    of 2014
                [Arising out of SLP (C) Nos. 17236-17237/2010
                                    WITH
                    Civil Appeal Nos.5170-5172    of 2014
                [Arising out of SLP (C) Nos. 23259-23261/2010
                                    WITH
                       Civil Appeal No. 5174   of 2014
                   [Arising out of SLP (C) No. 15732/2011
                                    WITH
                     Civil Appeal No.       5175 of 2014
                   [Arising out of SLP (C) No. 16466/2011


                                    WITH
                       Civil Appeal No. 5178   of 2014
                   [Arising out of SLP (C) No. 16137/2011
                                    WITH


                       Civil Appeal No. 5179   of 2014
                    [Arising out of SLP (C) No. 5503/2011
                                    WITH
                       Civil Appeal No. 5180   of 2014
                   [Arising out of SLP (C) No. 11147/2011
                                    WITH
                    Civil Appeal Nos.5181-5192    of 2014
                [Arising out of SLP (C) Nos. 11227-11238/2012
                                    WITH
                     Civil Appeal No.       5193 of 2014
                   [Arising out of SLP (C) No. 19901/2013
                                    WITH
                     Civil Appeal Nos. 5195-5206 of 2014
              [Arising out of SLP (C) Nos. 36001-36012/2013 and
                                    WITH
                         Civil Appeal No. 6285/2010




                               J U D G M E N T


      Dipak Misra, J.  [for R.M. Lodha, C.J., A.K. Patnaik,
                             Sudhansu Mukhopadhaya, JJ. and
                             himself]

            Leave granted in all the special leave petitions.

     2.      By  an  order  dated 13.2.2008 in Kone Elevator India  Private
        Limited v. State of Tamil Nadu and others[1], a  three-Judge  Bench
        of this Court, while dealing with the writ  petition  preferred  by
        Kone Elevator India Pvt. Ltd. along with Special  Leave  Petitions,
        noted that the question raised for consideration in the said  cases
        is whether manufacture, supply and installation of lifts is  to  be
        treated as “sale” or “works contract”, and a three-Judge Bench,  in
        State of A.P. v. Kone Elevators (India) Ltd.[2],  had  not  noticed
        the decisions rendered by this Court in State of Rajasthan  v.  Man
        Industrial Corporation Ltd.[3], State of Rajasthan  and  others  v.
        Nenu Ram[4] and  Vanguard  Rolling  Shutters  and  Steel  Works  v.
        Commissioner of Sales Tax[5] and perceiving the  manifest  discord,
        thought it appropriate that the controversy should be  resolved  by
        the larger Bench.  Thereafter, keeping in view the  commonality  of
        the controversy in Civil Appeal No. 6285 of 2010 and other  Special
        Leave Petitions, they were  tagged  with  the  originally  referred
        matters.  Thus, the matters are before us.

     3. The seminal controversy which has emerged in this batch of  matters
        is whether a contract for manufacture, supply and  installation  of
        lifts in a building is a “contract for sale of goods” or  a  “works
        contract”.  Needless to say, in case of the former, the entire sale
        consideration would be taxable under the sales tax or  value  added
        tax enactments of the State legislatures,  whereas  in  the  latter
        case, the consideration payable or paid for the labour and  service
        element would have to be  excluded  from  the  total  consideration
        received and sales tax or value added tax would be charged  on  the
        balance amount.

     4. Keeping in mind the said spinal issue,  we  think  it  apposite  to
        briefly refer to the facts  as  adumbrated  in  the  writ  petition
        preferred by Kone Elevator  India  Pvt.  Ltd.   The  petitioner  is
        engaged in  the  manufacture,  supply  and  installation  of  lifts
        involving civil construction.  For the Assessment Year 1995-96, the
        Sales Tax Appellate Tribunal, Andhra Pradesh, considering the  case
        of the petitioner, opined that the  nature  of  work  is  a  “works
        contract”, for the erection and commissioning  of  lift  cannot  be
        treated as “sale”.  On a revision being filed, the  High  Court  of
        Andhra Pradesh affirmed the view of the tribunal and dismissed  the
        Tax Case (Revision) filed by the Revenue.  Grieved by the  decision
        of the High Court, the State of Andhra  Pradesh  preferred  special
        leave petition  wherein  leave  was  granted  and  the  matter  was
        registered as Civil Appeal No. 6585 of 1999 and by  judgment  dated
        17.2.2005 in Kone Elevators (supra), the view of the High Court was
        overturned.  After the pronouncement in the said  case,  the  State
        Government called upon the petitioner to  submit  returns  treating
        the  transaction  as  sale.   Similarly,  in  some  other   States,
        proceedings were initiated proposing to reopen the assessments that
        had already been closed treating the transaction as sale.  The said
        situation compelled the petitioner to  prefer  the  petition  under
        Article 32 of the Constitution.  As far as  others  are  concerned,
        they have preferred the writ petitions or appeals by special  leave
        either challenging the show  cause  notices  or  assessment  orders
        passed by the assessing officers or affirmation thereof or  against
        the interim orders passed by the High Court requiring the  assessee
        to deposit certain sum against the demanded amount.  That apart, in
        certain cases, appeals have been preferred assailing  the  original
        assessment orders or  affirmation  thereof  on  the  basis  of  the
        judgment in Kone Elevators (supra).

     5. Mr. Harish Salve, learned senior counsel for the  petitioners,  has
        contended that prior to  the  decision  of  this  Court  in  Bharat
        Sanchar Nigam Ltd. and another v. Union  of  India  and  others[6],
        which has been further explained in Larsen and Toubro  Limited  and
        another v. State of Karnataka and another[7], the law as understood
        was (a) where a contract was divisible by itself, then the  element
        of sale would be taxed as an ordinary sale of  goods,  irrespective
        of the element of service; (b) where a contract was for the  supply
        of goods, and  for  rendition  of  services,  if  the  pre-dominant
        intention of the parties  was  to  supply  goods,  the  element  of
        service  would  be  ignored  and  the  entirety  of  the   contract
        consideration would be treated as the price of goods  supplied  and
        the tax imposed accordingly; and (c) as the law did not provide for
        dividing, by a legal fiction, a contract of such a  nature  into  a
        contract for goods and a contract for services, the goods in  which
        property passed from the contractor  to  the  owner  could  not  be
        brought to tax under the law of sales tax.  It is assiduously urged
        by Mr. Salve that the “predominant intention  test”  is  no  longer
        relevant and after the  decision  in  Larsen  and  Toubro  (supra),
        supply and installation of lift cannot be treated to be a  contract
        for sale.  It is argued that a  lift  comprises  of  components  or
        parts [goods] like lift car, motors, ropes, rails, etc. and each of
        them has its own  identity  prior  to  installation  and  they  are
        assembled/installed to create the working  mechanism  called  lift.
        Learned senior counsel would contend that the installation of these
        components/parts with immense skill is rendition  of  service,  for
        without installation in the building, there is no lift.

     6. Mr. Salve, learned senior counsel, has also referred to the  Bombay
        Lifts Act, 1939, the Bombay Lifts  Rules,  1958  and  Bombay  Lifts
        (Amendment) Rules, 2010.  He has referred to the  Preamble  of  the
        Act which stipulates that an Act has been enacted  to  provide  for
        the regulation of the construction, maintenance and safe working of
        certain classes of lifts and all machinery and apparatus pertaining
        thereto in the State of Bombay.  The State Act applies to the whole
        of Maharashtra.  He has  drawn  our  attention  to  the  dictionary
        clause of “lift” as has been defined  in  clause  3(c)  to  mean  a
        “hoisting  mechanism”  equipped  with  a  car  which  moves  in   a
        substantially  vertical  direction,  is  worked  by  power  and  is
        designed  to  carry  passengers  or  goods  or  both;   and   “lift
        installation” which includes the lift car, the lift way,  the  lift
        way enclosure and the operating  mechanism  of  the  lift  and  all
        ropes,  cables,  wires  and  plant,  directly  connected  with  the
        operation of the lift.  He has also placed reliance  on  Section  4
        which deals with permission to erect a lift, Section 5  that  deals
        with licence to use a lift and Section 7 which provides a lift  not
        to be operated without a licence.  Learned senior counsel has  also
        drawn our attention to the various rules  that  deal  with  many  a
        technical aspect and the terms on which lift shall  work  and  what
        requirements are to be carried out by a licencee under the Act.  In
        essence, the submission is that the  manufacture,  supply  and  the
        installation are controlled by the statutory  provisions  under  an
        enactment of the legislature and also the rules made in  consonance
        with the Act which would reflect that immense skill is required for
        such installation and the separate parts of the lift are  not  sold
        like goods, but it only becomes operational after it is  installed,
        adjusted, tested and commissioned in a building.

     7. Mr. Khambatta, learned Advocate General, appearing for the State of
        Maharashtra, submitted that in the case of sale and installation of
        a lift or elevator, the contract would include  the  obligation  to
        install the lift or to undertake any services in  relation  to  the
        lift and these elements of value need to be deducted  while  taxing
        the sale  of  goods  involved  in  such  a  contract.   It  is  his
        submission that in a given case, there can be a contract  which  is
        exclusively for sale of lift, i.e., for sale of  goods  which  does
        not include any labour or service element at all where the lift  is
        bought from a manufacturer but a separate contract for installation
        is  entered  into  with  an  independent  engineering   contractor.
        Learned Advocate General urged that such an installation by way  of
        contract is permissible under the Bombay Lifts Act, 1939 read  with
        the Bombay Lifts Rules, 1958.  It is urged by him that prior to the
        decision in Kone Elevators  case,  the  State  of  Maharashtra  had
        treated contracts for sale and  installation  of  lifts  as  “works
        contract” as per the decision of the High Court  in  Otis  Elevator
        Company (India) Ltd.  v.  The  State  of  Maharashtra[8].   He  has
        copiously referred to the rule position which is prevalent  in  the
        State of Maharashtra.  He has brought on record  a  Trade  Circular
        dated 11.11.2013 to show that from 1.4.2006, the decision  in  Kone
        Elevators (supra) has been followed in the State of Maharashtra and
        it has adjusted the position in accordance with the said  authority
        and the State having adjusted its position to the law  rendered  by
        the three-Judge Bench, in case  the  authority  in  Kone  Elevators
        (supra) is overruled, it should be given prospective effect.

     8. Mr. K.N. Bhat, learned senior counsel for the State  of  Karnataka,
        has  submitted  that  the  contract  of  manufacture,  supply   and
        installation  of  lifts  comprises  a  works  contract,   for   the
        expression “works contract” is not  a  term  of  art  as  has  been
        explained in Builders’ Association of India and others v. Union  of
        India and others[9] as well as in Larsen and Toubro (supra).  It is
        put forth by Mr. Bhat that lifts are assembled and manufactured  to
        suit the requirement in a particular building and are not something
        sold out of shelf and, in fact, the value of goods and the cost  of
        the components used in the manufacturing and installation of a lift
        are subject to taxation while the element  of  labour  and  service
        involved cannot be treated as goods.  In essence, the submission of
        Mr.  Bhat  is  that  taking  into  consideration  the  multifarious
        activities involved in the installation of the lift, it has  to  be
        construed as a “works contract” and the decision in Kone  Elevators
        (supra) does not lay down the law correctly.

     9. Mr. Rakesh Dwivedi, learned senior counsel appearing for the  State
        of Orissa,  has  referred  to  the  terms  of  the  quotation,  the
        confirmation  letter,  the  letter  of  approval,  the  preparatory
        erection work or civil work which are to  be  carried  out  by  the
        customer at its own cost, the specific  mode  of  payment  and  the
        nature of supply and, on that basis, contended  that  the  contract
        was for sale and supply of a lift to the customer  for  a  monetary
        consideration.  It is urged by him that a part  of  manufacture  is
        carried out at the project site of the customer and the  skill  and
        labour deployed in the installation or the work done  is  merely  a
        component of the manufacturing process and, as a  matter  of  fact,
        the  elevator  is  supplied  to  the  customer   only   after   its
        erection/installation at the site.  It is further contended by  him
        that where a manufacturer of lift first manufactures components and
        then completes the manufacture of the lift at the site and  retains
        ownership  in  the  components  as  property  while  producing  the
        completed lift, it is a case of pure manufacture.  It is  contended
        by him that the phraseology used in the contract  is  not  decisive
        because it is the economic  reality  which  is  decisive,  for  the
        installation is a part of the manufacturing  process  resulting  in
        the emergence of the product of elevator which is  contracted  for.
        Learned senior counsel would contend that it has to be construed as
        an elevator bought and sold as such.  In this regard, he has  drawn
        inspiration from the authorities in  Patnaik  &  Co.  v.  State  of
        Orissa[10], T.V. Sundram Iyengar & Sons  v.  State  of  Madras[11],
        Union of India v. Central  India  Machinery  Manufacturing  Company
        Ltd. and others[12], J. Marcel (Furrier)  Ltd.  v.  Tapper[13]  and
        Love v. Norman Wright (Builders) Ltd.[14].

    10. Mr. Dwivedi has also contended that even if high  degree  of  skill
        and craftsmanship goes into installation which is  a  part  of  the
        manufacturing process, it is not more than erecting an article  for
        sale  on  the  basis  of  a  special  order.   For  the   aforesaid
        proposition, he has placed reliance on  J.  Marcel  (Furrier)  Ltd.
        (supra).  It is his submission  that  emphasis  on  technology  and
        skill including labour and also the instructions in the manual  are
        of  no  consequence  as  all  are  insegregable   facets   of   the
        manufacturing process.   It  is  proponed  by  him  that  erection,
        commissioning and assembling of  parts  and  components  amount  to
        manufacture as has been laid down by this Court in MIL  India  Ltd.
        v. Commissioner of Central  Excise,  Noida[15],  Narne  Tulaman  v.
        Collector of Central Excise, Hyderabad[16], Titan  Medical  Systems
        (P) Ltd. v. Collector  of  Customs,  New  Delhi[17],  Collector  of
        Central Excise, Calcutta-II v. Eastend Papers  Industries  Ltd.[18]
        and  Aspinwall  &  Co.  Ltd.  v.  Commissioner   of   Income   Tax,
        Ernakulam[19].  He has also placed reliance on Underwood Limited v.
        Burgh Castle Brick and Cement Syndicate[20] wherein the Kings Bench
        has ruled that until the railway engine was reassembled and put  on
        rail, it could not be said that the goods were delivered as per the
        contract.  Commenting on the attachment to  immovable  property  as
        permanent affixation, it is put forth by him that the decisions  in
        Sentinel  Rolling  Shutters  &  Engineering  Company  (P)  Ltd.  v.
        Commissioner of Sales Tax[21], Ram Singh & Sons  Engineering  Works
        v. Commissioner of Sales Tax, U.P.[22], Man Industrial  Corporation
        (supra) and Vanguard Rolling Shutters & Steel  Works  (supra)  were
        rendered prior to the amendment of the Constitution and hence, they
        stand on a different footing as  they  were  fundamentally  dealing
        with  indivisible  contracts.   Elaborating  on   the   nature   of
        affixation, it is urged by him that only the guide  rails  and  the
        frame of  the  entry/exit  doors  are  attached  to  the  immovable
        property by nuts and bolts and the motor is also placed on the beam
        with the help of nuts and bolts.  The sheave  is  attached  to  the
        motor and it enables the steel rope to move.   The  steel  rope  is
        attached to one side of the cabin car and on the other side to  the
        counter weight.  These parts are aligned so that the cabin car  and
        the counter  weight  move  up  and  down  in  opposite  directions.
        Therefore, contends the learned senior counsel, the  lift  is  only
        partially attached to the building and the remaining major portions
        of the components are constantly mobile.  In fact, people buy lifts
        only with the object of movability and the lifts are advertised  as
        transport systems.  The learned senior counsel would further submit
        that if railway  engines  and  coaches  are  goods  notwithstanding
        motion on rail alone which is fixed to the earth by nuts and bolts,
        the elevators will also be goods notwithstanding the attachment  of
        guide rails.  For the aforesaid purpose, he has  drawn  inspiration
        from Sirpur Papers Mills  Ltd.  v.  Collector  of  Central  Excise,
        Hyderabad[23], Commissioner of Central Excise, Ahmedabad v. Solid &
        Correct Engineering of  Works  and  others[24]  and  Detroit  Steel
        Cooperage Company v. Sistersville Brewing Company[25].

    11. Mr. R. Venkataramani, learned  senior  counsel  appearing  for  the
        States of Tamil Nadu and Andhra Pradesh,  has  contended  that  the
        primary intention behind the demand of installation of  a  lift  is
        the intention to have the lift as a system and, therefore, the work
        of installation merely fulfills the erection and functional part of
        the system.  The service or work element may be the means to render
        a set of goods constituting a unit to be fit for use and, in  fact,
        the act of installation is to bring the goods to use and hence,  it
        is the culmination of the act of sale.  The learned senior  counsel
        has put forth that the contract involved would come in the category
        of contracts which can be described as contracts  where  goods,  in
        any form whatsoever, are intended for transfer but  the  completion
        of the transfer may involve certain set of activities, by  whatever
        name called, for the purposes of securing the use or consumption of
        such goods  in  question  and  to  that  class  of  contracts,  the
        principle of “deliverable state” as used in Section 21 of the  Sale
        of Goods Act, 1930  would  be  attracted  and,  therefore,  such  a
        contract would be a  pure  contract  for  sale  of  goods.   It  is
        emphasized by him that the threshold question to be  put  in  every
        case is whether  the  purchaser’s  true  object  is  to  obtain  an
        identifiable product or goods or the intention is  to  utilize  the
        services of or works from a person for the purposes of realizing an
        end product which may emerge only for the reason of  the  execution
        of the work by rendering of the services in question.  Applying the
        said principle to a lift, it is canvassed by him that a lift or  an
        elevator is an  identifiable  good  which  is  transferred  to  the
        purchaser as such and solely because certain amount  of  labour  or
        service is required for the purpose of  putting  together  all  the
        components of the lift at the site to bring it to its usable state,
        the same does not make  a  difference  as  to  the  nature  of  the
        contract and it cannot be regarded as a works contract.

    12. Ms. Hemantika Wahi and Mr. Preetesh Kumar, learned counsel for  the
        State of Gujarat, while adopting the  submissions  of  the  learned
        senior counsel for the State of Orissa,  have  submitted  that  the
        traditional tests for determining whether a  contract  is  a  works
        contract or not would continue to apply.  It is urged that the sale
        of goods involved in the execution of a  works  contract  is  quite
        distinct from the works performed while executing a sale  of  goods
        contract.  It is also put forth  that  it  would  come  within  the
        competence of the State legislature being a measure of tax and  for
        that purpose, reliance has been placed on Federation of  Hotel  and
        Restaurant Association of India v. Union of India  and  others[26].
        Be it noted, the learned  counsel  for  the  State,  while  placing
        reliance on Bharat Sanchar (supra), have  also  asserted  that  the
        dominant nature test or other test approved in  Larsen  and  Toubro
        (supra) are still relevant.  It is apt to note  here  that  in  the
        written note of submission, certain lines from para  45  of  Bharat
        Sanchar (supra) have been reproduced.  Relying on the same,  it  is
        contended that the “dominant nature test” is still available.

    13. Dr. Manish Singhvi, learned counsel  appearing  for  the  State  of
        Rajasthan, has submitted that the  decision  rendered  in  Vanguard
        Rolling Shutters & Steel Works (supra), Man Industrial  Corporation
        Ltd. (supra) and Nenu Ram (supra) do not lay down the  correct  law
        because the underlying reason accorded in those cases is that if  a
        particular item is to be fixed in the immovable property, then  the
        property passes on as an immovable property and, therefore,  cannot
        be  construed  as  a  sale.   Reliance  has  been  placed  on   the
        Constitution Bench decisions in Patnaik & Co. (supra) and Hindustan
        Shipyard Ltd. v. State of A.P.[27].

    14. Mr. P.N. Mishra, learned senior counsel appearing for the State  of
        Haryana, has supported the law laid down in Kone Elevators  (supra)
        and, on that base, contended that supply and  installation  of  the
        lift is a contract for sale and not  a  works  contract.   For  the
        aforesaid purpose, he has laid emphasis on the  specification  laid
        down in the terms and conditions  of  the  contract  in  which  the
        customer  is  obliged  to   undertake   certain   work   of   civil
        construction.  He has brought on record an order of assessment  for
        the assessment year 2009-2010 from which it is quite vivid that the
        assessing officer has treated the transaction as  a  sale  adopting
        the principle stated in Kone Elevators case.  Learned  counsel  for
        the  State  has  brought  to  our  notice  a  Gazette  Notification
        providing 15% tax on labour, service  and  other  like  charges  as
        percentage of total value of the contract to show that it has  been
        so done keeping in view the nature of composite contract.

    15. Mr. P.P. Malhotra, learned Additional Solicitor  General  of  India
        appearing for Union of India, has submitted that parts of the  lift
        are assembled at  the  site  in  accordance  with  its  design  and
        requirement of the building which may include the floor levels  and
        the lift has to open on different  floors  or  otherwise  depending
        upon the requirement.  It has to synchronize with the building  and
        each door has to open on the level of each floor and hence,  by  no
        stretch of imagination, it can be treated as a manufacture or  mere
        supply but cumulatively considered, it is  a  works  contract  and,
        more so, when the contract is a composite or turnkey contract.  Mr.
        Malhotra would further submit that it is not a mere  case  of  sale
        and according to the expanded definition of tax on sale,  “tax”  is
        leviable only on the transfer of  property  in  goods,  whether  in
        goods or in some other form, involved in the execution of work  and
        no sales tax is leviable on the execution of works contract.  Thus,
        the stand of the Union of India is that supply and installation  of
        lift is not a contract for sale but a works contract.

    16. To appreciate the controversy in  the  backdrop  of  the  rivalised
        submissions, it is necessary to delve into the genesis of  the  law
        in respect of “works contract” and thereafter to dwell upon how far
        the principles pertaining to  “works  contract”  would  govern  the
        manufacture, supply and installation of lifts.  In this context, it
        is seemly to appreciate the legal position as to how the impost  of
        sales tax on “works contract” was treated prior to the insertion of
        Clause (29A) in Article 366 of the Constitution by the Constitution
        (Forty-sixth Amendment) Act, 1982 with effect from 1.3.1983 and how
        this court has dealt with the said facet after  the  constitutional
        amendment that changed the concept of levy of sales tax  on  “works
        contract”. For the aforesaid purpose, chronological  recapitulation
        is imperative. In State  of  Madras  v.  Gannon  Dunkerley  &  Co.,
        (Madras) Ltd.[28], the assessee faced a levy in  respect  of  goods
        sold in relation to works contract under the Madras  General  Sales
        Tax  Act,  1939  as  amended  by  the  Madras  General  Sales   Tax
        (Amendment) Act 25 of 1947  wherein  certain  new  provisions  were
        incorporated and one such provision, namely, Section  2(i)  defined
        “works contract” to mean “any agreement for carrying out  for  cash
        or for  deferred  payment  or  other  valuable  consideration,  the
        construction, fitting out, improvement or repair of  any  building,
        road, bridge or other  immoveable  property  or  the  fitting  out,
        improvement or repair of any movable property”.   In  pursuance  of
        the said provision, the rules were amended and the  assessment  was
        framed.  When the matter travelled to  the  Constitution  Bench  of
        this Court, it was contended by the assessee that nothing could  be
        levied that was received by the assessee from the persons for whose
        benefit it  had  constructed  the  buildings.   On  behalf  of  the
        Revenue, it was urged that once there was an agreement between  the
        parties and in  the  carrying  out  of  that  agreement  there  was
        transfer of title in movables belonging to one  person  to  another
        for consideration, there would be a  “sale”.   Repelling  the  said
        submission, it was held that if the words "sale of goods"  were  to
        be interpreted in their legal sense, that sense could only be  what
        it was in the law relating to sale of goods. It was  observed  that
        the ratio of the rule of interpretation that words of legal  import
        occurring in a statute should be construed in their legal sense  is
        that those words have, in law,  acquired  a  definite  and  precise
        sense, and that, accordingly, the legislature must be taken to have
        intended that they should  be  understood  in  that  sense  and  in
        interpreting an expression used in a legal sense,  the  requirement
        was to ascertain the precise connotation which it possesses in  law
        because both under the common law and the statute law  relating  to
        sale of goods in England and in India, to constitute a  transaction
        of sale, there should be an agreement, express or implied, relating
        to goods to be completed by passing of title in those  goods.   The
        essence of the concept that both the agreement and the sale  should
        relate to the same subject-matter was highlighted and it was opined
        that under the law, there could not be an agreement relating to one
        kind of property and a sale as regards another.   The  Constitution
        Bench  further  held  that  on  the  true  interpretation  of   the
        expression "sale of goods", there must be an agreement between  the
        parties for the sale of the very goods in which eventually property
        passes and in  a  building  contract,  the  agreement  between  the
        parties being to the effect that the contractor should construct  a
        building  according  to  the  specifications   contained   in   the
        agreement,  and  in  consideration  therefor  receive  payment   as
        provided  therein,  there  was  neither  a  contract  to  sell  the
        materials used in  the  construction  nor  did  the  property  pass
        therein as movables and, therefore, it was impossible  to  maintain
        that there was implicit in a building contract a sale of  materials
        as  understood  in  law.   Eventually,  the  Court  summed  up  the
        conclusion by stating that the expression "sale of goods" in  Entry
        48 is a nomen juris, its essential ingredients being  an  agreement
        to sell movables for a price and property passing therein  pursuant
        to that agreement and in a building contract which was one,  entire
        and indivisible, there was no sale of goods, and it was not  within
        the competence of the Provincial  Legislature  under  Entry  48  to
        impose a tax on the supply of the materials used in such a contract
        treating it as a sale.

    17. In Carl Still G.m.b.H. & Another v. State of Bihar and  others[29],
        the majority, interpreting the nature of the contract which related
        to assembling and installing machinery, plant and accessories for a
        coke-oven battery and by-products plant, opined that the price  was
        agreed for the execution of the works and there  was  no  agreement
        for sale of materials as such by the appellant therein to the owner
        and, therefore, the agreement in question was  an  indivisible  one
        for the construction of specified works for a lump sum  and  not  a
        contract for sale of materials as such.

    18. Patnaik & Co. (supra) related to a  case  of  construction  of  bus
        bodies on a chassis and the builder of the bus bodies had taken the
        responsibility to bear the loss, if any, till the delivery  of  the
        chassis with bus bodies.  The question arose whether  the  assessee
        was liable to pay sales tax under the Orissa Sales Tax Act, 1947 on
        the whole amount or entitled to deduction from its  gross  turnover
        in respect of the amount received from  the  State  Government  for
        building bodies on the chassis supplied  by  the  Government.   The
        majority decision observed that it was a case of fixing chattel  on
        chattel and there was no authority for the proposition that when  a
        chattel was fixed on another chattel, there was no sale  of  goods.
        The decision in Gannon Dunkerley-I (supra) was distinguished on the
        ground that it related to contract to construct a building and  the
        property did not pass in the materials as movables but the property
        in the bus bodies passed as a movable property.  Thus, it  was  not
        one but sum total of several reasons which was  the  foundation  of
        the majority judgment in Patnaik & Co. (supra).

    19. In the case of State of Gujarat v.  M/s.  Kailash  Engineering  Co.
        (Pvt.) Ltd.[30], the issue was whether the  construction  of  third
        class  sleeper  coaches  by  the  respondent-assessee  on   certain
        conditions amounted to a works contract or it was a sale under  the
        said State enactment.  This Court,  taking  into  account  all  the
        terms of the contract and treating  the  same  as  one  entire  and
        indivisible contract for carrying out the works specified  in  full
        details in the agreement, and considering that it did not  envisage
        either the sale of materials by the respondent to the  Railway,  or
        of the coach bodies as such, treated it as a works contract.

    20. In The State of Madras v. Richardson & Cruddas Ltd.[31], there  was
        a postulate that a consolidated lump sum would be paid per ton  for
        fabrication, supply and erection at  site  of  all  steelwork,  and
        there was no provision under the contract for dissecting the  value
        of the goods supplied and the value of  the  remuneration  for  the
        work and labour bestowed in the  execution  of  the  work  and  the
        predominant idea underlying the contract was bestowing  of  special
        skill and labour by the experienced engineers and mechanics of  the
        respondent.  Taking into consideration the said aspects and relying
        on the principles stated in Clark v.  Bulmer[32],  the  Court  held
        that the contract was a works contract and not a contract for sale.



    21. In Man Industrial Corporation Ltd. (supra), which  has  been  taken
        note of in the referral order, this Court treated the contract  for
        providing and fixing four different types  of  windows  of  certain
        sizes  according  to   “specifications,   designs,   drawings   and
        instructions” set out in the contract as a contract  for  work  and
        labour and not a contract for sale, for ‘fixing’ the windows to the
        building was not incidental or subsidiary to the sale, but  was  an
        essential term of the contract.  Similar view has been expressed in
        Nenu Ram (supra).

    22. In The State of Punjab v. M/s. Associated Hotels of India Ltd.[33],
        the Constitution Bench, while dealing with the  construction  of  a
        contract of work and labour on the one hand and contract  for  sale
        on the other, opined that the  difficulty  which  the  Courts  have
        often to meet in construing a contract of work and labour,  on  the
        one hand, and a contract for sale, on the other, arises because the
        distinction between the two is very often a  fine  one  and  it  is
        particularly so when the contract is a composite one involving both
        a contract of work and labour and a contract  of  sale.  The  Court
        thereafter proceeded to state thus: -
           “Nevertheless, the distinction between the two rests on a  clear
           principle. A contract of sale is one whose main  object  is  the
           transfer of property in, and the delivery of the possession  of,
           a chattel as a chattel to the buyer. Where the principal  object
           of work undertaken by the payee of the price is not the transfer
           of a chattel qua chattel,  the  contract  is  one  of  work  and
           labour. The test is whether or not the work and labour  bestowed
           and in anything that can properly become the  subject  of  sale;
           neither the ownership of materials, nor the value of  the  skill
           and labour as compared with  the  value  of  the  materials,  is
           conclusive,  although   such   matters   may   be   taken   into
           consideration  in  determining,  in  the  circumstances   of   a
           particular case, whether the contract is in  substance  one  for
           work and labour or one for the sale of a chattel[34].”



            Be it stated, in the said case, the  respondent-company  carried
      business as hoteliers and, as a part  of  its  business,  the  company
      received guests to whom it furnished  certain  amenities.   The  Court
      ruled that the transaction  between  a  hotelier  and  a  visitor  was
      essentially one of contract of  service  and  facilities  provided  at
      reasonable price.

    23. In State of Gujarat (Commissioner of Sales Tax, Ahmedabad) v.  M/s.
        Variety Body Builders[35],  this  Court,  after  referring  to  the
        passage from Halsbury’s Laws of England, Third Edition, Volume  34,
        page 6, ruled thus: -

           “47. It can be treated as well settled that there is no standard
           formula by which one can distinguish a contract of sale  from  a
           contract for work and labour. There may be many common  features
           in both the contracts, some neutral in particular  context,  and
           yet certain clinching terms  in  a  given  case  may  fortify  a
           conclusion one way or the other. It will depend upon  the  facts
           and circumstances of each case. The question is not always  easy
           and has for all time vexed jurists all over.”



    24. In Vanguard Rolling Shutters and Steel Works’  case,  the  assessee
        manufactured rolling shutters according to specifications given  by
        the parties and fixed the same at the premises  of  the  customers.
        The assessee claimed that it was not liable to  sales  tax  on  the
        ground that the amount received by it represented the  proceeds  of
        works contract.  When the matter travelled to the  High  Court,  it
        opined that the contracts entered into by  the  assessee  were  not
        works contracts but contracts for supply of goods  simpliciter  and
        the assessee was,  therefore,  liable  to  pay  sales  tax.   While
        reversing the decision of the High Court, this Court took  note  of
        certain aspects, namely, that the amount  from  the  owner  of  the
        premises was in lump sum without specifying as what part was  meant
        for the material and the fabricated part and what  part  was  meant
        for service or labour put in by the contractor; that the  materials
        as supplied was not supplied by the owner so  far  as  to  pass  as
        chattel  simpliciter,  but  actually  affixing  to  one   immovable
        property and  after  they  were  fixed  and  erected,  they  became
        permanent fixture so as to become an  accretion  to  the  immovable
        property; and that the operation to be done at the site  could  not
        be said  to  be  merely  incidental  to  the  contract  but  was  a
        fundamental part of the contract.  In this backdrop, it  was  ruled
        that the contract in question was not a pure  and  simple  sale  of
        goods or materials as chattels but was a works contract.

    25. In Ram Singh  &  Sons  Engineering  Works  (supra),  the  assessee-
        manufacturer had entered into contracts for fabrication, supply and
        erection of overhead travelling cranes.  Under the contract, it was
        required to  design,  fabricate  and  erect  the  machines  at  the
        customers’ factories according to the specifications given  by  the
        customers.   The  Court  followed  the  principles  laid  down   in
        Commissioner of Sales Tax, Madhya Pradesh v. Purshottam Premji[36],
        Sentinel Rolling Shutters & Engineering Co. (P)  Ltd.  (supra)  and
        Man Industrial Corporation (supra) and treated it as works contract
        on the ground that the erection is a fundamental and integral  part
        of the  contract,  because  without  it,  the  3-motion  electrical
        overhead travelling crane does not come into being. It was  further
        observed that the manufacturer would undoubtedly be  the  owner  of
        the component parts when he fabricated them, but at no  stage  does
        he become the owner of the 3-motion electrical overhead  travelling
        crane as a unit so as  to  transfer  the  property  in  it  to  the
        customer.   Emphasis  was  laid  on  the  fact  that  the  3-motion
        electrical overhead travelling crane comes into existence as a unit
        only when the component parts are fixed in position and erected  at
        the site, but at  that  stage,  it  becomes  the  property  of  the
        customer because it is permanently embedded in the  land  belonging
        to the customer and, therefore, there is no transfer of property in
        it by the manufacturer to the customer as a chattel.

    26. In Hindustan Aeronautics Limited v. State of Orissa[37], the Court,
        while emphasizing  that  there  is  no  rigid  or  inflexible  rule
        applicable alike to all transactions which can indicate distinction
        between a contract for sale and a contract  for  work  and  labour,
        opined that basically and primarily, whether a particular  contract
        was one of sale or for work  and  labour  depended  upon  the  main
        object of the parties in the circumstances of the transaction.

    27. The aforesaid authorities clearly show that a works contract  could
        not have been liable to be taxed under the State sales tax laws and
        whether the contract was a works contract or a contract for sale of
        goods was dependent on the dominant intention as reflected from the
        terms and conditions of the contract and many  other  aspects.   In
        certain cases, the court has not treated the contract to be a works
        contract by repelling the plea of the assessee  after  taking  into
        consideration  certain  special  circumstances.   No   straitjacket
        formula could have been  stated  to  be  made  applicable  for  the
        determination of the nature of the contract, for it depended on the
        facts and circumstances of each case.  As the works contract  could
        not be made amenable to sales tax as the State Legislatures did not
        have the legislative competence to charge sales tax under Entry  48
        List  II  of  the  Seventh  Schedule  of  the  Constitution  on  an
        indivisible contract of sale of goods which had component of labour
        and service and it was not  within  the  domain  of  the  assessing
        officer to dissect an indivisible contract to distinguish the  sale
        of goods constituent and the labour  and  service  component.   The
        aforesaid being the legal position, the Parliament brought  in  the
        Forty-sixth Amendment by incorporating Clause (29A) in Article  366
        of the Constitution to undo the  base  of  the  Constitution  Bench
        decision in Gannon Dunkerley’s-I  case.

    28. To have a complete picture, we think it apt to reproduce  the  said
        constitutional provision: -
           “366 (29A) “tax on the sale or purchase of goods” includes –
                 a) a tax on the transfer, otherwise than in pursuance of  a
                    contract, of property in any goods  for  cash,  deferred
                    payment or other valuable consideration;
                 b) a tax on the transfer of property, in goods (whether  as
                    goods or in some other form) involved in  the  execution
                    of a works contract;
                 c) a tax on the delivery of goods on hire purchase  or  any
                    system of payment by instalments;
                 d) a tax on the transfer of the right to use any goods  for
                    any purpose (whether or not for a specified period)  for
                    cash, deferred payment or other valuable consideration;
                 e) a tax on the  supply  of  goods  by  any  unincorporated
                    association or body of persons to a member  thereof  for
                    cash, deferred payment or other valuable consideration;
                 f) a tax on the supply, by way of or as part of any service
                    or in any other manner whatsoever, of goods, being  food
                    or any other article for human consumption or any  drink
                    (whether or not  intoxicating),  where  such  supply  or
                    service, is for cash, deferred payment or other valuable
                    consideration,

           and such transfer, delivery or supply  of  any  goods  shall  be
           deemed to be a sale of those goods  by  the  person  making  the
           transfer, delivery or supply and a purchase or  those  goods  by
           the person to whom such transfer, delivery or supply is made;”



    29. After the amendment in the  Constitution,  various  States  amended
        their legislations pertaining to sales tax for levy of sales tax on
        works contract.  The constitutional  validity  of  the  Forty-Sixth
        Amendment by  which  the  State  Legislatures  were  conferred  the
        competence  to  levy  sales  tax  on   certain   transactions,   as
        incorporated in sub-clauses (a) to (f) of Clause (29A)  of  Article
        366 of the Constitution as well as the amendments made by the State
        Legislatures, were challenged  in  Builders’  Association  (supra).
        The Constitution Bench took note  of  the  various  problems  which
        arose on account of the decisions in the field pertaining to  works
        contract and the recommendations by the Law Commission in its  61st
        Report recommending for certain amendments in the  Constitution  so
        as to levy sales tax on transactions of the nature which  were  not
        liable to sales tax and the purpose of the amendment to bring  many
        of the transactions in which  property  in  goods  passed  for  the
        purpose of levy of sales tax within the scope of power of the State
        to levy  tax.   The  Constitution  Bench  also  took  note  of  the
        amendments that were incorporated in clause (1) of Article 269  and
        clause (3) of Article 286 and eventually upheld the  constitutional
        validity of the amendment.  In that  context,  the  court  observed
        that sub-clause (b) of clause (29-A) states that ‘tax on  the  sale
        or purchase of goods’ includes, among other things, a  tax  on  the
        transfer of property in the goods (whether  as  goods  or  in  some
        other form) involved in the execution of a works contract, but does
        not say that a tax on the sale or purchase of goods included a  tax
        on the amount paid for the execution of a works contract. It refers
        to a tax on the transfer of property in goods (whether as goods  or
        in some other form) involved in the execution of a  works  contract
        and the  latter  part  of  clause  (29A)  of  Article  366  of  the
        Constitution makes the position very  clear.   Further,  the  Court
        explained the constitutional validity of clause  (29A)  of  Article
        366 of the Constitution by expressing thus:

           “…. a transfer of property in  goods  under  sub-clause  (b)  of
           clause (29-A) is deemed to be a sale of the  goods  involved  in
           the execution of a works  contract  by  the  person  making  the
           transfer and a purchase of those goods by  the  person  to  whom
           such  transfer  is  made.  The  object  of  the  new  definition
           introduced in clause (29-A) of Article 366 of  the  Constitution
           is, therefore, to enlarge the scope of ‘tax on sale or  purchase
           of goods’ wherever it occurs in the Constitution so that it  may
           include within its scope the transfer,  delivery  or  supply  of
           goods that may take place under any of the transactions referred
           to in sub-clauses (a) to (f)  thereof  wherever  such  transfer,
           delivery or supply becomes subject to  levy  of  sales  tax.  So
           construed the expression ‘tax on the sale or purchase of  goods’
           in Entry 54 of the State List, therefore, includes a tax on  the
           transfer of property in goods (whether as goods or in some other
           form) involved in the execution of a works contract also.”


            After so stating, the  Constitution  Bench,  observed  that  all
      transfers, deliveries and supplies of goods referred to in clauses (a)
      to (f) of clause (29-A) of Article 366 of the Constitution are subject
      to the restrictions and conditions mentioned in clause (1), clause (2)
      and sub-clause (a) of clause (3) of Article 286  of  the  Constitution
      and the transfers and deliveries that  take  place  under  sub-clauses
      (b), (c) and (d) of clause (29-A) of Article 366 of  the  Constitution
      are subject to an additional restriction mentioned in  sub-clause  (b)
      of Article 286(3) of the Constitution.  The Constitution Bench further
      opined that it is open to the States to segregate works contract  into
      two  separate  components  or  contracts  by  legal  fiction,  namely,
      contract for sale of goods involved in  the  works  contract  and  for
      supply of labour and service.

    30. At this juncture, the pronouncement in M/s Gannon Dunkerley and Co.
        and others v. State of Rajasthan and others[38] is necessary to  be
        noted.  While dealing with the various submissions of  the  counsel
        for the States, the Constitution Bench referred  to  the  Builders’
        Association case wherein it has been clearly stated  that  the  tax
        leviable by virtue of sub-clause (b) of clause (29A) of Article 366
        of the Constitution becomes subject to the same discipline to which
        any levy under Entry 54 of the State List is made subject to  under
        the Constitution.  After so stating, the Court  did  not  think  it
        appropriate to reopen the  issues  which  were  covered  under  the
        Builders’ Association case and proceeded to deal with the matter in
        accordance with the law laid down in that case.

    31. Be  it  noted,  the  Constitution  Bench,  in  Gannon  Dunkerley-II
        (supra), has unequivocally restated and  reaffirmed  the  principle
        that the States  have  legislative  power  to  impose  tax  on  the
        transfer of property  in  goods  or  in  some  other  form  in  the
        execution of works  contract  and  they  have  also  the  power  to
        bifurcate the contract and levy sales tax on the value of materials
        used in the execution of the works contract, regard  being  had  to
        the principle that the State Legislatures have been empowered under
        Clause (29A) of Article 366 to levy tax on the  deemed  sales.   We
        may state with profit that certain principles have been  laid  down
        in the said decision to which we shall refer to at the  appropriate
        stage.

    32. Having dealt with the aforesaid authorities, as advised at present,
        we shall refer to certain authorities as to  how  the  term  “works
        contract” has been understood in the  contextual  perspective  post
        the constitutional amendment.  In Hindustan Shipyard Ltd.  (supra),
        the Court observed that the distinction between a contract of  sale
        and a works contract is not free from difficulty and has  been  the
        subject-matter  of  several  judicial  decisions.  It  is   further
        observed  that  neither  any  straitjacket  formula  can  be   made
        available nor can such  quick-witted  tests  devised  as  would  be
        infallible, for it is all a question of determining  the  intention
        of the parties by culling out the same on an overall reading of the
        several terms and conditions of a contract.  Thereafter,  the  two-
        Judge Bench set out three categories of contracts and explained the
        contours, namely, (i) the contract may be for work to be  done  for
        remuneration and for supply of materials used in the  execution  of
        the work for a price; (ii) it may be a contract for work  in  which
        the use  of  the  materials  is  accessory  or  incidental  to  the
        execution of the work; and (iii) it may be a contract for supply of
        goods where some work is required to be done as incidental  to  the
        sale.  Thereafter, it opined that the first contract is a composite
        contract consisting of two contracts, one of which is for the  sale
        of goods and the other is  for  work  and  labour;  the  second  is
        clearly a contract for work and labour not involving sale of goods;
        and the third is a contract for sale where the goods  are  sold  as
        chattels and the work done is merely incidental to the sale.

    33. Commenting on the said decision in Larsen  and  Toubro  (supra),  a
        three-Judge Bench opined that after the 46th Amendment, the thrusts
        laid down therein are not of much help in determining  whether  the
        contract is a works contract or a contract for sale of  goods.   We
        shall elaborate the perception as has been  stated  in  Larsen  and
        Toubro (supra) at a later stage.

    34. In Bharat Sanchar Nigam  Ltd.  (supra),  a  three-Judge  Bench  was
        concerned with the question of the nature of the  transaction  with
        regard to whether mobile phone connections which are enjoyed, is  a
        sale or is a service or both.  Though the context pertained to  the
        meaning of the term “goods” under Article 366(29A), yet  the  Court
        referred to  the  case  in  Associated  Cement  Companies  Ltd.  v.
        Commissioner of Customs[39] and stated thus: -

           “After the Forty-sixth Amendment,  the  sale  element  of  those
           contracts which are covered by the six sub-clauses of clause (29-
           A) of Article 366 are separable and may be  subjected  to  sales
           tax by the States under Entry 54 of List  II  and  there  is  no
           question of the dominant nature test applying. Therefore when in
           2005 C.K. Jidheesh v. Union of India[40] held that the aforesaid
           observations in Associated Cement were merely  obiter  and  that
           Rainbow Colour Lab v. State of M.P.[41] was still good  law,  it
           was not correct.”



    35. We have referred to the aforesaid decision only to point  out  that
        the “dominant nature test” relating to the works contract that gets
        covered under Article 366(29A) of the Constitution  has  been  held
        therein to be not applicable.

    36. In K. Raheja Development Corporation v. State of Karnataka[42], the
        appellants were involved in carrying on  business  of  real  estate
        development and allied contracts and had entered  into  development
        agreement with the owners of  the  land.   They  had  entered  into
        agreement with the intended purchasers for  residential  apartments
        and/or  commercial  complexes.   The  agreement  provided  that  on
        completion of the construction, the residential apartments  or  the
        commercial complexes would be handed over  to  the  purchasers  who
        would get an undivided interest in the land also with  the  further
        condition that the owners of  the  land  would  then  transfer  the
        ownership directly to the society which was being formed under  the
        State Legislation.  The question that arose for  consideration  was
        whether the appellants, the dealers, were liable  to  pay  turnover
        tax under the Karnataka Sales Tax  Act.   Their  returns  were  not
        accepted by the adjudicating authority and they  were  assessed  to
        sales tax.  Facing failure at all levels including the High  Court,
        the appellant preferred an appeal by way of special leave.  The two-
        Judge Bench considered  the  scope  of  Section  2(1)(u-1)  of  the
        Karnataka Sales Tax Act and other provisions and,  considering  the
        wide amplitude of the definition of “works contract”  in  the  Act,
        interpreted the  contract  and  came  to  hold  that  the  contract
        remained a works contract within the meaning of the term as defined
        under the said Act.   The  Bench  further  clarified  that  if  the
        agreement was entered into after  the  flat  or  unit  was  already
        constructed, then there would be no works contract.  But so long as
        the  agreement  was  entered  into  before  the  construction   was
        completed, it would be a works contract.  We may hasten to add that
        the aforesaid decision has been approved to have been  laying  down
        the correct legal position in Larsen and Toubro (supra).

    37. In State of U.P. and others v. P.N.C.  Construction  Co.  Ltd.  and
        others[43], the raw materials were bought  by  the  assessee  which
        were  used  in  the  manufacture  of  hot  mix  utilized  for  road
        construction.  The question that  emanated  before  the  Court  was
        whether, on the said facts, the Department was right in denying the
        benefit of recognition certificate as contemplated under Section 4B
        of the U.P. Trade Tax Act, 1948.  In that context, it was  observed
        that after the introduction of sub-clause (b)  of  Clause  29-A  in
        Article 366,  the  emphasis  is  on  the  expression  “transfer  of
        property in goods (whether goods as such or in  some  other  form)”
        and, therefore, the works contract which is an indivisible contract
        is, by a legal fiction, divided into  two  parts—one  for  sale  of
        goods and the other for supply of labour and  services,  which  has
        made it possible for the States to levy sales tax on the  value  of
        the goods involved in a works contract in the same way in which the
        sales tax was leviable on the price of  the  goods  supplied  in  a
        building contract, for the concept of “value addition” comes in.

    38. Reference to the aforesaid authorities is for the purpose that post
        the constitutional amendment, the Court  has  been  interpreting  a
        contract of  work,  i.e.,  works  contract  in  the  constitutional
        backdrop.  In certain cases, which involve transfer of property and
        also an element of service in the context of work rendered, it  has
        been treated as works contract.

    39. The essential characteristics have been elucidated by a three-Judge
        Bench in Larsen and Toubro (supra) thus: -

           “As the very title of Article 366 shows, it  is  the  definition
           clause. It starts by saying that in the Constitution unless  the
           context otherwise  requires  the  expressions  defined  in  that
           article [pic]shall have the meanings  respectively  assigned  to
           them in the article. The definition of expression “tax  on  sale
           or purchase of the goods” is contained in clause (29-A). If  the
           first part of clause (29-A) is read with  sub-clause  (b)  along
           with latter part of this clause, it reads like this: “tax on the
           sale or purchase of the goods” includes a tax on the transfer of
           property in goods (whether as  goods  or  in  some  other  form)
           involved in the execution of a works contract and such transfer,
           delivery or supply of any goods shall be deemed to be a sale  of
           those goods by the  person  making  the  transfer,  delivery  or
           supply and a purchase of those goods by the person to whom  such
           transfer, delivery or supply is made. The definition of  “goods”
           in  clause  (12)  is  inclusive.  It  includes  all   materials,
           commodities and articles. The expression “goods” has  a  broader
           meaning than merchandise. Chattels or movables are goods  within
           the meaning of clause (12). Sub-clause (b) refers to transfer of
           property in goods (whether as  goods  or  in  some  other  form)
           involved in the execution of a works  contract.  The  expression
           “in some other form” in the bracket is of utmost significance as
           by this  expression  the  ordinary  understanding  of  the  term
           “goods” has been enlarged by bringing within its fold goods in a
           form other than goods. Goods in some other form would thus  mean
           goods  which  have  ceased  to  be  chattels  or   movables   or
           merchandise and become attached or embedded to earth.  In  other
           words,  goods  which  have  by  incorporation  become  part   of
           immovable property are deemed as goods. The definition  of  “tax
           on the sale or purchase of goods” includes a tax on the transfer
           of property in the goods as goods or which have lost its form as
           goods  and  have  acquired  some  other  form  involved  in  the
           execution of a works contract.”



    40. On the basis of the aforesaid elucidation, it has been deduced that
        a transfer of property in goods under Clause  (29A)(b)  of  Article
        366 is deemed to be a sale of goods involved in the execution of  a
        works contract by the person making the transfer and  the  purchase
        of those goods by the person to whom such transfer  is  made.   One
        thing is significant to note that in Larsen and Toubro (supra),  it
        has been stated that after the constitutional amendment, the narrow
        meaning given to the term “works contract”  in  Gannon  Dunkerley-I
        (supra) no longer survives at present.  It has been observed in the
        said case that even if in a contract, besides  the  obligations  of
        supply of  goods  and  materials  and  performance  of  labour  and
        services, some additional obligations are  imposed,  such  contract
        does not cease to be works contract, for the additional obligations
        in the contract would not alter the nature of the contract so  long
        as the contract provides for a contract for works and satisfies the
        primary description of works contract. It  has  been  further  held
        that once the characteristics or elements  of  works  contract  are
        satisfied  in  a  contract,   then   irrespective   of   additional
        obligations, such contract would be  covered  by  the  term  “works
        contract” because nothing in Article 366(29-A)(b) limits  the  term
        “works contract” to contract for labour and service only.

    41. In the said case, another significant aspect has  been  considered.
        That relates to the “dominant nature test”.  We  think  it  apt  to
        reproduce what has been stated in Larsen and Toubro (supra):-

           “Whether the contract involved a dominant intention to  transfer
           the property in goods, in our view, is not at all material.   It
           is not necessary to ascertain what is the dominant intention  of
           the contract.  Even if the dominant intention of the contract is
           not to transfer the property in  goods  and  rather  it  is  the
           rendering of service or the ultimate transaction is transfer  of
           immovable property, then also it is open to the States  to  levy
           sales tax on the materials used in such contract if it otherwise
           has elements of works contract…”



    42. At this juncture, it is condign to state that  four  concepts  have
        clearly emerged.  They are (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 Article 366 of
        the Constitution 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.

    43. Having noted the conceptual telescopic arena  of  the  term  “works
        contract” and the principles we  have  stated  hereinabove,  it  is
        necessitous to  refer  to  how  the  installation  of  a  lift  was
        understood and treated prior to  the  decision  in  Kone  Elevators
        case.  In Otis  Elevator  (supra),  a  contract  was  entered  into
        between the parties for supply and installation of two lifts and in
        pursuance of the contract, the assessee duly erected and  installed
        two lifts in  accordance  with  the  terms  of  the  contract  and,
        eventually, the lifts  were  handed  over  to  the  customer.   The
        question arose for determination whether sales tax was  payable  by
        the applicant therein in respect of  the  said  contract.   It  was
        contended that it was an entire and indivisible  contract  for  the
        erection and installation of lifts and the materials furnished were
        only in execution of the works contract and there was  no  sale  of
        goods and materials by them.  The learned  Deputy  Commissioner  of
        Sales Tax came to  hold  that  though  the  contract  was  one  and
        indivisible contract and of lump sum value, yet in essence, it  was
        to transfer the property in the goods for money  consideration  and
        so, the contract  involved  a  sale  of  lifts.   When  the  matter
        travelled to the Sales Tax Tribunal, it  concurred  with  the  view
        expressed by the Deputy Commissioner of Sales Tax.  It was observed
        by the Tribunal that the amount or price of the materials  supplied
        was overwhelming as compared to the amount agreed upon  for  labour
        and service and that apart, the price of the materials supplied was
        subject to adjustment.  It was further held by  the  Tribunal  that
        the intention of the parties was that there was a  sale  qua  lifts
        for money consideration and there was also to be  the  installation
        of those lifts by the applicants.  On a reference being made by the
        Tribunal, the High Court scanned the terms of the contract and took
        note of certain facts, namely, that detailed provisions were  given
        regarding the dimensions and travel of the car, the load and  speed
        of the elevator, the type of the platform and  the  car  enclosure,
        and what the car was to consist of, as also of the place where  the
        machine was to be located, viz., above  the  hoistway  upon  rolled
        steel joists to be provided to the elevator; that the car-frame was
        to be made of structural steel and equipped  with  suitable  guides
        and an Otis car safety device; that the counterbalance was also  to
        be of a suitably guided structural  steel  frame  with  appropriate
        filler weights which would  be  furnished  to  promote  smooth  and
        economical operation; that  terminal  limit  switches  were  to  be
        provided to slow  down  and  stop  the  car  automatically  at  the
        terminal landing and final limit switches were to be  furnished  to
        automatically cut off the power and apply the brake, should the car
        travel beyond the terminal landings; that there was a reference  to
        terminal buffers; that Otis spring buffers were to be installed  as
        a means for stopping the  car  and  counterweight  at  the  extreme
        limits of travel; that there were provisions regarding the machine,
        brake and motor; that the motor  was  to  be  of  Otis  design  and
        manufacture, or equivalent  suited  to  the  service  proposed  and
        arranged for ample lubrication; that  there  were  also  provisions
        regarding sheaves and beams; that the contract also made provisions
        for a special operating device in the car and at hoistway landings;
        that for the actual operation of the car, a provision was made  for
        the car door or gate, hoistway doors and alarm bell; and  that  the
        contract specifically provided for the item  of  maintenance.   The
        High Court referred to various components of the price  and,  after
        referring to Richardson and Cruddas Ltd. (supra), opined that after
        the lifts were properly erected and installed in the building, they
        became permanent fixtures of the premises. The Court took  note  of
        the terms of the agreement and held that the terms in the agreement
        were also  indicative  of  the  fact  that  the  whole  contractual
        obligation was not divisible in parts, and was intimately connected
        with the labour  and  services  undertaken  by  the  applicants  in
        erecting and installing the apparatus.  After so stating, the Court
        observed that the work of erection and installation of an apparatus
        like the lift in a huge building, which has to carry passengers  to
        several floors, is a type of  work  which  calls  for  considerable
        skill and experience and  the  technical  skill  and  precision  in
        execution of the  work  is  absolutely  essential  if  satisfactory
        services are to be rendered by the person who undertakes such work.
        Eventually, the High Court ruled that it would be difficult to hold
        that the mere use of the  material,  or  the  ultimate  passing  of
        property in the article or apparatus as a result of  the  execution
        of the contract, will make it possible to sever the agreement  into
        two parts, one for the sale of goods, and the  other  for  services
        rendered, for the two are so intimately connected that severance is
        not possible in such cases and, in  fact,  it  was  an  indivisible
        contract.

    44. The aforesaid decision makes it limpid how many facets  are  to  be
        taken care of for the purpose  of  installation  of  the  elevator,
        regard being had to its technical facet, safety device  and  actual
        operation.  That apart, the decision has taken  note  of  the  fact
        that upon the installation of the lift in the building, it  becomes
        a permanent fixture in the premises and  that  the  involvement  of
        technical  skill  and  experience  pertain  to  the  precision   in
        execution for rendering satisfactory service and the obligation  to
        maintain which are integral to the supply and installation.

    45. In this backdrop, we shall now proceed to deal with the submissions
        advanced by the learned counsel for the respondents which  we  have
        already noted.  The fundamental submission of Mr. Dwivedi  is  that
        the manufacturer of the lift retains ownership in the components as
        property while producing the completed lift and, hence, it would be
        a case of pure manufacture.  A distinction has been  sought  to  be
        made that if another agency is appointed to install,  it  does  not
        have the  ownership  of  the  components.   To  bolster  the  basic
        submission, as we find, he has referred  to  various  facets.   The
        said proponement, as we understand, is based on the assumption that
        the supplier remains  the  owner  of  the  components  as  per  the
        contract; that the manufacture  is  a  process  or  activity  which
        brings in existence new identifiable and distinct  component;  that
        installation is an integral part of the manufacturing  process  and
        proceeds from the manufacture of the  components  themselves;  that
        the concept of permanent fixture to a building cannot  be  enlarged
        to such an extent to put it in the realm of works  contract  or  to
        take it away from the conceptual meaning of manufacture.   We  have
        already dealt  with  the  principles  stated  in  Patnaik  and  Co.
        (supra), Hindustan Aeronautics Ltd. (supra), T.V. Sundaram  Iyengar
        (supra), Kailash Engineering Co. (supra) and the observations  made
        by Sikri, J., in Patnaik & Co.  (supra)  wherein  the  decision  in
        Anglo-Egyptian Navigation Co. v. Rennie[44]  was  distinguished  by
        stating that whenever a contract  provides  for  the  fixing  of  a
        chattel to another chattel, there is  no  sale  of  goods.   Be  it
        noted, in Patnaik & Co.  (supra), an illustration  was  given  that
        when a dealer fits  tyres  supplied  by  him  to  the  car  of  the
        customer, it would tantamount to sale of the tyres by the dealer to
        the customer.  In these cases, the Court was  really  dealing  with
        the terms of the contract contextually to come to a  conclusion  as
        to whether the contract in question was a contract for  sale  or  a
        works contract.  The fundamental principle that was applied is that
        what was sold was a chattel  as  chattel  or  the  contract  was  a
        composite one on a different base/foundation.

    46. The other decisions which have been relied upon by Mr.  Dwivedi  to
        show that installation is a part of the manufacturing  process  are
        J.  Marcel  (Furriers)  Ltd.  (supra),  Central   India   Machinery
        Manufacturing Company Ltd. (supra), Norman Wright  (Builders)  Ltd.
        (supra), Titan Medical Systems (supra),  MIL  India  Ltd.  (supra),
        Eastend Papers Industries Ltd. (supra) and Aspinwall & Co. (supra).
         In J. Marcel (Furriers) Ltd. (supra), the  plaintiff  had  kept  a
        stock of furs made up ready for sale and they also  made  up  furs,
        coats, jackets, and boleros for customers.  An order was placed  by
        the defendant for a mutation mink jacket.  As the jacket was not up
        to mark, it was rejected by the defendant.  In  that  context,  the
        Court observed that though huge degree of skill  and  craftsmanship
        had gone into making up of  a  fur  jacket  as  was  made  for  the
        defendant, yet it was no more than making an article  for  sale  to
        the defendant on a special order  and  the  transaction,  in  fact,
        related to sale of a complete article and the receipt of the price.



    47. In Norman Wright (Builders) Ltd. (supra), an agreement was  entered
        into by the appellant for fixing  of  black-out  curtains  at  some
        London police stations.  The appellant-plaintiff  contended  before
        the Court that the fixing of curtains was not a sale of goods but a
        contract for  work  and  labour  and  the  supply  of  material  in
        connection therewith.  Repelling the said submission, it  was  held
        that  as  the  contract  involved  transferring  chattels,  namely,
        curtains to the defendants for  a  price,  in  which  they  had  no
        previous right, it was a sale of goods.

    48. Narne Tulaman Manufacturers Pvt. Ltd., Hyderabad  v.  Collector  of
        Central  Excise,  Hyderabad[45],  Eastend  Paper  Industries   Ltd.
        (supra), Aspinwall & Co. Ltd. (supra), MIL India Ltd.  (supra)  and
        Sirpur Papers Mills  Ltd.  (supra)  are  the  decisions  under  the
        Central Excise Act, 1944 which are really not of relevance as  they
        relate to the concept, term and expression  “manufacture”  as  used
        and understood under the said Act.  The  concept  of  “manufacture”
        has limited relevance and cannot be a determining factor to  decide
        whether the contract is one for supply of goods or is  a  composite
        contract.   In  Narne  Tulaman  Manufacturers  Pvt.  Ltd.  (supra),
        installation of weighbridges was held to  be  manufacture  for  the
        purpose of excise duty, observing that the  assessee  was  obsessed
        with the idea that part of the machinery was liable to duty but the
        whole  of  the  product  was  not  dutiable  as  excisable   goods.
        Similarly, in Aspinwall & Co. (supra), curing  of  coffee,  it  was
        held, amounts to manufacture, as a new and  distinct  commodity  of
        independent identity, distinct from raw  material,  had  come  into
        existence.  In Sirpur Paper Mills Ltd.’s case, the  question  arose
        whether paper making machine was an immovable property  as  it  was
        embedded on the earth and, therefore, not exigible to excise  duty.
        This Court opined that paper making machine was exigible to  excise
        duty as the whole machine could be dismantled and it  was  attached
        to the earth only for operational efficiency.   Though  the  entire
        machine was assembled from various components, yet, by  itself,  it
        was a new marketable commodity that had emerged as a result of  the
        manufacturing activity.  The aforesaid decisions  cannot  be  taken
        aid of to come to a conclusion that installation is assembling and,
        in the ultimate eventuate,  it  is  a  part  of  the  manufacturing
        process.  We are disposed to think so as  there  is  a  fundamental
        fallacy in the submission as far as installation  of  the  lift  is
        concerned.  It is not a plant which is erected at the site.  It  is
        not a different item like coffee which comes into the market  after
        processing.  It is also not like a “weighbridge” as  is  understood
        under the excise law.  It has to be understood  in  the  conceptual
        context of  the  manufacture  and  installation  of  a  lift  in  a
        building.  The lift basically comprises components like  lift  car,
        motors, ropes, rails, etc. having their own identity even prior  to
        installation.    Without   installation,   the   lift   cannot   be
        mechanically functional because it is a permanent  fixture  of  the
        building  having  been  so  designed.   These  aspects  have   been
        elaborately discussed in Otis Elevator (supra) by the High Court of
        Bombay.  Therefore, the installation of a lift in a building cannot
        be regarded as a transfer of a chattel or  goods  but  a  composite
        contract.  Hence, we unhesitatingly hold that  the  said  decisions
        are not of much help to the learned senior counsel for the State of
        Orissa.

    49. Coming to the submissions of Mr. Venkataramani, we  find  that  the
        fundamental facet of the contention is based on  the  principle  of
        “deliverable state” and the intention of the purchaser to obtain an
        identifiable product or goods and the said identified product comes
        into being after the components are fixed at the site to  make  the
        lift usable.  As submitted, the rendering of  service  is  only  to
        make the lift deliverable.  The  aforesaid  submission,  on  proper
        appreciation,  really  rests  on  the  bedrock  of  incidental   or
        ancillary service involved in the installation of lift.   We  shall
        deal with this aspect when  we  address  more  elaborately  to  the
        dominant nature test and the incidental service in the  context  of
        clause 29A(b) of Article 366 of the Constitution.

    50. As far as the submission put forth by the learned counsel  for  the
        State of Gujarat, it is based on the  edifice  that  the  “dominant
        nature test” is still available in view of the decisions in  Bharat
        Sanchar (supra) and  Larsen  and  Toubro  (supra).   On  a  careful
        reading of the written note of submission of the  learned   counsel
        for the State of Gujarat, we find that the learned counsel have not
        appositely  understood  the  ratio  laid  down  in  the   aforesaid
        authorities.  Reliance was placed on para 45  of  the  decision  in
        Bharat Sanchar (supra).   It  is  noticeable  that  the  Court  was
        analyzing the principle stated in Gannon  Dunkerley-I  (supra)  and
        thereafter, in para 49, which we have  reproduced  hereinabove,  it
        has been clearly held that after the Forty Sixth Amendment  of  the
        Constitution, the works contract  which  is  covered  under  Clause
        (29A)(b) of Article 366 of the Constitution is separable and may be
        subject to sales tax by the State under Entry  54  of  List-II  and
        there is no question of the dominant nature test being  applicable.
        Thus, the submission is absolutely misconceived.

    51. The submission of Dr. Manish Singhvi, learned counsel for the State
        of Rajasthan, primarily rests on the base that decisions which have
        been discussed in the referral order, do not lay down  the  correct
        law.  In our considered opinion, the judgments rendered in the said
        cases rested on the nature of the contract and the tests laid  down
        in Gannon Dunkerley-I (supra).  We see no reason to hold  that  the
        said decisions do not lay down the correct law in  the  context  of
        works contract as it was understood and treated prior to the  Forty
        Sixth Amendment.

    52. Coming to the stand and stance of the  State  of  Haryana,  as  put
        forth by Mr. Mishra, the same suffers  from  two  basic  fallacies,
        first, the supply  and  installation  of  lift  treating  it  as  a
        contract for sale on the basis of the overwhelming component  test,
        because there is a stipulation in the contract that the customer is
        obliged to undertake the work of civil construction and the bulk of
        the material used in construction belongs to the  manufacturer,  is
        not correct, as the subsequent discussion would show;  and  second,
        the notification dated 17th May, 2010 issued by the  Government  of
        Haryana, Excise and Taxation Department, whereby certain  rules  of
        the Haryana Value Added Tax Rules, 2003 have  been  amended  and  a
        table  has  been  annexed  providing  for  “Percentages  for  Works
        Contract and Job Works” under  the  heading  “Labour,  service  and
        other like charges as percentage of total value  of  the  contract”
        specifying  15%  for  fabrication  and  installation  of  elevators
        (lifts) and escalators,  is  self-contradictory,  for  once  it  is
        treated as a composite contract invoking labour and  service  as  a
        natural corollary, it would be works contract and  not  a  contract
        for sale.   To elaborate, the submission that the element of labour
        and service can be deducted from the total contract  value  without
        treating the composite contract as a works contract  is  absolutely
        fallacious.  In fact, it  is  an  innovative  subterfuge.   We  are
        inclined to think so as it would be frustrating the  constitutional
        provision and, accordingly, we unhesitatingly repel the same.

    53. As far as submissions of Mr. K.N. Bhat, learned senior counsel  for
        the State of Karnataka, and Mr. P.P. Malhotra,  learned  Additional
        Solicitor General, are  concerned,  as  their  stand  is  that  the
        decision in Kone Elevators (supra) is not  correct,  we  have  only
        noted that for completeness.

    54. Having dealt with the submissions advanced by the  learned  counsel
        for various States and the learned Additional Solicitor General for
        the Union of India, we shall presently proceed  to  deal  with  the
        correctness of the legal position as stated in Kone Elevators case.
         In the said case, a three-Judge Bench took note of the submissions
        on behalf of the Department that the main object of the contract in
        question was to sell the lifts and the works done by  the  assessee
        for installation was incidental to the sale of lifts.  It had  also
        taken note of the submission that the  legislature  has  classified
        the commodity “lift” under Entry 82 of the First  Schedule  to  the
        Andhra Pradesh General Sales Tax Act, 1957 keeping in mind that the
        word “installation” was ancillary to  the  “sale”  of  lifts.   The
        Court, while dealing with the differentiation between “contract for
        sale” and “works contract”, opined thus: -

           “5. It can be treated as well settled that there is no  standard
           formula by which one can distinguish a “contract for sale”  from
           a  “works  contract”.  The  question  is  largely  one  of  fact
           depending upon the terms of the contract including the nature of
           the obligations to be discharged thereunder and the  surrounding
           circumstances. If the intention is to transfer  for  a  price  a
           chattel in which the transferee had no previous  property,  then
           the contract is a contract for sale. Ultimately, the true effect
           of an accretion made pursuant to a contract has to be judged not
           by artificial rules but from the intention of the parties to the
           contract. In a “contract  of  sale”,  the  main  object  is  the
           transfer of property and delivery of possession of the property,
           whereas the main object in a “contract  for  work”  is  not  the
           transfer of the property but it is  one  for  work  and  labour.
           Another test often to be applied is: when and how  the  property
           of the dealer in such a transaction passes to the  customer:  is
           it by transfer at the time of delivery of the  finished  article
           as a chattel or by accession during the procession  of  work  on
           fusion to the movable property of the customer?  If  it  is  the
           former, it is a “sale”; if it is the  latter,  it  is  a  “works
           contract”. Therefore, in judging whether the contract is  for  a
           “sale” or for “work and labour”, the essence of the contract  or
           the reality of the transaction as a whole has to be  taken  into
           consideration. The  predominant  object  of  the  contract,  the
           circumstances of the case and the custom of the trade provide  a
           guide in deciding whether transaction is a “sale”  or  a  “works
           contract”. Essentially, the question is of interpretation of the
           “contract”. It is settled law that the  substance  and  not  the
           form of the contract is material in determining  the  nature  of
           transaction. No definite rule can be formulated to determine the
           question as to whether a particular given contract is a contract
           for sale of goods or is a works contract. Ultimately, the  terms
           of a given contract would be determinative of the nature of  the
           transaction, whether it is  a  “sale”  or  a  “works  contract”.
           Therefore, this question has to be ascertained on facts of  each
           case, on proper construction of  terms  and  conditions  of  the
           contract between the parties.”

    55. After so stating, the three-Judge Bench adverted to the definitions
        in the State Act, referred to the decision  in  Gannon  Dunkerley-I
        (supra), placed reliance on the decision in Hindustan Shipyard Ltd.
        (supra) and, analyzing the principle stated therein, observed thus:
        -

           “9. In the case of Hindustan Shipyard Ltd. v. State of A.P. this
           Court held that if the thing to be delivered has any  individual
           existence before the delivery as the sole property of the  party
           who is to deliver it, then it is a sale. If the bulk of material
           used in construction belongs to the manufacturer who  sells  the
           end product for a price, then it is  a  strong  pointer  to  the
           conclusion that the contract is in substance one for the sale of
           goods and not one for labour. However, the test is not decisive.
           It is not the bulk  of  the  material  alone  but  the  relative
           importance of the material qua the work, skill and labour of the
           payee which also has to be seen. If the major component  of  the
           end product is the material consumed in producing the chattel to
           be delivered and skill and labour are  employed  for  converting
           the main components into the end products, the skill and  labour
           are only incidentally used, the delivery of the end  product  by
           the seller to the buyer would constitute a sale.  On  the  other
           hand, if the main object of the contract is to avail  the  skill
           and labour of the seller though some material or components  may
           be incidentally used during the process of the end product being
           brought into existence by the investment of skill and labour  of
           the supplier, the transaction would be a contract for  work  and
           labour.”


    56. Applying the above test, the learned Judges referred to  the  terms
        of the contract and took note of the fact that the entire  onus  of
        preparation and making ready of the site for installation  of  lift
        was on the customer. It was  agreed  that  under  no  circumstances
        would the assessee undertake installation of lift if the  site  was
        not kept ready by the customer inasmuch as under clause 4(g) of the
        “Customers’ Contractual Obligations”,  the  assessee  reserved  the
        right to charge the customer for delay in  providing  the  required
        facilities. The Court observed that these facts  clearly  indicated
        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
        and  the  said  “supply”  part  included  installation   of   lift.
        Therefore, the learned Judges further observed that the 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.
        The Court took note 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 and ruled that it  was  clear
        that the transaction in question was a contract of “sale” and not a
        “works contract”. The Court perused the brochure  of  the  assessee
        Company and noticed that  the  assessee  was  in  the  business  of
        manufacturing of various types of lifts, namely,  passenger  lifts,
        freight elevators, transport  elevators  and  scenic  lifts  and  a
        combined study of the above  models,  mentioned  in  the  brochure,
        indicated that the assessee had been exhibiting various  models  of
        lifts for sale and the  said  lifts  were  being  sold  in  various
        colours with various capacities  and  variable  voltage.  From  the
        further analysis, it is manifest that the Court took  into  account
        the fact that it was open for a prospective buyer to place purchase
        order for supply of lifts as per his  convenience  and  choice  and
        ruled that the assessee, on facts, satisfied the twin  requirements
        to attract the charge of tax under the 1957 Act,  namely,  that  it
        carried on business of selling the lifts and elevators and  it  had
        sold the lifts and elevators during  the  relevant  period  in  the
        course of its business.  To strengthen the conclusion, it has  been
        held 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 are only incidentally used.

    57. From the aforesaid decision, it is perceptible that the three-Judge
        Bench has drawn distinction between the contract for sale and works
        contract and, in that context,  the  essence  of  the  contract  or
        reality of the transaction as a whole,  regard  being  had  to  the
        predominant object of the contract, the circumstances of  the  case
        and the custom of the trade have been taken into consideration.  In
        that context, the learned Judges have opined that  it  is  not  the
        bulk of the material alone  but  the  relevant  importance  of  the
        material qua the work, skill and labour of the payee which also has
        to be seen and if the major component of the  end  product  is  the
        material consumed in producing the  chattel  to  be  delivered  and
        skill and labour are employed for converting  the  main  components
        into the end product, the skill and labour  are  only  incidentally
        used and the delivery of the end product by the seller to the buyer
        would constitute a sale.  On the aforesaid  principle,  the  three-
        Judge Bench has finally ruled that a dealer carries on business  of
        selling lifts and elevators and 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  are  incidentally  used   and,
        therefore, the delivery of the end product by the assessee qua  the
        customer has to be constituted as a sale and not a works  contract.



    58. To understand the reasons ascribed in  the  said  decision,  it  is
        requisite to appreciate the principle relating to the  overwhelming
        component test or major component test.  We have  already  referred
        to the decision in Bharat  Sanchar  (supra)  wherein  it  has  been
        clearly stated that the dominant nature test  has  no  application.
        The said principle has been reiterated in Larsen and Toubro (supra)
        by stating thus: -

           “87. It seems to us (and that is the view taken in some  of  the
           decisions) that a contract may involve both a contract  of  work
           and labour and a contract of sale of goods. In our opinion,  the
           distinction between contract for sale of goods and contract  for
           work (or service)  has  almost  diminished  in  the  matters  of
           composite contract involving both a contract of work/labour  and
           a contract for sale for the purposes  of  Article  366(29-A)(b).
           Now  by  legal  fiction  under  Article  366(29-A)(b),   it   is
           permissible to make such contract divisible  by  separating  the
           transfer of property in goods as goods or  in  some  other  form
           from the contract of work and labour. A transfer of property  in
           goods under clause (29-A)(b) of Article 366 is deemed  to  be  a
           sale of goods involved in the execution of a works  contract  by
           the person making the transfer and the  [pic]purchase  of  those
           goods by the person to whom such  transfer  is  made.  For  this
           reason, the traditional decisions which hold that the  substance
           of the contract must be seen have lost their significance.  What
           was viewed traditionally has to be now understood  in  light  of
           the philosophy of Article 366(29-A).”

                       xxx        xxx        xxx
           “97.5. A contract may involve both a contract of work and labour
           and a  contract  for  sale.  In  such  composite  contract,  the
           distinction between contract for sale of goods and contract  for
           work (or service) is virtually diminished.

           97.6. The dominant  nature  test  has  no  application  and  the
           traditional decisions which have held that the substance of  the
           contract  must  be  seen  have  lost  their  significance  where
           transactions are of the nature contemplated in  Article  366(29-
           A). Even if the dominant intention of the  contract  is  not  to
           transfer the property in goods and rather  it  is  rendering  of
           service or the ultimate transaction  is  transfer  of  immovable
           property, then also it is open to the States to levy  sales  tax
           on  the  materials  used  in  such  contract  if  such  contract
           otherwise has elements of  works  contract.  The  enforceability
           test is also not determinative.”



    59. It is also necessary to  state  here  that  in  Larsen  and  Toubro
        (supra), the question arose whether taxing of sale of goods  in  an
        agreement for sale of flat  which  is  to  be  constructed  by  the
        developer-promoter is  permissible  under  the  Constitution.   The
        three-Judge Bench  opined  that  though  the  ultimate  transaction
        between the parties may be sale of the flat, yet it cannot be  said
        that the characteristics of works contract are not involved in that
        transaction because the term “works  contract”  is  nothing  but  a
        contract in which one of the parties is obliged to undertake or  to
        execute the work and such an activity of construction bears all the
        characteristics and elements of works contract.  In  that  context,
        in paragraph 107 of the decision, reliance was placed on  Builders’
        Association (supra) wherein the contention that a flat is sold as a
        flat and not as an aggregate of its component parts was negated  on
        the ground that the properties that were transferred to  the  owner
        in the execution of the works contract are not  goods  involved  in
        the execution of the works contract, but a conglomerate,  that  is,
        the entire building which is actually constructed.

    60. The aforesaid analysis has to be understood on the anvil of Article
        366 (29A) of the Constitution.  In this regard, we  may  fruitfully
        reproduce a passage from Builders’ Association case: -

           “… After the 46th Amendment the  works  contract  which  was  an
           indivisible one is by a legal fiction altered  into  a  contract
           which is divisible into one for sale of goods and the other  for
           supply of labour and services. After the 46th Amendment, it  has
           become possible for the States to levy sales tax on the value of
           goods involved in a works contract in the same way in which  the
           sales tax was leviable on the price of the goods  and  materials
           supplied in a building contract which had been entered  into  in
           two distinct and separate parts as stated above.”



    61. Explaining the said passage,  the  Constitution  Bench,  in  Gannon
        Dunkerley-II (supra), has opined thus:-
           “This would mean that as a result of the Forty-sixth  Amendment,
           the contract which was single and indivisible has  been  altered
           by a legal fiction into a contract which is divisible  into  one
           for sale of goods and other for supply of  labour  and  services
           and as a result such a contract which was single and indivisible
           has been brought  on  a  par  with  a  contract  containing  two
           separate agreements.”


    62. It has been further observed therein as follows: -

           “36. If the legal fiction introduced by Article 366(29-A)(b)  is
           carried to its logical end it follows that even in a single  and
           indivisible works contract there is a deemed sale of  the  goods
           which are involved in the execution of a works contract. Such  a
           deemed sale has all the incidents of a sale of goods involved in
           the  execution  of  a  works  contract  where  the  contract  is
           divisible into one for sale of goods and the other for supply of
           labour and services.”

    63. Considered on the touchstone  of  the  aforesaid  two  Constitution
        Bench  decisions,  we  are  of  the  convinced  opinion  that   the
        principles stated in Larsen and Toubro (supra) as reproduced by  us
        hereinabove, do correctly enunciate the legal position.  Therefore,
        “the dominant nature test” or “overwhelming component test” or “the
        degree of labour and service test” are really not  applicable.   If
        the contract is a composite one which falls under the definition of
        works contracts as engrafted under clause (29A)(b) of  Article  366
        of the Constitution, the incidental  part  as  regards  labour  and
        service  pales  into  total  insignificance  for  the  purpose   of
        determining the nature of the contract.

    64. Coming back to Kone Elevators (supra), it is perceivable  that  the
        three-Judge Bench has referred to the statutory provisions  of  the
        1957 Act and thereafter  referred  to  the  decision  in  Hindustan
        Shipyard Ltd. (supra), and has further taken note of the customers’
        obligation to do the civil construction and the time  schedule  for
        delivery  and  thereafter  proceeded  to  state  about  the   major
        component  facet  and  how  the  skill  and  labour  employed   for
        converting the main  components  into  the  end  product  was  only
        incidental and arrived at the conclusion that it was a contract for
        sale.  The principal logic applied, i.e., the incidental  facet  of
        labour and service, according to us, is not  correct.   It  may  be
        noted here that in all the cases that have been brought before  us,
        there is a composite contract for the purchase and installation  of
        the lift.  The price quoted is a composite one for  both.   As  has
        been held by the High Court of Bombay  in  Otis  Elevator  (supra),
        various technical aspects go into the  installation  of  the  lift.
        There has to  be  a  safety  device.   In  certain  States,  it  is
        controlled by the legislative enactment and the rules.  In  certain
        States, it is not, but the fact remains that a lift is installed on
        certain norms and parameters keeping in view numerous factors.  The
        installation  requires  considerable  skill  and  experience.   The
        labour and service element is obvious.  What has been taken note of
        in Kone Elevators (supra) is that the  company  had  brochures  for
        various types of lifts and one is required to place  order,  regard
        being had to the building, and also make certain preparatory  work.
        But it is not in dispute that the preparatory work has to  be  done
        taking into consideration as  to  how  the  lift  is  going  to  be
        attached to the building.  The  nature  of  the  contracts  clearly
        exposit that they are contracts for supply and installation of  the
        lift where labour and service element  is  involved.   Individually
        manufactured goods such as lift car, motors, ropes, rails, etc. are
        the components of the lift which are eventually  installed  at  the
        site for the lift to operate in the  building.   In  constitutional
        terms, it is transfer either in goods or some other form.  In fact,
        after the goods are assembled and installed with skill  and  labour
        at the site, it  becomes  a  permanent  fixture  of  the  building.
        Involvement of the skill has been elaborately  dealt  with  by  the
        High Court of Bombay in  Otis  Elevator  (supra)  and  the  factual
        position is undisputable and irrespective of  whether  installation
        is regulated by statutory law or not, the result would be the same.
         We may hasten to add that this position is stated in respect of  a
        composite contract which requires the contractor to install a  lift
        in a building.  It is necessary to state here that if there are two
        contracts, namely, purchase of the components of the  lift  from  a
        dealer, it would be a contract for sale and similarly, if  separate
        contract is entered into for installation, that would be a contract
        for labour and service.  But, a  pregnant  one,  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.  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 conclusion, as  has  been
        reached in Kone Elevators (supra),  is  based  on  the  bedrock  of
        incidental service for delivery.  It would not be  legally  correct
        to make such a distinction in respect of  lift,  for  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.  Hence, the  fundamental
        characteristics of works contract are satisfied.  Thus analysed, we
        conclude and hold that the  decision  rendered  in  Kone  Elevators
        (supra) does not correctly lay down the law and it is, accordingly,
        overruled.

    65. Ordinarily, after so stating, we would have directed the matter  to
        be listed before the appropriate Division Bench.   However,  it  is
        not necessary to do so in this batch of cases inasmuch as the  writ
        petitions have been filed either  against  the  show-cause  notices
        where cases have been reopened or against the orders of  assessment
        framed by the assessing officers and civil  appeals  filed  against
        certain assessment orders or affirmation thereof which are based on
        the decision of the  three-Judge  Bench  in  Kone  Elevators  case.
        Considering the factual  matrix,  we  direct  that  the  show-cause
        notices, which have been issued by taking recourse to reopening  of
        assessment, shall stand quashed. The assessment orders  which  have
        been framed and are under assail before this Court are  set  aside.
        It is necessary to state here that where the assessments have  been
        framed and have attained finality and are not  pending  in  appeal,
        they  shall  be  treated  to  have  been  closed,  and  where   the
        assessments are challenged in appeal or revision, the same shall be
        decided in accordance with the decision rendered by us.

    66. The writ petitions and the civil appeals are disposed  of  with  no
        order as to costs.
                                                        ……………………………………….…CJI
                                                                [R.M. Lodha]


                                                        …………………………………….………J.
                                                              [A.K. Patnaik]


                                                        ……………………………………….……J.
                                          [Sudhansu Jyoti Mukhopadhaya]






                                                        ……………………………………….……J.
                                                               [Dipak Misra]


      New Delhi;
      May 06, 2014.




























                                                                  Reportable



                        IN THE SUPREME COURT OF INDIA

                         CIVIL ORIGINAL JURISDICTION

                    WRIT PETITION (CIVIL) NO. 232 OF 2005



M/s. Kone Elevator India Pvt. Ltd.                 ….Petitioner



                                   VERSUS



State of T.N. & Ors.                                     .…Respondents

                                    With




       W.P.(C)  No.298/2005,   W.P.(C)  No.487/2005,  W.P.(C)  No.528/2005,
       W.P.(C) No.67/2006, W.P.(C) No.511/2006, W.P.(C) No.75/2007, W.P.(C)
       No.519/2008,  W.P.(C)  No.531/2008,  W.P.(C)  No.548/2008,   W.P.(C)
       No.569/2008,      W.P.(C)       No.186/2009,                 W.P.(C)
       No.23/2010,  W.P.(C)  No.62/2010,   W.P.(C)   No.232/2010,   W.P.(C)
       No.279/2010,  W.P.(C)  No.377/2010,  W.P.(C)  No.112/2011,   W.P.(C)
       No.137/2011,  W.P.(C)  No.181/2011,  W.P.(C)  No.207/2011,   W.P.(C)
       No.278/2011,  W.P.(C)  No.243/2011,  W.P.(C)  No.372/2011,   W.P.(C)
       No.398/2011,  W.P.(C)  No.381/2011,  W.P.(C)  No.468/2011,   W.P.(C)
       No.547/2011,  W.P.(C)  No.107/2012,  W.P.(C)  No.125/2012,   W.P.(C)
       No.196/2012,  W.P.(C)  No.263/2012,  W.P.(C)  No.404/2012,   W.P.(C)
       No.567/2012,  W.P.(C)  No.145/2013,  W.P.(C)  No.241/2013,   W.P.(C)
       No.454/2013,  W.P.(C)  No.404/2013,  W.P.(C)  No.723/2013,   W.P.(C)
       No.440/2012,  W.P.(C)  No.441/2012,  W.P.(C)  No.156/2013,   W.P.(C)
       No.533/2013,  W.P.(C)  No.403/2012,  W.P.(C)  No.824/2013,   W.P.(C)
       No.428/2009, W.P.(C)  No.1046/2013,  W.P.(C)  No.1047/2013,  W.P.(C)
       No.1048/2013, W.P.(C) No.1049/2013,  W.P.(C)  No.1050/2013,  W.P.(C)
       No.1051/2013, W.P.(C) No.1052/2013, W.P.(C) No.1098/2013



       SLP(C)  Nos.14148-14153/2005,  SLP(C)  Nos.14961-14967/2005,  SLP(C)
       Nos.17842-17847/2005, SLP(C)  No.5377/2006,  SLP  (C)  No.7037/2006,
       SLP (C) No.30272/2008, SLP (C) No.30279/2008, SLP (C)  No.5289/2009,
       SLP  (C)  No.6520-6521/2009,  SLP  (C)   No.4469-4471/2010,   SLP(C)
       No.11258/2010, SLP (C) No.17228/2010, SLP  (C)  No.17236-17237/2010,
       SLP  (C)  No.23259-23261/2010,   SLP   (C)   No.15732/2011,   SLP(C)
       No.16466/2011, SLP (C) No.16137/2011, SLP (C) No.5503/2011, SLP  (C)
       No.11147/2011,  SLP  (C)  No.11227-11238/2012,  SLP  (C)   No.36001-
       36012/2013, SLP (C) No.19901/2013, C.A. No.6285/2010




                               J U D G M E N T





Fakkir Mohamed Ibrahim Kalifulla, J.



. 1.  I had the benefit of reading the illuminating judgment of  my  brother
 Justice Dipak Misra.  With  respect,  I  state  that  I  am  not  able  to
 subscribe to the views and conclusions of His Lordship.  Therefore, I wish
 to record my reasoning  and  conclusions  holding  that  the  manufacture,
 supply and installation of lifts are to be treated as a contract of ‘Sale’
 in the following paragraphs.

. 2.  By an Order dated 13.02.2008, a  three  Judge  Bench  of  this  Court,
 headed by the Hon’ble Chief Justice, referred the following question to be
 decided by a Constitution Bench, namely,

          “Whether manufacture, supply and installation of LIFTS are  to  be
          treated as a contract of ‘Sale’ or ‘Works Contract’?”


. 3.  In  the  decision  reported  in  State  of  Andhra  Pradesh  vs.  Kone
 Elevators (India) Pvt. Ltd., (2005) 3 SCC 389, it was held that a contract
 for supply of LIFTS constituted a ‘Sale’ and did not amount  to  a  ‘Works
 Contract’ and that the element of service provided by the  vendor  of  the
 elevator  was  negligible.  The  referral  order  referred  to  the  other
 decisions which were drawn to the attention of the Court, namely, State of
 Rajasthan & Anr. vs. Man Industrial Corporation Ltd., [1969] 24  STC  349,
 State of Rajasthan vs. Nenu Ram, [1970]  26  STC  268  and  M/s.  Vanguard
 Rolling Shutters and Steel Works vs. Commissioner of Sales Tax,  (1977)  2
 SCC 250, wherein a contrary view was expressed than what has been taken in
 Kone Elevators (India) Pvt. Ltd (supra).

. 4.  On behalf of the State of  Tamil  Nadu,  Gujarat,  Uttar  Pradesh  and
 Andhra Pradesh, it was submitted that  Kone  Elevator  (India)  Pvt.  Ltd.
 (supra) was correctly decided and placed reliance  on  Hindustan  Shipyard
 Ltd. vs. State of Andhra Pradesh, (2000) 6 SCC 579, apart from  contending
 that the Writ Petition under Article  32  was  not  maintainable.  In  the
 referral order, while giving liberty to raise all contentions at the  time
 of final hearing, the issue came  to  be  referred  to  this  Constitution
 Bench.

. 5.  We heard Mr. Harish N. Salve, learned  Senior  Counsel  appearing  for
 the Petitioner  and  Mr.  Rakesh  Dwivedi,  Dr.  Manish  Singhvi,  Mr.  R.
 Venkataramani, Mr. Kapoor, Mr. K.N. Bhatt and Mr. Darius Khambata, Counsel
 for the State of Orissa, Rajasthan, Tamil Nadu, Andhra  Pradesh,  Gujarat,
 Karnataka and Maharashtra. We also  heard  Mr.  P.  P.  Malhotra,  learned
 Additional Solicitor General, who appeared  on  behalf  of  the  Union  of
 India.

.  6.   Mr.  Salve,  learned  Senior  Counsel  for  the  Petitioner  in  his
 submission contended that after the 46th  Amendment,  Article  366(29A)(b)
 came to be introduced and in the light of the ratio laid down in a  recent
 decision of this Court in Larsen & Toubro  Ltd.  vs.  State  of  Karnataka
 reported in 2013 (12) SCALE 77, the nature  of  contract  as  between  the
 Petitioner and the various buyers of LIFTS was nothing but a ‘contract for
 works’ and consequently, whatever materials used in the performance of the
 contract could be taxed  only  based  on  the  prescription  contained  in
 Article 366(29A)(b) and that the transaction could not be  categorized  as
 one of ‘Sale’ attracting payment of Sales  Tax  under  the  various  State
 enactments, as well as the Central Sales Tax Act.

. 7.  At the very outset, it must be stated that in the light of  the  three
 Judge Bench decision in Kone Elevators (India) Pvt. Ltd. (supra)  and  the
 decision of the same strength of Judges reported in Larsen &  Toubro  Ltd.
 (supra), the ultimate answer to the question  would  result  in  affirming
 either  of  the  views  of  the  above  two  decisions.  Further,  certain
 Constitution Bench decisions should also have to be kept in mind,  wherein
 the basic principle/test to be applied to  find  out  as  to  whether  the
 contract is one for ‘Sale’ or ‘Works Contract’. The first decision is  the
 M/s. Patnaik and Company vs. State of Orissa reported in AIR 1965 SC 1655,
 wherein the principle stated  by  the  High  Court  was  affirmed  by  the
 Constitution Bench of this Court. The said principle  was  to  the  effect
 that it makes no difference whether an article is a ready-made article  or
 is prepared according to the customer's specification. It would also  make
 no difference whether the assessee prepares it separately from  the  thing
 and then fixes it  on  it,  or  does  the  preparation  and  the  fixation
 simultaneously in one operation. It  was  further  held  that  it  is  the
 essence of the transaction viz., the agreement and sale, which relates  to
 the same subject-matter, i.e. the goods agreed to be sold and in which the
 property gets transferred. In another Constitution Bench decision of  this
 Court in The  Commissioner  of  Commercial  Taxes  Mysore,  Bangalore  vs.
 Hindustan Aeronautics Ltd. reported in (1972) 1 SCC 395, it was again held
 that the answer to the question whether it is a works contract or it is  a
 contract of sale depends  upon  the  construction  of  the  terms  of  the
 contract and in the light of the surrounding circumstances. It  will  have
 to be further noted that the principles set down in the above Constitution
 Bench decisions were neither varied nor upset in  any  other  judgment  of
 equal strength, though in Larsen & Toubro Ltd. (supra) it has been  stated
 that the ‘Dominant Nature Test’ laid down in  State  of  Madras  vs.  M/s.
 Gannon Dunkerley and Co.  (Madras)  Ltd.,  AIR  1958  SC  560,  no  longer
 survives. In my humble view, it will have to be stated that even after the
 Constitutional Amendment introducing Article 366(29A)(b), it will have  to
 be necessarily examined for its application as  to  whether  a  particular
 contract would fall  within  the  expression  ‘Works  Contract’  and  only
 thereafter, the incidence of taxation as provided in the  said  sub-clause
 could operate. I must also point out that this  principle  has  also  been
 emphasised in the decision of Larsen &  Toubro  Ltd.  (supra).  Therefore,
 while venturing to answer the question referred for our consideration, the
 various principles laid down in the Constitution Bench decisions  have  to
 be necessarily kept  in  mind  to  state  whether  the  decision  in  Kone
 Elevators (India) Pvt. Ltd. (supra) will prevail or the one  in  Larsen  &
 Toubro Ltd. (supra) should be followed.

. 8.  Before  referring  to  the  detailed  submissions  of  the  respective
 counsel,  since  the  substantive  submission  of  the  Counsel  for   the
 Petitioner centers around the contract  between  the  Petitioner  and  its
 customers, which contains various terms and conditions, the same are to be
 noted in the forefront. With that in view, I wish to refer to the specimen
 documents relating to the supply of the elevators by  the  Petitioner  for
 its customers. Annexure A1 consists of the order of acknowledgement of the
 model, details of the  benefits  of  the  elevator  to  be  supplied,  the
 preparatory  work  to  be  carried  out  by  the  customer,  the  document
 containing price  variation  clause  and  elevator  works  contracts,  the
 general conditions of Contract, the acceptance document  by  both  parties
 and the invoice raised along with the various bills for  purchase  of  the
 model items. A detailed reference to each one of the documents has  to  be
 noted in order to examine the question  as  to  whether  the  manufacture,
 supply and installation of LIFT by the Petitioner should be treated either
 as a ‘Sale’ or ‘contract for work’.

. 9.  The above documents are found in Volume 1 of I.A. No. 2 of  2013.  The
 details of the above documents are available in Annexure A-1, which are at
 pages 6 to 27. The first document is dated 23.12.2009, addressed to one of
 the customers of the Petitioner.  The subject column reads as under:
 “Order Acknowledgment for One (1) No.  OTIS  Electric  Traction  Passenger
 Elevator for your Building at “BAPU NAGAR, JAIPUR, RAJASTHAN”.”





. 10. In the body of the said letter, the order placed by the  customer  was
 acknowledged by referring to the acceptance of the  Petitioner’s  proposal
 for ‘SUPPLY’ and ‘INSTALLATION’ of one  (1)  No.  OTIS  Electric  Traction
 Passenger Elevator for their building.  Along with the said letter, a copy
 of the proposal duly approved by the Petitioner’s authorized  officer  was
 also enclosed. The contract number allocated  to  the  customer  was  also
 mentioned. The first document enclosed along with the  said  letter  dated
 23.12.2009, is a document dated 21.10.2009, containing nine pages  and  in
 the last page the signatures of the  Petitioner  and  its  customers  were
 found affixed in proof of acceptance of the Petitioner’s offer  to  supply
 and installation of its elevator. Though it is  one  single  contract,  it
 contains separate terms and  conditions  dealing  with  different  aspects
 relating to the supply and erection of the elevator.

. 11. The first one is titled as Model  Code,  which  contains  the  various
 details about the elevator to be supplied. Such details relate to the load
 and speed, the travel and rise of the LIFT, the stops and openings of  the
 LIFT, the power supply requirement for its operation, the  control  aspect
 of the LIFT, the nature of operation of the LIFT manual or automatic,  the
 mechanical aspect of the LIFT, the size of the LIFT,  the  requirement  of
 the hoist way for installing the LIFT, the various panels to  be  provided
 in the LIFT and handrails to be provided inside the LIFT,  the  nature  of
 false ceiling, the nature of flooring, the width of opening in  the  LIFT,
 the method of operation of the doors  of  the  LIFT,  the  design  of  the
 signals, other details such as the type of Buttons at different levels  of
 the LIFT, the type of LIFT car operating panel with Touch Screen facility,
 Battery operated alarm bell & emergency light, fireman’s  switch  at  main
 lobby and one number colour LCD in the lobby. It also specifies the colour
 scheme of the LIFT and the shape of the LIFT.

. 12. The next page of the document is  under  the  caption  ‘A.C.  Variable
 Voltage Variable Frequency Control’. In the said document  description  of
 the machine, the brake system, the motor and other  technological  details
 have been set out. As far as the type of  machine  is  concerned,  various
 details about the operating mechanism, which is part of the elevator  such
 as motor, electro-mechanical brake, chromium molybdenum steel worm, bronze
 gear etc., have been mentioned. The brake system  has  been  described  as
 direct current brake with spring applied  and  electrically  released  and
 designed to provide for smooth stop under variable loads. As  far  as  the
 motor is concerned, it is mentioned that the A.C. motor has been  designed
 for elevator service, which  will  have  high  starting  torque  with  low
 starting current. That apart, the advance technological system,  which  is
 called as ‘Microprocessor Based Control’ that will be provided in the LIFT
 has  been  stated  in  detail.  The  details  about  the  digital  control
 provisions, other user friendly features included  in  the  Microprocessor
 Based Control has also been furnished. It is finally mentioned in the said
 document that the system would continuously monitor  critical  aspects  of
 system health, self-health, diagnostic capabilities, which are built  into
 the control system to speed up trouble-shooting, which  can  be  monitored
 from seven segment display provided in the logic board and  that  it  will
 facilitate  quick  identification  of  fault  for  restoration  of  normal
 operation.

. 13. The next page of the document annexed is under the  caption  ‘Benefits
 of ACV F (Variable  Voltage  Variable  Frequency  Drive)’.  This  document
 contains  10  specific  details,  namely,  (i)   smooth   and   controlled
 acceleration/deceleration,  (ii)  better  riding  quality,  (iii)  assured
 leveling accuracy +/- 5  MM,  (iv)  improved  flight  time,  (v)  improved
 reliability & increased efficiency, (vi) reduced power  consumption  about
 50%  and  improved  power  factor,  (vii)  reduced  heat  release,  (viii)
 flexibility of  programme  and  programming  of  features  at  site,  (ix)
 enhances the value of building, and (x) simplified maintenance. A  cursory
 glance of the details furnished  under  the  above  10  heads  by  way  of
 benefits of the offered LIFT discloses the claim of the Petitioner  as  to
 the advantage that will be available to  the  customer  in  the  event  of
 ordering for supply of the said type of elevator.

. 14. The next page of the document  is  under  the  caption  ‘Maintenance’.
 Under the head of ‘Maintenance’ it is mentioned as to from when  the  free
 maintenance for 12 months period as per the quotation would commence,  the
 nature of inspection and examination that would be carried out during  the
 said period of 12 months of free  maintenance  and  the  extent  to  which
 replacement of parts could be made free of cost, as well as on  chargeable
 basis. It also specifies the exclusion of any special examination that may
 be carried out in between the monthly free  examination  dates,  in  which
 event, the exclusive responsibility would be of  the  Purchaser  as  owner
 when once possession is handed over apart from the force majeure clause.

. 15. The next page of  the  document  is  under  the  heading  ‘Preparatory
 Work’. This document contains as many as 21 Clauses and at the very outset
 it is stipulated as ‘You Agree at your cost’. The  nature  of  preparatory
 work set out in the said 21 Clauses relates to the RESPONSIBILITY  OF  THE
 PURCHASER to furnish within two weeks or sooner if required from the  date
 of acceptance of the proposal all the required data for the performance of
 the contract, to design and furnish a properly framed and  enclosed  legal
 ELEVATOR HOIST WAY/STRUCTURE, to furnish an ELEVATOR  PIT  of  proper  and
 legal depth below the lowest landing, to furnish properly lighted and FIRE
 PROOF MACHINE ROOM of sufficient  size  to  accommodate  the  Petitioner’s
 equipment with other  detailed  specifications,  to  furnish  and  install
 necessary  HOIST  WAY  DOOR  FRAMES  and  allied  provisions,  to  provide
 continuous  SILL  BEARING  AREA  for  each  hoist  way  entrance  of  such
 constructions, to do all painting except  elevator  material,  to  do  all
 CUTTING OF WALLS, floors, partitions  including  grouting  of  all  bolts,
 sills etc., to furnish REQUIRED POWER at the top floor landing terminating
 in suitable main  switches  for  power  and  light  circuits  with  allied
 provisions, to furnish LIGHT OUTLET POINTS at the middle of the hoist  way
 and a light point in the pit, to be furnished during the erection  of  the
 elevators, ELECTRIC POWER SUPPLY of necessary characteristics  to  provide
 illumination and operation of tools and hoists etc., to guard and  protect
 the hoist way, TO COMPLETE ALL THE WORKS IN SUCH SPECIFIED TIME so that no
 delay is caused in carrying out the installation  by  the  Petitioner,  to
 relieve the Petitioner  of  any  responsibility  in  respect  of  expenses
 relating to power supply or expenses of any nature relating to the rest of
 the building and other contractor’s work, to pay  all  fees  that  may  be
 required in connection with erection of preparation of  the  structure  in
 which the elevator equipment  is  to  be  erected  including  any  general
 permit/certificate fees, usually billed by the Government  Agency  licence
 fee etc., to PROVIDE SCAFFOLDING for erector’s requirement in the elevator
 hoist way, during the erection period AND FOR ITS REMOVAL  thereafter  and
 in the event of the elevator hoist way being more than  40  meter  height,
 such scaffolding should be in steel structure by OTIS, to provide suitable
 weatherproof lock-up storage accommodation of approximately 50 sq.mt.  per
 elevator at the ground floor level near the  hoist  way,  to  provide  and
 maintain adequate safety and security measures, as also retain OTIS safety
 infrastructure to prevent any injury to third party or  damage,  theft  or
 pilferage of material during erection period till the  installed  LIFT  is
 handed over, to provide hoisting beam in  the  machine  room  ceiling  and
 rolled steel sections with bearing plates for support of  the  machine  if
 required, to provide acceptable living accommodation with facilities  such
 as light, running water, sanitary for the erection crew  at  or  near  the
 site and to  indemnify  and  SAVE  THE  PETITIONER  HARMLESS  AGAINST  ALL
 LIABILITY GROWING OUT OF THE PURCHASER’S FAILURE TO CARRY OUT ANY  OF  THE
 FOREGOING. Out of the above 21 items, the  aspects  for  which  Petitioner
 takes the responsibility are the provision of a ladder in a pit, provision
 of steel fascia by OTIS in respect of S. No.6 and the  provision  relating
 to scaffolding. It also states that the clause relating to  provision  for
 living accommodation is not applicable.  The  rest  of  the  works  to  be
 carried out relating to provision of a  HOIST,  which  is  otherwise  also
 called as ‘Well’ for erecting the LIFT has been entirely fastened  on  the
 Purchaser. It is also relevant to note that under the heading ‘Preparatory
 Work’, major responsibility has been  entrusted  with  the  Purchaser  for
 providing the HOIST/WELL, which relates to both prior to the  erection  of
 the LIFT, as well as in the course of the erection of the LIFT.

. 16. The next page of the  document  is  under  the  caption  ‘IEEMA  Price
 Variation Clause for Elevator Works Contracts’. It  is  described  therein
 that  the  price  quoted/confirmed  is  based   on   the   cost   of   raw
 materials/components and labour costs as on the date of quotation and  the
 same is deemed to be related to Wholesale Price  Index  Number  for  Metal
 Products and All India Average Consumer Price Index Number for  Industrial
 Workers as specified in  the  said  document  and  that  in  case  of  any
 variation in the index numbers, the price would be subject  to  adjustment
 up or down in accordance with the formula. Though, a formula is set out in
 the said document, based on enquiries with the counsel appearing  for  the
 Petitioner, it is revealed that the said formula is a formal  one  and  is
 never applied for the purpose of determining the cost. For the purpose  of
 working out the formula, the details of various abbreviations noted in the
 formula are furnished. Inasmuch as it was informed to this Court that  the
 formula as a matter of practice is not worked out, there is no need to  go
 into the details of those abbreviations mentioned in  the  formula.  There
 are two notes, namely, Note 1 and  Note  2  at  the  bottom  of  the  said
 document, which states that the sole purpose of the above  stipulation  is
 to arrive  at  the  amount  of  the  entire  contract  under  the  various
 situations and the above stipulations do not indicate  any  intentions  to
 sell materials under this contract as movables. Note No.2 states that  the
 indices MP and WO are regularly published by IEEMA in monthly basic  price
 circulars based on information bulletins from  the  authorities  mentioned
 and those indices would be used for determining price variation  and  only
 IEEMA circulars would be shown as  evidence,  if  required.  Another  very
 important clause stated in the said document  is  ‘Payment  Terms’,  which
 reads as under:
     “Under this clause claim for  manufactured  materials  shall  be  paid
     along with our material invoice  and  claim  for  installation  labour
     shall be paid along with our final invoice.

      Firm prices: The prices quoted in this  proposal  will  be  firm  upto
      5/5/10. Thereafter for any delay in  completion  of  installation  and
      commissioning due to reasons attributable to  your  goodselves  prices
      will be adjusted in accordance with the above clause.”





. 17. Therefore, it is quite apparent that there  is  no  relevance  to  the
 subtitle, namely, ‘Elevator Works Contract’ mentioned in the said page  of
 the document. The only relevant aspect which is required to  be  noted  is
 that in the event of price variation due to the delay attributable to  the
 Purchaser, the labour cost and the material cost would be worked out based
 on the prevailing Consumer Price Index Number for Industrial  Workers  and
 Wholesale Price Index Number for Metal Products. In other words, there  is
 no  significant  relevance  for  the  subtitle  and  the  various  details
 mentioned in the said page of the document.




. 18. The next page of the document is a very relevant  document,  which  is
 in two pages, which carries the title ‘Conditions of Contract’. As many as
 27 conditions have been stipulated. In order to appreciate  the  stand  of
 the Petitioner and to arrive at  a  conclusion  whether  the  contract  of
 supply of erection can be construed as ‘Sale’  or  ‘Works  Contract’,  the
 conditions have to be necessarily examined in detail. The first  condition
 mentions that the quotations are effective for 30 days from  the  date  of
 proposal and thereafter, are subject to change without notice. The  second
 condition pertains to the various circumstances under which the Petitioner
 would be entitled to vary the price as per ‘IEEMA Price Variation  Clause’
 inasmuch as the price quoted would be valid for 52 weeks from the date  of
 acceptance  of  the  proposal.  Condition  No.3  also  is   an   ancillary
 stipulation relating to the application of Price Variation Clause  as  per
 ‘IEEMA Price Variation Clause’.  Condition No.4 again shifts the burden on
 the Purchaser to furnish the Petitioner within two weeks from the date  of
 the agreement, all required data for performance of the contract, that the
 PURCHASER TO AGREE TO PREPARE THE HOIST WAY STRUCTURE and  make  it  ready
 with proper electric power supply as per the required data to  enable  the
 Petitioner to have uninterrupted use for installation  and  adjustment  of
 the elevator. It also mentions that if the electric power  supply  is  not
 provided, the installation of the equipment would still be  completed  and
 the Purchaser should be prepared to take over the elevator  and  make  the
 payment as they fall due. Condition No.5 consists of the payment  schedule
 and also a default clause. The payment schedule is 90%  on  acceptance  of
 the proposal and the balance  10%  by  way  of  final  payment  either  on
 commissioning or in the event of delay by any cause beyond the control  of
 the Petitioner, which is to be paid within  90  days  from  the  date  the
 materials are ready for dispatch.  In the event of any fault on  the  part
 of the Purchaser in making the Preparatory Work unavailable to enable  the
 Petitioner to carry out the installation, such as  defects  in  the  hoist
 room or for any other lapse, the option is retained by the  Petitioner  to
 discontinue the work or withhold the release of completed elevator subject
 however, to charge of over payments to be charged at the rate of 1.5%  per
 month of the agreed price. It also entitles the Petitioner  to  reschedule
 the erection time depending upon the delay caused at the instance  of  the
 Purchaser. Condition No.6 relates to the  provision  to  be  made  by  the
 Purchaser for the stay of the employees of the Petitioner who are assigned
 the task of erection of the LIFT.  Condition  No.7  relates  to  the  work
 timings and in the event of the employees of the Petitioner were  to  work
 overtime based on mutual  agreement  with  the  Purchaser,  such  overtime
 charges should be borne by the Purchaser. Condition No.8 is a mutual FORCE
 MAJEURE clause as between both the parties. Condition No.9 specifies  that
 the title to each elevator would pass on to the Purchaser when payment for
 such elevators are fully paid to  the  Petitioner  and  in  the  event  of
 default being committed by the Purchaser, the right of the  Petitioner  to
 retrieve the elevator in full or in part and also  its  right  to  recover
 from the Purchaser, the value of the elevator supplied, can  be  initiated
 by  appropriate  legal  proceedings.  Condition  No.10  mainly  uses   the
 expression that the contract should be deemed to be an  INDIVISIBLE  WORKS
 CONTRACT though the cost of labour involved  and  the  price  of  movables
 could be specifically ascertained. Condition No.11 is prescription of  the
 defect liability period, which would be 18 months from the date of initial
 supply of materials or 12 months  from  the  date  of  completion  of  the
 erected elevator, whichever is earlier. The default clause  is  that  such
 agreed warranty period would apply for normal wear and tear  only  and  if
 any repair  or  damage  would  occur  due  to  any  unauthorized  person’s
 handling, such warranty would not be applicable. Condition No. 12  relates
 to any work to be carried out for the purpose of erection of  an  elevator
 due to statutory prescription and according to the Petitioner  that  would
 be the  responsibility  of  the  Purchaser  and  if  for  any  reason  the
 Petitioner is to carry out such works, extra cost would be charged on  the
 Purchaser.  Condition  No.13  pertains  to  any  changes,   modifications,
 additions, deletion or  extra  work  involved  in  which  event  the  cost
 escalation would be mutually agreed between the parties and finalized.  As
 per Condition  No.14,  the  Petitioner  wants  to  call  the  Contract  as
 indivisible Works Contract and states that the materials such  as  packing
 cases, left over materials, tools tackles, instruments, etc.,  brought  to
 site by the Petitioner would remain the property  of  the  Petitioner  and
 also its right to sub-contract any of the work which it deems  fit.  Under
 Condition  No.15,  the  Petitioner  wants  to  make  it  clear  that   any
 descriptive matter, drawings or illustrations  brochures  furnished  along
 with its proposal are not accurate but are approximate.   Under  Condition
 No.16, it is made clear that the specifications of the Petitioner will  be
 the one which can be relied upon even if such specifications  varied  with
 the requirements made by the Purchaser prior to  the  Contract.  Condition
 No.17 is  again  a  FORCE  MAJEURE  clause.  Under  Condition  No.18,  the
 Petitioner wants to reserve its right to effect the supply either from its
 factory at Karnataka or from any other place in India or by importing  the
 LIFT from a foreign country. Condition No.19 is the provision under  which
 the Petitioner’s right to  claim  compensation/damages  in  the  event  of
 breach of contract at the  instance  of  the  Purchaser.  Condition  No.20
 provides for settlement of the disputes by  way  of  conciliation  at  the
 bipartite level and on its failure to go  in  for  Arbitration.  Condition
 No.21 refers to the manner in which the apportionment over the expenses of
 the contract relating to the amount or advances  paid  by  the  Purchaser,
 which would be determined by the Petitioner and that the  same  cannot  be
 questioned by the Purchaser even before the legal forums. As per Condition
 No.22, the proposals when  accepted  by  the  Purchaser,  the  same  would
 supersede all other  earlier  proposals,  representations  etc.  Condition
 No.23 clarifies that in order to authenticate any change in the conditions
 of the contract after the signing of the contract, the same  can  be  done
 only by the authorized person from the  Head  Office  of  the  Petitioner.
 Condition No.24 states that the contract could be deemed to  be  concluded
 at Mumbai/Delhi/Calcutta/Bangalore after allocation of the contract by the
 Petitioner. Clause 25 specifies the delivery time and  erection  time  and
 that the completion of the installation would be made within 16 weeks from
 the date of the receipt of the order, advance payment, layout approval and
 settlement of all technical  details,  whichever  is  later.  It  however,
 reserves the Petitioner’s right to vary  the  delivery  and  the  erection
 schedule depending upon any delay being caused  at  the  instance  of  the
 Purchaser in carrying out the  Preparatory  Works  as  per  the  contract.
 Condition No.26 is again a default clause for escalation of  the  cost  of
 labour in the event of the Petitioner withdrawing the work  force  for  no
 fault of its. The last Condition No.27 shifts the entire responsibility on
 the Purchaser for getting necessary certificates/permits/licenses from the
 Statutory/Regulatory Authorities, including payment of all necessary  fees
 for such certificates/licenses/permits etc. and that the  Petitioner  will
 not be in anyway liable for any delay occurring on that score.

. 19. The last page  of  the  document,  which  is  also  dated  21.10.2009,
 disclose the signature affixed by the Authorized Official/Signatory of the
 Petitioner and the Purchaser wherein, the price  of  the  elevator  to  be
 supplied in  a  sum  of  Rs.12,50,000/-  is  quoted.  In  the  said  page,
 applicable rate of Excise  Duty,  Service  Tax  and  other  statutory  tax
 liabilities to be  incurred  are  all  mentioned.  Along  with  the  above
 document, the payment of Rs.12,12,500/- already made by the Purchaser,  as
 well as the final invoice raised for value of  the  full  amount,  namely,
 Rs.12,50,000/- is also enclosed.

. 20. Before adverting to the other statutory provisions, which  are  to  be
 noted while dealing with the issue involved, as well  as  the  submissions
 made by either side, it will be appropriate to sum up the  nature  of  the
 contract that is normally transacted by the Petitioner with its customers,
 based on the above Annexure A-1. From what has been noted  from  the  said
 Annexure, the following facts emerge:
   . (a)   Every supply and erection of an elevator by  the  Petitioner  is
     always preceded by  a  proposal  furnishing  the  requirement  of  the
     customer.  The  model  of  the  LIFT  specifying  its  capacity  load,
     technical aspects and other minute details relating to the LIFT to  be
     supplied along with the works to be carried out at the instance of the
     Purchaser to enable the Petitioner to supply and erect  the  LIFT  are
     also furnished.

   . (b)   Based on the proposal of  the  Petitioner,  once  the  order  is
     placed by the Purchaser  by  way  of  acknowledging  the  said  order,
     specific  communication  is  issued  furnishing  a  distinct  contract
     number. In the  said  acknowledgment  of  order,  the  entire  set  of
     documents relating to the proposal and the  signed  contract  is  also
     enclosed with the price agreed between the parties.

   . (c)   The documents found in the ultimate agreed contract,  therefore,
     contain the details relating to the model and the  mechanical  details
     about the operation of the LIFT, which  are  furnished  with  detailed
     particulars.

   . (d)   The various details contained in the  proposal  are  all  mainly
     related to the nature of the LIFT to be supplied and  as  to  how  the
     technology involved in the LIFT would be advantageous to the  customer
     when it is ultimately erected and put into operation.

   . (e)   The details of the Preparatory  Work  is  one  of  the  relevant
     aspects of the contract, which disclose that at the  site,  where  the
     LIFT is to be installed, the entire Preparatory Work is to be  carried
     out  by  the  customer  such  as,  the  setting  up   of   the   hoist
     way/structure, elevator pit, fire proof machine room, hoist  way  door
     frames, provision of sill bearing area,  all  cutting  of  the  walls,
     provision of required power supply, furnishing of light outlet points,
     provision of elevators electric power supply,  provision  of  required
     accommodation for the work force of the Petitioner and above all,  the
     time within which the above works  have  to  be  carried  out  by  the
     customer. As part of the Preparatory Work, the  only  area  where  the
     Petitioner comes forward to take the responsibility are the  provision
     of a ladder in a  pit,  the  provision  of  a  steel  fascia  and  the
     provision relating to scaffolding.

   . (f)   As far as the price  variation  clause  is  concerned,  it  only
     states that in the event of any delay being  caused  not  due  to  the
     fault of the Petitioner, the price variation of the  labour  cost  and
     material cost would depend upon the All India Average  Consumer  Price
     Index Number for Industrial Workers and Wholesale Price  Index  Number
     for Metal Products.

   . (g)   The specific condition imposed  in  the  prescription  contained
     under the heading ‘Preparatory Work’ makes it clear  that  only  after
     the customer satisfactorily completes all the  basic  works  such  as,
     erection of the hoist/structure and other allied necessary works,  the
     Petitioner would commence its installation. In the event of any  delay
     being caused at the instance of the customer, the commencement of  the
     installation would get postponed at the risk of the customer.

   . (h)   Though, in the conditions of contract  the  expression  used  in
     condition number 10 is ‘indivisible works contract’ the reading of  as
     many as 27 conditions disclose that it  only  highlights  the  overall
     responsibility of the customer to undertake the main work of providing
     a solid hoist/structure to enable the Petitioner to bring its LIFT and
     fix it in the said earmarked  place  with  all  the  other  provisions
     readily made  available  by  the  Purchaser,  including  the  electric
     points.

   . (i)   As per condition No.5 of the conditions of contract, 90% of  the
     value is to be paid on acceptance of the proposal. Balance 10% payment
     is payable either on commissioning or in the event of any delay  being
     caused and not attributable to the Petitioner, within 90 days  of  the
     materials relating to the LIFT to be  supplied  being  made  and  kept
     ready for dispatch. Therefore, the said condition is  required  to  be
     examined in detail to ascertain as to  whether  the  payment  schedule
     really determines the nature of the contract.


. 21. Having noted the above salient features of the  contract  relating  to
 the supply and erection of the LIFT by the Petitioner,  to  which  I  will
 discuss in detail in the latter part of this judgment, I wish to refer  to
 the statutory provisions which are required to be noted at this stage. Mr.
 Salve, learned Senior Counsel  in his submissions drew  our  attention  to
 various statutory provisions relating to LIFTS, which provide for charging
 of duty under the provisions of the Central Excise Legislation as well  as
 the provisions brought out by various States for charging  tax  on  supply
 and installation of LIFTS construing the same as ‘Works Contract’ and  the
 subsequent changes brought about after the decision of this Court in  Kone
 Elevators (India) Pvt. Ltd. (supra), besides the Constitutional provision,
 namely, Article 366(29A)(b) of the Constitution.

. 22. Under Article 366(29A), tax on the sale or purchase of  the  goods  is
 defined and the concerned sub-clause (b) of sub-Article  (29A),  reads  as
 under:
 “A tax on the transfer of property in goods (whether as goods or  in  some
 other form) involved in the execution of a works contract;”





. 23. This clause was inserted under the Constitution 46th Amendment Act  of
 1982. A reading of the said sub-clause (b), which is  a  part  of  various
 other  definitions  under  Article  366,  would  enable  the  tax  levying
 authorities to levy tax on the transfer of property in goods  involved  in
 the execution of a ‘Works Contract’. In order to apply the said sub-clause
 (b), in the foremost, what is to be ascertained  is  whether  there  is  a
 ‘Works Contract’ and while executing such a ‘Works Contract’ any  transfer
 of property in goods are involved, whether as goods or in some other  form
 on which a tax can be validly levied by the concerned authorities.

. 24. Having noted the constitutional mandate provided therein, it  will  be
 beneficial to refer to the other statutory prescriptions  brought  to  our
 notice. Mr. Salve, learned  Senior  Counsel  brought  to  our  notice  the
 definition of ‘Works Contract’ under Section 2(jj) of the Orissa Sales Tax
 Act, 1947. The said provision reads as under:
      “works contract includes any agreement for carrying out  for  cash  or
      deferred payment or  other  valuable  consideration  ,  the  building,
      construction,   manufacture,   processing,   fabrication,    erection,
      installation,  fitting  out,  improvement,  modification,  repair   or
      commissioning of any movable or immovable property.”





. 25. It was also brought to our notice certain  provisions  in  the  Bombay
 Lifts Act, 1939. The relevant provisions  are  Sections  3(c),(d),(e)&(f),
 which defines ‘Lift, Lift Car, Lift Installation and Lift way’. Section  4
 stipulates that every owner of a place intending to install a  LIFT  after
 the commencement of the said  Act,  should  make  an  application  to  the
 concerned authority of the State Government for permission to erect such a
 LIFT and while seeking for such a permission, the  obligation  is  on  the
 applicant to furnish the various details about the  LIFT  to  be  erected.
 Section 5 deals with the licence to be  obtained  to  use  a  LIFT,  which
 states that every owner of a place who is  permitted  to  install  a  LIFT
 under Section 4 should within one month after completion of  the  erection
 of such LIFT, inform the Authorized Officer of the  State  Government  who
 has been empowered to issue a licence for the working of  the  LIFT.  Such
 intimation about the erection of the LIFT and the nature of licence to  be
 issued in the prescribed format has been specified. The required fee to be
 paid is also mentioned in the said section. Section 7  specifies  that  no
 LIFT should be  operated  without  a  licence.  The  corresponding  rules,
 namely, Rules 3, 5, 6, 9 and 9(a),  as  well  as  Form  A  has  also  been
 referred. In furtherance of Sections, 4, 5, 6 and 7 of  the  Bombay  Lifts
 Act, 1939 and the Bombay Lifts Rules, 1958, namely, Rules 3, 4,  5,  6,  9
 and 9(a), what is specified is the detailed procedure to  be  followed  by
 approaching the concerned authorities initially for the  erection  of  the
 LIFT by getting a permission  and  securing  a  licence  after  successful
 installation of the LIFT and the periodical inspection to be  carried  out
 in order to ensure that the LIFT erected does not cause any damage to  men
 and materials due to any defect in the material used while installing  the
 LIFT, as well as in its future operation on regular basis, as well  as  in
 the course of its maintenance. Rule 9A(5) prescribes the fee for issuing a
 licence to LIFT contractors for permission, while issuing the licence  for
 prescribed number of LIFTS. Apart from the above  rules,  Form  A  is  the
 prescribed form by which an application for permission to install  a  LIFT
 or for making any addition or alteration to the LIFTS is to be  made.  The
 details to be furnished in the said form includes the name of  the  owner,
 the name of the person who would be installing the LIFT, the  place  where
 the LIFT would be installed and some basic details about the LIFT which is
 to be installed. Under Form A-1, the LIFT installation contractor  has  to
 make  a  declaration  as  to  the  successful  installation  of  the  LIFT
 undertaken by it.

. 26. Reference to the above provisions contained in the  Bombay  Lifts  Act
 and Rules show that before erection of LIFT  in  the  premises,  necessary
 permission has to be obtained from the concerned  authority  appointed  by
 the State Government. By making a specific application for permission  for
 the erection of a LIFT and secure  a  licence  when  a  LIFT  is  erected,
 thereafter also periodical intimation is  to  be  sent  to  the  concerned
 authority about the proper maintenance of the LIFT, which has been erected
 in the premises of the owner. The underlining requirement of  the  statute
 is apparently to ensure that such a LIFT installed in  a  premises,  which
 would be regularly used by the persons visiting the said  premises  should
 not endanger their lives either due to any defects in the installation  or
 its operation or in its maintenance  after  its  installation.  Therefore,
 reference to the above provisions in my view is not decisive  for  finding
 out as to whether the manufacture, supply and installation of a LIFT would
 fall within the expression ‘Works Contract’ or not.

. 27. Mr. Salve,  learned  Senior  Counsel  in  his  submissions  also  made
 reference to the definition ‘Commissioning and  Installation  Agency’  and
 ‘Taxable Service’ under Section 65(29) and (105)(zzd) of the Finance  Act,
 1994  as  was  brought  out  w.e.f.  14.05.2003  and  subsequently  w.e.f.
 10.09.2004 and 16.06.2005.  In  fact,  the  learned  Senior  Counsel  also
 referred to the definition of ‘Erection, Commissioning  and  Installation’
 as was inserted as sub-section (39a) to Section  65  by  the  Finance  Act
 (No.2) of 2004 w.e.f. 10.09.2004. The definition of the  above  provisions
 were made w.e.f. 16.06.2005. Lastly, learned Senior Counsel brought to our
 notice the definition of ‘Taxable Service’ under sub-clause (zzzza) to sub-
 section (105) of Section 65, which was inserted by the Finance  Act,  2008
 w.e.f. 16.05.2008. The said provision reads as under:
 “105 – Taxable Service means any service provided,-

 “(zzzza)  to any person, by any other person in relation to the  execution
 of a works  contract,  excluding  works  contract  in  respect  of  roads,
 airports, railways, transport terminals, bridges, tunnels and dams.

 Explanation-For the purposes of this sub-clause, “works contract” means  a
 contract wherein-

       i) Transfer of property in goods involved in the  execution  of  such
          contract is leviable to tax as sale of goods, and

      ii) Such contract is for the purposes of carrying out,-

         a) erection, commissioning or installation  of  plant,  machinery,
            equipment or structures, whether pre-fabricated  or  otherwise,
            installation of electrical and  electronic  devices,  plumbing,
            drain laying or other installations for  transport  of  fluids,
            heating, ventilation or air-conditioning including related pipe
            work, duct work and sheet metal work, thermal insulation, sound
            insulation,  fire  proofing  or  water   proofing,   lift   and
            escalator, fire escape staircases or elevators; or

         b) construction of a new building or a civil structure or  a  part
            thereof, or  of  a  pipeline  or  conduit,  primarily  for  the
            purposes of commerce or industry; or

         c) construction of a new residential complex or a part thereof; or



         d)  completion  and  finishing   services,   repair,   alteration,
            renovation or restoration of, or similar services, in  relation
            to (b) and (c) or

         e)  turnkey  projects  including  engineering,   procurement   and
            construction or commissioning (EPC) projects:”







. 28. Before referring to the details of the  above  provisions  brought  to
 our notice, it is relevant  to  mention  at  this  juncture  the  specific
 prayers of the Petitioner in the leading case W.P.(C) No.232 of  2005  and
 W.P.(C) No. 548 of 2008. In W.P.(C) No.232 of 2005, the  Petitioner  seeks
 to challenge the impugned notices dated  30.03.2005  by  which  the  First
 Respondent wanted to re-open the assessment for the Assessment Years 1999-
 2000 (C.S.T. No. 631067/1999-2000) under the Central  Sales  Tax  Act  and
 again for the years 1999-2000 (TNGST No. 1340636/99-2000),  and  2000-2001
 (TNGST No. 1340636/2000-01) under the Tamil Nadu General  Sales  Tax  Act,
 1959. Similarly, in W.P No.548 of 2008, the challenge is  to  the  revised
 pre-assessment notices dated 23.06.2006 for the  assessment  period  2002-
 2003 and 03.04.2008 for the Assessment Year 2001-2002, issued by the Third
 Respondent and  the  Second  Respondent  respectively.  Keeping  the  said
 challenges in mind, the provisions will have to be examined.  As has  been
 stated in the opening part of this Judgment, the answer  to  the  question
 referred to us will have  to  be  made,  keeping  in  mind  the  statutory
 provisions relating to charging of tax vis-à-vis the impact of Article 366
 (29A)(b) of the Constitution.





. 29. Sub-section (29) of Section 65 of the Finance Act, 1994  defines  what
 is ‘Commissioning and Installation Agency’ providing services in  relation
 to commissioning and installation. Sub-clause (zzd) to  sub-section  (105)
 of Section 65 defines the ‘taxable service’ to mean any  service  provided
 to a customer by a commissioning and installation agency  in  relation  to
 commissioning or installation.   These  definitions  relating  to  taxable
 service of commissioning and installation agency as was prevailing  w.e.f.
 14.05.2003, were general and there was no specified category or  class  of
 service referred to therein. With effect from  10.09.2004,  there  was  an
 addition made in sub-section (29) of Section 65 by which while defining  a
 ‘commissioning and installation agency’, the expression ‘erection’ came to
 be added.  A further  sub-section,  namely,  sub-section  39(a)  was  also
 introduced by Finance Act (No.2) of 2004 w.e.f. 10.09.2004, which  further
 defined the expression ‘erection, commissioning or installation’  to  mean
 any service  provided  by  a  commissioning  and  installation  agency  in
 relation to erection, commissioning of installation of plant, machinery or
 equipment. Consequently, in sub-section 105(zzd) the expression ‘erection’
 was  added  along   with   the   other   expressions   ‘commissioning   or
 installation’, which was again to operate  w.e.f.  10.09.2004.  The  above
 definition relating to ‘commissioning and installation agency’ under  sub-
 section (29) of Section 65 continued even w.e.f. 16.06.2005.  However,  in
 sub-section 39(a) of Section 65 while defining ‘erection, commissioning or
 installation’, an elaborate definition came to be introduced as per  which
 the expression ‘erection, commissioning or installation’  would  mean  any
 service provided by a commissioning or installation agency in relation  to
 installation of among other classes of service included  under  sub-clause
 (ii)(e) LIFT and ESCALATOR, fire escape staircases or travelators or  such
 other similar services,  which  came  into  operation  w.e.f.  16.06.2005.
 However, the definition of  Taxable  Service  under  sub-section  105(zzd)
 remained unaltered.

. 30. Chapter V under the caption ‘Service Tax’ of the ‘Finance  Act’,  1994
 underwent a further change wherein a sub-clause (zzzza) to sub-section 105
 came to be added, which while defining a ‘taxable service’ to  any  person
 by any other person in  relation  to  the  execution  of  ‘Works  Contact’
 excluding ‘Works  Contract’  in  respect  of  roads,  airports,  railways,
 transport terminals, bridges, tunnels and dams, specifically  brought  out
 an explanation for the purpose of the said sub-clause, in  and  by  which,
 the expression ‘Works Contract’ came to be defined for the first time.  As
 per the said definition, it meant that a transfer  of  property  in  goods
 involved in the execution of such contract would be  leviable  to  tax  as
 sale of goods and to ascertain whether  the  said  contract  is  a  ‘Works
 Contract’, it went on to State  that  such  contract  should  be  for  the
 purpose of carrying out inter alia  for  the  erection,  commissioning  or
 installation of LIFT and Escalator, fire escape staircases  or  elevators.
 It is very relevant to note that this definition of  ‘Works  Contract’  by
 way of an explanation  to  sub-clause  (zzzza)  to  sub-section  (105)  of
 Section 65 came to be introduced for the first time w.e.f. 16.05.2008.

. 31. Therefore, while examining the question referred to this Bench in  the
 order of reference dated 12.05.2005, in an  attempt  to  answer  the  said
 reference, it will have to be necessarily noted at the very outset that as
 and from 16.05.2008, the erection, commissioning or installation  of  LIFT
 and Escalator would fall within the  expression  ‘Works  Contract’  having
 regard to the specific definition so brought out under  the  Finance  Act,
 1994 w.e.f. 16.05.2008 for  the  purpose  of  Service  Tax.  However,  the
 question still remains whether the same would hold good for levy of  Sales
 Tax on the anvil of Article 366(29A)(b) of  the  Constitution  read  along
 with the provisions of the Sales Tax Act and that to for the period  prior
 to the said date,  namely,  16.05.2008.  As  noted  by  us,  in  the  Writ
 Petitions, the challenge is to the revised  pre-assessment  notices  under
 the Central Sales Tax Act or under the respective State General Sales  Tax
 Act for the assessment periods related to the years 1999-2000,  2000-2001,
 2001-2002 and 2002-2003.  Therefore, the  question  for  consideration  is
 what is the legal position with reference to the nature of contract of the
 Petitioner vis-à-vis its Purchaser with reference to  manufacture,  supply
 and installation of LIFTS. Based on the terms of the specific contracts, a
 specimen copy  is  placed  before  us  vis-à-vis  the  relevant  statutory
 provisions which are in existence during the relevant years.

. 32. Other statutory provisions  which  are  relevant  to  be  noted  while
 construing the definitions prior to 16.05.2008 are sub-clause (29),  (39a)
 and (105)(zzd) of Section 65. Service Tax was levied at the  rate  of  12%
 for the value of the ‘taxable services’ referred to under sub-clause (zzd)
 of sub-section (105) of Section 65. After 16.05.2008, under the amendments
 introduced by Finance Bill  No.2  of  2009,  the  charge  of  service  tax
 underwent a change and the rate was brought down to 5%  of  the  value  of
 taxable services referred to in sub-clauses  (zzd)  and  (zzzza)  of  sub-
 section (105) of Section 65.

. 33. Having  noted  the  above  statutory  provisions,  we  are  now  again
 mandated to examine the question as to whether the manufacture, supply and
 installation of LIFTS by the Petitioner would fall within  the  expression
 ‘Works  Contract’  or  ‘Sale’.  For  examining  the   said   question,   a
 recapitulation of the various  details  has  to  be  noted  based  on  the
 specimen contract that came into existence as between the  Petitioner  and
 the Purchaser. A detailed reference has been made to the salient  features
 of the said contract and I  have  also  highlighted  the  terms  contained
 therein. There was a detailed description of the product to be supplied by
 the Petitioner, namely, the LIFT to its Purchaser. The  description  about
 the product content with very many minute details relating to  the  model,
 the capacity it would carry, namely, the number of passengers, the weight,
 the  sophisticated  equipments  such  as  feather  touch  buttons,  highly
 precisioned stop facility at each  floor  of  its  operation,  the  smooth
 sailing of the LIFT in between different floors, the other safety  gadgets
 provided in the LIFT and so on.  Thereby, what was highlighted in one part
 of the contract was the advantage that  a  customer  would  get  when  the
 Petitioner’s LIFT is purchased and erected in its premises. In  the  other
 parts of the contract, the obligation of  the  Purchaser  was  to  provide
 certain facilities  such  as  hoist  way,  power  supply,  procurement  of
 permits, licences,  etc.  under  certain  other  enactments,  the  payment
 schedule with the  time  schedule  along  with  the  default  clauses  are
 stipulated. There are also provisions in the contract relating to the time
 within which the LIFT will be commissioned, namely, within 52 weeks and if
 for any reason any delay is caused beyond the control of  the  Petitioner,
 even then there would be a requirement of making the full payment  by  the
 Purchaser to the Petitioner. This  is  on  the  Petitioner  informing  its
 readiness with the materials of the LIFT to be commissioned  available  at
 the premises of the Petitioner with no obligation for  its  commissioning.
 Also a period of 90 days is stipulated for effectuating the final payment.



. 34. The arguments on behalf of the Petitioners  was  mainly  addressed  by
 Mr. Salve, learned Senior Counsel.  In  his  submissions,  learned  Senior
 Counsel contended that after the decision of this Court in Kone  Elevators
 (India) Pvt. Ltd. (supra), the various States who were earlier  contending
 that supply and erection  of  a  LIFT  was  a  ‘Works  Contract’,  took  a
 diametrically opposite view and started contending that the said  contract
 will amount to ‘Sale’ and not ‘Works Contract’. The learned Senior Counsel
 drew our attention to some of the counter affidavits filed  on  behalf  of
 the State of U.P., Andhra Pradesh and Karnataka in Writ Petition No.232 of
 2005, wherein such  a  stand  has  been  taken  by  the  respective  State
 Governments. The learned Senior Counsel by referring to the definition  of
 ‘Works Contract’ under Section 2(jj) of the Orissa Sales  Tax  Act,  1947,
 which has been extracted in the earlier part of this  Judgment,  submitted
 that the manufacture, supply and erection/installation of a LIFT  squarely
 falls within the said definition of ‘Works Contract’ and,  therefore,  the
 stand of the Petitioner is well-founded. In support  of  his  submissions,
 the learned Senior Counsel also relied upon the Division Bench decision of
 the Bombay High Court in OTIS Elevators Co. (India) Ltd. vs. The State  of
 Maharashtra reported in [1969] 24 STC 525.

. 35. The learned Senior Counsel then  referred  to  the  Standard  Contract
 Form of the Petitioner, as well  as  the  Field  Installation  Manual  and
 contended that the various works to  be  carried  out  in  the  course  of
 installation of a LIFT can only be held to be a ‘Works Contract’. By doing
 so, he drew our attention to the Field Installation Manual, which is meant
 for its field staff at the time of erection of  the  LIFT  to  follow  the
 various instructions and the manner in which the LIFT is to  be  assembled
 at the premises of the Purchaser. By making reference to the said  manual,
 which contains very many details as to the various parts of the  LIFT  and
 how these parts are to be assembled and also the  safety  measures  to  be
 followed, submitted  that  such  an  elaborate  process  involved  in  the
 assembling of the LIFT is nothing but a contract  for  work  and  not  for
 sale. He therefore, contended that the decision in Kone Elevators  (India)
 Pvt. Ltd. (supra) has to be varied.

. 36. The learned Senior Counsel in his submissions further  contended  that
 in the light of  the  prescription  contained  in  sub-Article  29A(b)  of
 Article 366 of the  Constitution  and  having  regard  to  the  nature  of
 operation/function in the supply and installation  of  a  LIFT,  the  said
 activity cannot be called as a mere ‘Sale’ but can only  be  called  as  a
 ‘Works Contract’.

. 37. The learned Senior Counsel also relied upon the decision in  State  of
 Madras vs. Richardson Cruddas Ltd.  reported  in  [1968]  21  STC  245  in
 support of his submissions. By referring to the  provisions  contained  in
 the Bombay Lifts Act, 1939 in particular Sections 3, 4, 5 and 7 and  Rules
 3, 5, 6, 9 and 9A along with Form A1, the learned Senior Counsel contended
 that the said provisions in the Acts and the Rules, also goes to show that
 the installation of a LIFT, having regard to the nature  of  the  activity
 and the functions involved can only be held to be a ‘Works  Contract’  and
 not a ‘Sale’. According to the learned Senior Counsel, the contract  being
 an indivisible contract for  supply  and  erection  of  the  LIFT  to  the
 customer and the erection part of it is so intertwined with the supply  of
 the LIFT, the contract can only be construed as ‘Works Contract’ and not a
 ‘Sale’.

. 38. The learned  Senior  Counsel  also  relied  upon  a  decision  of  the
 Government of India in In re: OTIS Elevator Co. (India)  Ltd.  (1981)  ELT
 720 in support of his submissions. That was a decision of  the  Government
 of India in an appeal filed by OTIS Elevator Company under the  provisions
 of the Central Excise Act, wherein it  was  contended  that  erection  and
 installation of elevators and escalators were indivisible ‘Works Contract’
 and do not constitute contracts for mere sale of goods. While dealing with
 the said submission, the  above  decision  came  to  be  rendered  by  the
 Government stating that elevators and escalators erected and installed  by
 the company became a part of immovable property and hence are  not  goods.
 It was, however, held that  the  component  parts  of  the  elevators  and
 escalators manufactured and cleared from their respective factory would be
 chargeable to duty at the appropriate rates.

. 39. By relying on the above decision,  the  learned  Senior  Counsel  also
 brought to our notice an order under Section 37B of the Central  Board  of
 Excise and Customs dated 15.01.2002, wherein the  assessibility  of  plant
 and machinery assembled at site was explained and as regards the LIFTS and
 Escalators in sub-paragraph (iv) of paragraph 5,  it  was  described  that
 though LIFTS and Escalators  are  specifically  mentioned  in  sub-heading
 8428.10, those which are installed in  buildings  and  permanently  fitted
 into the civil structure cannot be considered to be excisable  goods.  The
 learned Senior Counsel therefore, by referring to the above orders of  the
 Government of India and the Board of Central Excise,  contended  that  the
 same  reasoning  would  hold  good  while  considering  the  case  of  the
 Petitioner.
. 40. As regards the question whether manufacture, supply  and  installation
 of LIFTS would fall within the expression ‘Sale’ or ‘Works Contract’,  the
 learned Senior Counsel heavily relied upon the recent  three  Judge  Bench
 decision of this Court in Larsen & Toubro Ltd. (supra). The  judgment  was
 rendered by one  of  us,  Hon’ble  Mr.  Justice  R.M.  Lodha,  wherein  in
 paragraph 101, this Court while answering a reference made by a two  Judge
 Bench, held that a contract may involve both work and labour and  also  an
 element of sale and in such composite contract, the distinction between  a
 contract for sale of goods and contract for work (or  services)  virtually
 gets diminished. It was further held that the ‘Dominant Nature  Test’  has
 no application and the earlier decisions which held that the substance  of
 the contract must be seen, have lost their significance where transactions
 are of the nature contemplated in Article 366(29A). It  went  on  to  hold
 that even if the dominant intention of the contract is not to transfer the
 property in goods and rather it is rendering of service  or  the  ultimate
 transaction is transfer of immovable property, then also it is open to the
 States to levy Sales Tax on the materials used in such contract,  if  such
 contract otherwise has elements of ‘Works Contract’.  Ultimately,  it  was
 held that the enforceability test is also not determinative.  The  learned
 Senior Counsel drew our attention to paragraphs 17, 19, 21, 47, 60  to  65
 and 76, as well as paragraph 101 where the legal position  was  summarised
 while answering the question referred to it.


. 41. The learned Senior Counsel by drawing our attention to the  definition
 contained in the Finance Act of 1994,  in  particular  sub-sections  (29),
 39(a) of Section 65 and sub-clause (zzd) to sub-section (105)  of  Section
 65, contended that such definitions in the Finance Act under Chapter V for
 imposition of Service Tax, would show that the installation of a  LIFT  is
 nothing but a ‘Contract for Works’ and  not  ‘Sale’.  The  learned  Senior
 Counsel drew our attention to sub-clause (zzzza) to sub-section  (105)  of
 Section 65 wherein,  in  the  explanation  to  the  said  sub-clause,  the
 erection of a LIFT has been  defined  to  mean  a  ‘Works  Contract’.  The
 learned Senior Counsel would, therefore, contend that there cannot be  two
 different meanings relating to ‘Works Contract’, one for  the  purpose  of
 Service Tax and the other for the purpose of Sales Tax. The submission  of
 the learned Senior Counsel was adopted by all other counsel  who  appeared
 for the Petitioners in the other cases.

. 42. Mr. Dwivedi,  learned  Senior  Counsel  appearing  for  the  State  of
 Orissa, in his submissions contended that  the  contract  as  between  the
 Petitioner and its Purchaser, going by its terms, is always one  for  sale
 of its branded LIFTS, which having regard to the nature of the product has
 to be necessarily erected at the site, that 90% of payment is to  be  made
 on the signing of the contract, that the LIFTS would be handed over to the
 Purchaser on its erection and that the contract provides for  the  payment
 of balance 10% on fulfillment of certain  other  conditions.  The  learned
 Senior Counsel would, therefore, contend that in the present  case,  there
 can be no doubt at all as  to  the  nature  of  contract  as  between  the
 parties, which is one for sale and, therefore, there is  no  necessity  to
 further examine whether it is  a  ‘Sale’  or  ‘contract  for  works’.  The
 learned Senior Counsel by drawing our attention to the judgment in  Larsen
 and Toubro Ltd. (supra) contended that the converse position argued by the
 learned Senior Counsel Mr.  Rohinton  Nariman  in  the  said  judgment  as
 recorded therein, would explicitly show as to how a clear distinction  can
 be drawn as between a ‘Works Contract’ and a  ‘contracts  for  Sale’.  The
 learned Senior Counsel further pointed out that in the case on  hand,  the
 contract being one for sale of the LIFTS, the same cannot fall within  the
 expression ‘Works Contract’. In support of  his  submissions  the  learned
 Senior Counsel relied upon  the  decisions  in  M/s  Patnaik  and  Company
 (supra), M/s T.V. Sundram Iyengar & Sons vs. The State of Madras -  (1975)
 3 SCC 425, Union of India vs. The Central  India  Machinery  Manufacturing
 Company Ltd. and others - (1977) 2  SCC  847  and  also  referred  to  the
 decision in Hindustan Aeronautics Ltd. (supra), to state as  to  what  are
 the basic tests to be applied in order to find out whether a  contract  as
 between the parties will fall within the expression  ‘Works  Contract’  or
 one of ‘Sale’. The learned Senior Counsel, however, fairly brought to  our
 notice the provisions contained in the Orissa Value Added Tax  Act,  2004,
 in particular Rule 6 and the Appendix, to show that by virtue of the  said
 Act in the State of Orissa, as  far  as  value  added  tax  is  concerned,
 erection of a LIFT, Elevator and Escalator would fall under  the  category
 of ‘Works Contract’ and that in the Appendix, a provision of 15%  is  made
 for deduction towards  labour  charges,  while  arriving  at  the  taxable
 turnover.

. 43. Mr. R. Venkataramani, learned Senior Counsel, appearing for the  State
 of Tamil Nadu and Andhra Pradesh, drew our attention to the definition  of
 ‘Sale’ and ‘Works Contract’ under the Andhra  Pradesh  General  Sales  Tax
 Act, 1957 as defined in Section 2(n) & (t) and submitted that going by the
 definition of ‘Sale’ every transfer of the property in goods in  pursuance
 of a contract or otherwise by one person in the course  of  his  trade  or
 business, for cash, or for deferred payment  or  for  any  other  valuable
 consideration, the same would be a sale and by referring to the definition
 of ‘Works Contract’ under Section 2(t), he pointed out that the definition
 itself makes it clear that  any  agreement  for  cash  or  for  any  other
 valuable  consideration  for  carrying  out  the  building   construction,
 manufacture,  fabrication   etc.,   including   erection/installation   or
 commissioning of any movable or immovable property alone would fall within
 the said definition. By referring to the above statutory  provisions,  the
 learned Senior Counsel contended that there is a world  of  difference  as
 between a contract by which one  party  agrees  to  supply  a  product  as
 compared to a party agreeing to carry out a work such as  construction  of
 building, erection, installation or commissioning of movable or  immovable
 property. In other words, according to the learned Senior Counsel going by
 the terms of the contract  between  the  Petitioner  and  the  prospective
 Purchasers, what is agreed to between the parties is the supply  of  LIFTS
 and the act of installation is not the contract for which the parties were
 ad idem. Therefore, if the contract distinctly discloses that  it  is  one
 for supply of a LIFT and the same  is  effected  by  erecting  it  in  the
 premises of the Purchaser, it cannot be held  that  the  act  of  erection
 alone should be taken into  account  and  on  that  basis  hold  that  the
 contract was one for ‘Works’ and not for ‘Sale’.

. 44. The learned Senior Counsel  by  referring  to  paragraph  101  of  the
 judgment in Larsen & Toubro Ltd. (supra) contended that  by  installation,
 the LIFT in its full form is brought out and handed over to the Purchaser.
 In other words, according to the learned Senior Counsel  by  installation,
 the LIFT is put in  a  fit  condition  for  use  and  submitted  that  the
 principles laid down in the case of M/s. Patnaik and Company (supra), T.V.
 Sundaram Iyengar & Sons (supra), have all laid down the correct principles
 and, therefore, the decision in Kone Elevators (India) Pvt.  Ltd.  (supra)
 was rightly decided. While referring to the decisions in Vanguard  Rolling
 Shutters and Steel Works  (supra)  and  Man  Industrial  Corporation  Ltd.
 (supra), the learned counsel submitted that none of the said decisions can
 be said to warrant  any  consideration.   In  support  of  his  submission
 learned Senior Counsel relied upon the decision in Dell Inc. vs.  Superior
 Court No.A118657 and  relied  upon  the  following  passage  in  the  said
 judgment:
     “Drawing the line  between  taxable  sales  of  tangible  property  and
     nontaxable sales of services or  intangibles  is  sometimes  difficult,
     especially where property that was largely created by personal services
     is transferred. (Hellerstein, State  Taxation  (3d  ed.2007)  12.08[1],
     p.1).  Where services and tangible  property  are  inseparably  bundled
     together, determination of the taxability of the translation turns upon
     whether the purchaser’s  “true  object”  was  to  obtain  the  finished
     product or the service.”




. 45. The learned Senior Counsel, therefore, contended that  when  the  true
 object of the transaction in the case on hand was  to  obtain  a  finished
 product whatever services involved should be held  to  be  incidental  and
 also should be treated as part of a sale of the tangible property and thus
 subject to ‘sales’ or ‘use tax’.


. 46. Dr. Singhvi, learned Additional Advocate  General  appearing  for  the
 State of Rajasthan prefaced his submission by contending  that  the  first
 question to be examined is whether the transaction is a ‘Sale’  or  ‘Works
 Contract’. According to the learned Counsel, the test that was  prevailing
 pre 46th Amendment, continued to hold good and that the sale of a LIFT  is
 definitely not a ‘Works Contract’. The learned  Counsel  relied  upon  the
 decision reported in Bharat Sanchar Nigam Ltd. and Another  vs.  Union  of
 India and others, (2006) 3 SCC 1, in particular paragraph 43  and  pointed
 out that the transactions which are ‘mutant sales’ alone  are  limited  to
 the clauses of Article 366 (29-A) and that all  other  transactions  would
 have to qualify sales within the meaning of Sale of Goods  Act,  1930  for
 the purpose of levy of sales tax. The learned Counsel while  referring  to
 the judgment in Larsen & Toubro Ltd. (supra) by making specific  reference
 to paragraph  90,  contended  that  although  the  decision  in  Hindustan
 Shipyard Ltd. (supra) has been distinguished,  paragraph  6  of  the  said
 decision is still the correct proposition of law  to  be  applied  in  all
 cases to find out the nature of a  contract.

. 47  Mr. Preetesh Kumar, learned Standing Counsel for the State of  Gujarat
 by referring to paragraphs 71 to 76 of the judgment  in  Larsen  &  Toubro
 Ltd. (supra) and in particular  the  ratio  laid  down  in  paragraph  76,
 contended that even by applying the test stated therein, the  contract  of
 the Petitioner for supply of the LIFT could  not  be  brought  within  the
 concept of ‘Works Contract’. The learned Counsel  contended  that  in  the
 light of the agreement by which the Petitioner came forward to supply  the
 LIFT and erect the same in the premises of the Petitioner, it  could  only
 be held to be a ‘contract for sale’  and  not  ‘Works  Contract’,  thereby
 attracting Article 366 (29-A) (b) of the Constitution.

. 48. Mr. Darius Khambata, learned Advocate General for Maharashtra and  Mr.
 K.N. Bhatt, learned Senior Counsel for Karnataka actually conceded to  the
 effect that the question posed for consideration has been  fully  answered
 in the decision in Larsen & Toubro Ltd. (supra).

. 49. Mr. Malhotra, learned Additional Solicitor General for Union of  India
 contended that the Union of India has nothing to do with the issue  as  to
 whether it is a ‘Sale’ or ‘Works Contract’, inasmuch as erection  of  LIFT
 has been brought under the definition of ‘Works Contract’ for the  purpose
 of levying service tax.

. 50. Mr. Salve, learned Senior Counsel in his submissions referred  to  the
 decisions in M/s  Vanguard  Rolling  Shutters  and  Steel  Works  (supra),
 Commissioner of Sales Tax, M.P. vs. Purshottam Premji reported in (1970) 2
 SCC 287 and Commissioner  of  Central  Excise,  Ahmadabad  vs.  Solid  and
 Correct Engineering Works and others reported in (2010)  5  SCC  122.  The
 learned Senior Counsel  attempted  to  distinguish  the  decision  in  M/s
 Vanguard Rolling Shutters and Steel Works  (supra).   In  so  far  as  the
 decision in Solid and Correct Engineering Works and  others  (supra),  the
 learned Counsel after  making  reference  to  paragraph  16,  23  and  25,
 submitted that erection or installation of a LIFT could not, therefore, be
 held to be a structure which was embedded to  the  earth  on  a  permanent
 basis in order to call it an immovable property.

. 51.  Having  heard  the  learned  Counsel  for  the  Petitioners  and  the
 Respondents and having considered the material papers placed before us and
 the various decisions relied upon  by  the  Petitioners  as  well  as  the
 Respondents, at the foremost, what has to be first ascertained is  whether
 the contract between the Petitioner and its Purchaser  would  fall  within
 the definition of ‘Works Contract’ in order to attract clause (b) to  Sub-
 Article (29-A) of Article 366 of the Constitution. In fact, if  an  answer
 to the said question can be held  in  the  affirmative,  then  that  would
 axiomatically lead to an answer  in  favour  of  the  Petitioner.  Though,
 several decisions, wherein various tests have been highlighted, were cited
 before us and also reference to various provisions of different  statutes,
 as well as the Finance Act provisions were brought to our  notice,  in  my
 view, before adverting to those tests and the  provisions,  in  the  first
 instance, it will have to be found out as to what exactly was  the  nature
 of contract, as between the Petitioner and its Purchasers.

. 52. At the outset, even before examining the terms  of  the  contract,  it
 will have to be stated  that  the  only  business  of  the  Petitioner  is
 manufacture and supply of LIFTS/ELEVATORS. In fact, neither Mr. Salve  nor
 any other Counsel appearing for the Petitioners submitted before  us  that
 the business of the Petitioner included any other activity along with  the
 manufacture and supply of LIFTS/ELEVATORS. Certainly, it is not  the  case
 of  the  Petitioner  that  mere  installation/erection  of   LIFT/ELEVATOR
 simpliciter is their business activity. It cannot also be  contended  that
 the job of installation/erection of a LIFT/ELEVATOR can be  done  only  by
 LIFT/ELEVATOR manufacturers. In  other  words,  manufacture  of  LIFT  and
 erection of a LIFT can be  independently  handled  by  different  persons.
 Therefore, the best course to proceed is on the admitted position that the
 business of the Petitioner is manufacture and supply of LIFTS/ELEVATORS as
 well as its installation. Once, the said factual position relating to  the
 business of the Petitioners is steered clear of, the next question relates
 to the basis of the Contract that emerged between the Petitioners and  the
 Purchasers in regard to the supply  of  the  LIFTS/ELEVATORS  and  thereby
 ascertaining what were the agreed terms as between the parties. It must be
 stated that in order to find out the  answer  to  the  question  referred,
 namely, whether manufacture, supply  and  erection/installation  of  LIFTS
 would fall within the concept of ‘Sale’ or ‘Works Contract’, analyzing the
 various tests in the forefront and thereafter apply them to  the  contract
 concerned, may not be an appropriate approach in  the  peculiar  facts  of
 this case.

. 53. Therefore, in my view, the proper course would  be  to  first  analyze
 what exactly is the contract between the Petitioner and the Purchaser  and
 under the terms of the ‘Contract’ what is  the  element  of  works/service
 involved in order to hold that it is a ‘Works Contract’. Therefore, at the
 risk of repetition, it will have to be stated that the initial exercise to
 be carried out is as to what are the terms of the contract.

. 54. I have set out  in  detail  the  said  terms  based  on  the  specimen
 contract filed before us in the  form  of  Annexure  A-1  along  with  its
 enclosures. These terms have been set out in detail in paragraphs 8 to  19
 and 32. I have also found that the Purchaser  placed  an  order  with  the
 Petitioner for supply of LIFTS/ELEVATORS mentioning the specifications. In
 fact, the document dated  23.12.2009,  along  with  which  all  the  other
 connected annexures have been  enclosed  states  that  it  is  by  way  of
 acknowledgement of the order of the proposed features of the  LIFT  to  be
 supplied. It is true that in the enclosures annexed along  with  the  said
 document, in few places, the expression ‘Works Contract’ has been used. It
 is needless to state that simply because someone calls an  activity  as  a
 ‘Works Contract’ that by itself will not ipso facto make  the  activity  a
 ‘Works Contract’ unless the activity as explained in the document  affirms
 and confirms to the effect that the said activity is nothing but a  ‘Works
 Contract’. In my opinion, when a detailed reference to  the  terms  agreed
 upon between the Petitioner and the Purchaser is  made,  it  will  not  be
 proper to merely go by such expression used sporadically to hold that  the
 contract is a ‘Works Contract’. On the other hand, I find  that  what  the
 Petitioner has agreed under the Contract, is only to  supply  its  branded
 LIFT in the premises of the Purchaser. I can firmly and validly state that
 a careful analysis of the terms contained in the contract will  lead  only
 to that conclusion and not any other conclusion.

. 55. As stated earlier and as has been set out in detail  in  paragraphs  8
 to 19, the Petitioner while agreeing to supply an Elevator of  a  specific
 model, highlighted the details  of  the  LIFTS,  such  as,  its  technical
 details, advantages of its product and other sophisticated equipments  put
 into the product. In fact, if at all any work element is involved  in  the
 activity of supply of the LIFTS/ELEVATORS, I find that the major  part  of
 the work has been directed to be carried out  by  the  Purchaser,  in  its
 premises, in order to enable the Petitioner to erect its LIFT/ELEVATOR  in
 the  said  premises.  In  a  very  insignificant  manner,  the  Petitioner
 undertakes to attend to certain aspects while erecting the  LIFTS  in  the
 premises of its Purchaser, such as connecting the power supply to the LIFT
 after fixing it in the identified place where the Purchaser  has  prepared
 the Hoist/Well in its premises and such other aspects as mentioned in  the
 contract. The Petitioner cannot be heard to say that it  brings  different
 parts of the LIFT and that its activity of  assembling  the  same  in  the
 premises of the Purchaser should be construed as one of service.  In  view
 of the nature of product that the  Petitioner  agreed  to  supply  to  its
 Purchaser, it has to necessarily assemble different parts in the  premises
 of the Purchaser and thereby,  fulfill  its  contract  of  supply  of  the
 LIFT/ELEVATOR in a working condition.

. 56. When examining the claim of the Petitioner that  what  was  agreed  by
 the Petitioner in the contract with its Purchaser is nothing but a  ‘Works
 Contract’, such a claim should be explicit and must  be  discernable  from
 the contract itself. When in the Contract the element of ‘Works  Contract’
 is totally absent and what was agreed between the parties was only  supply
 of its elevator for a fixed  price,  mere  mentioning  of  the  expression
 ‘Works Contract’ or by making reference to the basis for fixing  the  cost
 of labour involved in the manufacture or by simply  using  the  expression
 ‘Works Contract’ without any scope of performing any work at  the  command
 of the Purchaser, in my  opinion,  the  Petitioner’s  claim  to  hold  its
 activity as a ‘Works Contract’ cannot be accepted on mere asking. In other
 words, the contract must disclose in no uncertain terms that  it  was  one
 for carrying out ‘the work’ and the supply of the materials were  part  of
 such agreement to carry out any such specified work. Here, it is the other
 way around, the contract is only for supply of LIFTS/ELEVATOR and whatever
 element of works which the Petitioner claims to carry out in effecting the
 supply is virtually very insignificant as compared to the element of sale,
 which is paramount as found in the terms of the contract. The whole of the
 preparatory work for the erection of the LIFT is that of the Purchaser and
 the Petitioner merely goes to  the  Purchaser’s  premises  and  fixes  the
 various parts of the LIFT in the slots created for it.

. 57. While making a deeper scrutiny of the  terms  of  the  contract  as  a
 whole, as noted earlier, in Annexure A-1, which is the acknowledgement  of
 the Order dated 23.12.2009, the very subject column States:
        “Order  Acknowledgment  for  One  (1)  No.  OTIS  Electric  Traction
        Passenger  Elevator  for  your  Building  at  “BAPU  NAGAR,  JAIPUR,
        RAJASTHAN”.”





. 58. The contents of the letter also states that the  Petitioner  was  glad
 to receive the valued order placed with it by  the  Purchaser  and  stated
 that it is prepared to supply  and  install  One  (1)  No.  OTIS  Electric
 Traction Passenger Elevator. Thus, while acknowledging the order placed by
 the Purchaser, the proposed specifications submitted earlier based on  the
 Purchaser’s requirement have been enclosed. A specific Contract number  is
 also provided. Rest of the documents consist of the details of the  model,
 the nature of the machine that would be operating  the  LIFTS,  the  brake
 system, the type of parts that are used in the Machine  and  the  peculiar
 features of those mechanical aspects.  Thereafter,  the  benefits  of  the
 LIFTS   are   set    out,    namely,    the    smooth    and    controlled
 acceleration/deceleration,  better  riding   quality,   assured   leveling
 accuracy of +/- 5 MM,  improved  flight  time,  improved  reliability  and
 increased efficiency, reduced power  consumption,  reduced  heat  release,
 flexibility of programme and programming of features  at  site,  enhancing
 the value of the  building  where  the  LIFT  is  erected  and  simplified
 maintenance.  The  other  terms  relate  to   maintenance,   wherein   the
 Petitioner’s offer of providing 12 months free maintenance, the time  from
 which such maintenance would commence and the conditions upon  which  such
 maintenance offered would operate and also making it clear that during the
 period of maintenance the  Purchaser  will  be  the  owner  and  also  the
 circumstances in which the Petitioner would be liable for any damage  that
 occurs to the LIFT. A consideration of this part of the contract also does
 not refer to or contain any element of work or service to be  provided  as
 agreed between the parties.

. 59. The other set of terms are called as  ‘Preparatory  Work’.  Under  the
 said head, it is mainly stated as to the nature of preparatory  work  that
 the Purchaser will have to organize in its premises,  such  as,  the  time
 within which such preparatory work is  to  be  carried  out,  which  would
 require the Purchaser to design and furnish what  is  called  as  Elevator
 hoist way/structure to provide in its building to enable the Petitioner to
 supply its LIFT and locate it. It contains as many as 21 different aspects
 of preparatory work wherein, what all the Petitioner has come  forward  to
 provide is a ladder for having access to the pit. The other one which  the
 Petitioners agreed to provide is a steel fascia for each sill.  The  third
 one is the cutting of  walls,  floors  or  partitions  together  with  any
 repairs to be made necessary including,  grouting  of  all  bolts,  sills,
 members indicator and button boxes, etc. and a  steel  scaffolding  to  be
 made in the  course  of  erection,  which  the  Petitioner  undertakes  to
 provide.

. 60. As far as the provision of a ladder in the pit is  concerned,  it  can
 again be taken only as a material part of the LIFT and it does not involve
 any work to be performed. Similarly, provision of a steel fascia at  every
 sill level is again another part of the LIFT and here again  there  is  no
 element of work or service to  be  rendered.  The  provision  relating  to
 cutting of walls, floors or partitions together with  any  repairs  to  be
 made necessary including grouting of all bolts, sills,  members  indicator
 and button boxes etc.,  are  but  certain  incidental  minor  jobs  to  be
 attended to in the course of the supply and erection  of  the  LIFT.  When
 under the contract, the Purchaser has been directed to prepare  the  hoist
 way, which is a solid structure in the building and in the course  of  the
 erection of the LIFT if some holes are to be drilled for fixing a frame or
 a nut and bolt as compared to the enormity of the  preparatory  work  that
 has been entrusted with the Purchaser for  the  purpose  of  erecting  the
 LIFT, it must be stated that the said work of cutting the walls to fix the
 frames and grouting the bolts could not be held to be a  service  or  work
 for which the contract was entered into. It is like doing some  incidental
 work for fixing a Fan or an Air Conditioner. Providing a steel scaffolding
 again is not a matter which can be held to be a contract for works. On the
 other hand, for the purpose of grouting bolts and fixing the frames  in  a
 hoist way, which is stated to be having 30/40 metres height/depth, it  has
 to be mandatorily arranged by someone but here again it will  have  to  be
 stated that the same cannot be a decisive one for ascertaining the  nature
 of contract, as between the parties. Therefore, on the  whole,  the  terms
 under the head ‘Preparatory Work’ does not in anyway persuade us  to  hold
 that what was agreed between the parties in this  contract  was  a  ‘Works
 Contract’.

. 61. The next set of conditions contained in  the  Contract  is  under  the
 head ‘IEEMA Price Variation  Clause  for  Elevator  Works  Contracts’.  As
 stated earlier, this is  the  document  in  which  the  expression  ‘Works
 Contract’ has been used. When examining the details  contained  under  the
 said head what all it says is that the price quoted/confirmed is based  on
 the cost of raw materials/components and labour cost as  on  the  date  of
 quotation and the same is deemed to be related to  Wholesale  Price  Index
 Number for Metal Products and  All  India  Average  Consumer  Price  Index
 Number for Industrial Workers. The said part of the  contract  is  nothing
 but an indication that the price agreed between the parties or the  supply
 of the LIFT may vary under certain contingencies and such  variation  will
 depend upon the price indices relating to Metal Products and the  Consumer
 Price Index. I  see  no  co-relation  at  all  for  the  said  stipulation
 contained vis-à-vis the caption ‘Elevator Works Contract’. Merely  because
 the price is likely to vary based on the variation in the indices  of  the
 price of Metals and Consumer Price, I fail to understand as  to  how  that
 has any relevance or a reference to  those  indices  would  determine  the
 nature of the contract as  a  ‘Works  Contract’.  Therefore,  the  caption
 ‘Elevators Works Contract’, while referring to the Price Variation  Clause
 is a total misnomer and based on the said caption simpliciter,  the  whole
 contract cannot be called as a ‘Works Contract’. Under the very same  head
 it is stipulated by way of  payment  terms  that  claim  for  manufactured
 materials should be paid along with the material  invoice  and  claim  for
 installation  should  be  paid  along  with  their  final  invoice,  which
 according to the Petitioner would relate to the labour costs. It  however,
 states that the price quoted in  the  proposal  would  be  formed  upto  a
 particular date and thereafter, if there is any  delay  in  completion  of
 installation  and  commissioning  due  to  reasons  attributable  to   the
 Purchaser, the price would be varied in accordance with  the  above  costs
 indices. The price variation is supposedly agreed between the  parties  to
 prevail upto a specified date. Therefore, in the  event  of  the  contract
 being completed within the specified date, there is  no  question  of  any
 price variation arising in order to work out such variation based  on  the
 ‘Wholesale Price  Index’  or  ‘Consumer  Price  Index’.  Even  assuming  a
 contingency arises due to the fault of  the  Purchaser,  at  best  it  may
 result in some variation in the price and I fail to understand as  to  how
 based on the working out of such variation in the price, it  can  be  held
 that the whole contract is a ‘Works Contract’.

. 62. I do not find any sound logic or basis in the Petitioner referring  to
 the Price Variation Clause under the caption ‘Works Contract’.  Therefore,
 it can be validly stated that by calling the Price Variation Clause as  an
 ‘Elevator Works Contract’, the contract cannot be construed  as  a  ‘Works
 Contract’. On the other hand, going by the stipulations contained  therein
 viz., that the claim for manufactured materials should be paid along  with
 material invoice and the installation charges to be paid  based  on  final
 invoice makes it clear that the contract is divisible in its nature and to
 call it an indivisible one, is contrary to its own terms.

. 63. With this, the ‘Conditions of the Contract’ can be referred to,  which
 contains as many as 27 conditions. These conditions have been  elaborately
 discussed in paragraph 18 of this judgment, to which I once  again  bestow
 my serious consideration, in order to appreciate whether, these conditions
 at least throw any light to state that the contract can be brought  within
 the expression ‘Works Contract’.

. 64. When examining these conditions,  in  the  first  instance,  the  most
 relevant and clinching condition is the one relating to the payment to  be
 effected by the Purchaser, which is to the  effect  that  on  signing  the
 contract, 90% of the contract amount should be paid and  the  balance  10%
 either on the  commissioning  of  the  LIFT  or  within  30  days  of  the
 Petitioner’s offer to commission the LIFT and  if  for  any  delay  caused
 beyond the control of the Petitioner, within 90 days  from  the  date  the
 materials are ready for dispatch at the premises of  the  Petitioner.  The
 agreed period for execution  of  the  supply  of  the  LIFT,  as  per  the
 contract, is 52 weeks i.e., one full year. Whereas by reason of any  delay
 beyond the control of the Petitioner, within 90 days from the date of  the
 commencement of the contract, the Petitioner will have the right to demand
 for the entire payment without doing anything towards the erection part of
 it. Alternatively, while the Purchaser would be liable to pay the entirety
 of the contracted amount for the supply of the LIFT, the Petitioner  after
 receiving the full payment would still have sufficient time to  effectuate
 the supply in the event of the supply not being effectuated within the due
 date, then, on that ground the inability to commission the LIFT within  30
 days or within 90 days after the materials are ready for dispatch will not
 for any reason be attributable to the Petitioner. In fact, Condition  No.8
 at the end states that if for any reason the Petitioner  is  not  able  to
 supply any equipment within 52 weeks, then at its option,  it  can  cancel
 the contract without there being any liability for payment of  damages  or
 compensation. Therefore, those terms relating to payment in Condition No.5
 and the right retained by the Petitioner to cancel the  contract  for  any
 reason whatsoever under Condition No.8 disclose that for mere  signing  of
 the contract for supply of the LIFT, the Petitioner would  get  the  whole
 value of it without any corresponding obligation to effect the  supply  or
 to suffer any damages. The said outcome based on  the  payment  conditions
 when read along with the other stipulations, disclose that the  claim  for
 manufactured materials should be paid along with the material invoice  and
 the claim for installation should be paid along with their final  invoice.
 It further makes it abundantly clear that the right of the  Petitioner  to
 realize the full value of the materials of the LIFT to  be  supplied  does
 not entirely depend upon the installation part  of  it.  In  other  words,
 supply of materials of the LIFT  and  installation  costs  are  separately
 worked out in order to ensure that irrespective of the  installation,  the
 Petitioner will be able to realize the value of the  material  cost.  This
 conclusion which is  based  on  the  above  terms,  also  strengthens  the
 reasoning that the contract is  not  an  indivisible  one  and  is  always
 separable i.e., one for supply of materials and the miniscule part of  the
 work involved. The division of 90% payment in the first instance  and  the
 balance 10% under certain  other  situations,  fully  supports  the  above
 conclusion.



. 65. A reference to the various other conditions in the  contract  also  do
 not suggest that the consideration under the Contract to be borne  by  the
 Purchaser, has got anything to do with the installation part of the  LIFT.
 On the other hand, the terms have downright been agreed upon  between  the
 parties only to mandate the Purchaser to pay 90% of the contracted  amount
 on mere signing of the contract and to pay the balance 10% within 30  days
 of the Petitioner’s offer to commission the LIFT  and  even  if  the  said
 event of commissioning of the LIFT fails to occur due to  any  reason  not
 attributable to the Petitioner or beyond its control, within  90  days  of
 the materials made ready for dispatch at the premises of  the  Petitioner.
 In that situation also what all the Petitioner will have to ensure is that
 such components of the LIFTS are  ready  for  dispatch.  At  the  risk  of
 repetition, it can be stated that if on the date of  the  signing  of  the
 contract 90% payment is made and within the contract period i.e 52  weeks,
 the Petitioner is able to show that the whole of  the  components  of  the
 LIFTS are ready for dispatch at its premises, the Purchaser  is  bound  to
 pay the balance 10% also within 90 days from the date of such availability
 of materials for  dispatch  without  any  other  stipulation  as  to  such
 equipments or components being delivered at the spot of the Purchaser  for
 its installation. If the conditions of the contract  relating  to  payment
 are discernable to that effect, it can only be stated that the contract of
 the Petitioner with the Purchaser is virtually for the manufacture of  the
 materials and for its absolute readiness to  supply  those  materials  and
 nothing more. The sum and substance of the conditions of the  contract  de
 hors the other clauses is only to that effect.


. 66. As far as the other clauses are concerned, they  have  nothing  to  do
 with the execution of the works or creating any duty or responsibility  on
 the Petitioner to carry out such execution and thereby, any  corresponding
 liability being fastened on the Petitioner in the event of its failure  to
 carry  out  the  erection/installation  part  of  it   will   not   become
 attributable. It will also be relevant to note that if for any reason, the
 contract is not fulfilled due to reasons attributable  to  the  Purchaser,
 the apportionment clause will enable the Petitioner to retain such part of
 the amount of 90% already received to cover its  costs  and  expenses.  In
 fact the whole discretion vests with  the  Petitioner  to  determine  such
 apportionment under Clause 21. Therefore, on a detailed  consideration  of
 the conditions of the contract, one will not be able  to  state  with  any
 certainty that the contract has got anything to do only with any  work  or
 service to be performed in the course of supply of  the  LIFT/ELEVATOR  by
 the Petitioner.

. 67. The signed part of the said contract makes it clear that the price  is
 inclusive of indirect taxes, as is currently applicable either leviable by
 the Central  Government  or  State  Government  or  any  local  Authority,
 including Excise Duty and Service Tax. However, it also states that in the
 event of any such statutory levy or payment of tax or otherwise  faced  by
 the Petitioner, then under such circumstances, that should be borne by the
 Purchaser.

. 68. Having considered the above terms of the  contract  threadbare,  I  am
 convinced that it can only be concluded that this contract is only one for
 the manufacture and supply  of  the  LIFT/ELEVATOR  and  the  installation
 though mentioned in the contract, has very insignificant relation  to  the
 consideration agreed upon between the parties. In any  event,  as  I  have
 found that the contract of supply and installation are divisible  in  very
 many aspects, it is difficult to hold  that  it  is  a  ‘Works  Contract’.
 Therefore, it will have to  be  held  that  the  manufacture,  supply  and
 erection of LIFT/ELEVATOR agreed upon by the  Petitioner  to  any  of  its
 customers, would only fall within the expression ‘Sale’ and can  never  be
 called as ‘Works Contract’. Once that is the conclusion that can  be  made
 based on the contractual terms as agreed between the  Petitioner  and  its
 customers, the application of Article 366(29A)(b) cannot be made and  does
 not in any way support the contentions raised by the Petitioner.

. 69. De hors the abovesaid conclusion, based on the very contract,  I  wish
 to deal with the various submissions of the Petitioner  based  on  various
 decisions relied upon, including the decision  in  Larsen  &  Toubro  Ltd.
 (supra).

. 70. Keeping the  above  salient  features  of  the  contract  between  the
 Petitioner and the Purchaser in mind, I now deal with the submissions made
 by the learned Senior Counsel for  the  Petitioners.  Mr.  Salve,  learned
 Senior Counsel in his opening submission relied upon Section 2(jj) of  the
 Orissa Sales Tax Act, 1947 and contended that applying the said definition
 of ‘Works Contract’ to the present contract, the same would squarely  fall
 within the said definition. When examining the said contention, it will be
 relevant to make a detailed reference to  the  said  provision  under  the
 Orissa Sales Tax Act. For appreciating this provision, a reading of it  is
 required and has been extracted in paragraph  24  of  this  judgment.  The
 definition of ‘Works Contract’ under Section 2(jj) of the Orissa Sales Tax
 Act states that it would include any agreement for carrying out  for  cash
 or  deferred  payment  or  other  valuable  consideration,   among   other
 activities, fabrication, erection, installation or  commissioning  of  any
 movable or immovable property.

. 71. As far as a LIFT is concerned, in one sense it  can  be  called  as  a
 movable property  when  it  is  in  the  course  of  operation  after  its
 installation and that it is not embedded to the earth  permanently  while,
 in another sense, having regard  to  the  manner  in  which  the  LIFT  is
 installed in a premises, it can also be stated to be part of an  immovable
 property.  In  my  view,  whether  as  a  movable  property  or  immovable
 property, it may not make  any  difference  while  considering  the  other
 prescriptions contained in the said provision.  What  is  really  relevant
 for consideration is to  examine  the  issue  by  referring  to  the  said
 provision, which in the foremost, depends upon an  agreement  between  the
 parties. The said agreement should ordain an obligation on one  party  who
 has been entrusted with the task of fabrication, erection, installation of
 any movable or immovable property.  The  most  mandatory  requirement  for
 invoking the said provision and for applying the said definition would  be
 that the whole of the agreement should be for carrying  out  the  work  of
 fabrication, installation or erection of a movable or immovable  property.
 Significantly, the expression ‘manufacture’ is absent in Section 2(jj).

. 72. Next, as per the agreement, it should be for cash or deferred  payment
 or other valuable consideration. In other words, it must first satisfy the
 definition of a ‘concluded contract’ as provided under that  Section.   In
 this context, it would be relevant to refer to Section 2(h) and the  first
 part of Section 10 of the Indian Contract Act, 1872.  Section  2(h)  reads
 as under:
      “An agreement enforceable by law is a contract.”

      The first part of Section 10 reads as under:

      “What Agreements are contracts – All Agreements are Contracts if they
      are made by the free consent of parties, competent to contract, for a
      lawful consideration and with the lawful object and  are  not  hereby
      expressly declared to be void.”





. 73. Therefore, in order for a contract to be valid, it must be  one  which
 can be enforced by law and such agreements if  made  between  the  parties
 must be for a lawful  consideration  and  with  a  lawful  object.  It  is
 needless to state that for any contract to be valid and lawful, the  basic
 ingredients of offer and acceptance for  valuable  consideration  must  be
 present. Keeping the said provisions relating to a  valid  contract  under
 the provisions of the Indian Contract Act in mind, when an examination  is
 made on the implication  of  the  definition  of  ‘Works  Contract’  under
 Section 2(jj) of the Orissa Sales Tax Act to the  case  on  hand,  at  the
 foremost, it is necessary to examine  as  to  whether  there  is  a  valid
 agreement and that valid agreement and if  such  an  agreement  is  for  a
 lawful  consideration  to  perform  the  work  of  fabrication,  erection,
 installation of any  movable  or  immovable  property.  Further,  such  an
 agreement should also be  one  for  cash  or  deferred  payment  or  other
 valuable consideration.

. 74. Keeping the above statutory prescriptions in mind,  the  same  can  be
 applied to the case on hand. As has been pointed out in the  earlier  part
 of the judgment, where the various terms of the contract  as  between  the
 Petitioner and  the  Purchaser  have  been  examined,  in  particular  the
 consideration  part  of  it,  it  is  found  that  the  majority  of   the
 consideration was payable to the Petitioner within one month from the date
 of commissioning or within 90 days of  keeping  the  materials  ready  for
 supply in its premises. This is on the ground that the commissioning could
 not be effected as agreed or within 30 days of its readiness to commission
 and by stating that its inability to commission was delayed due to reasons
 beyond its control.  This  provision  in  the  Contract  is  de  hors  the
 stipulation in Condition No.25(a) under which a minimum  of  16  weeks  is
 prescribed for commissioning while the maximum period is 52  weeks,  which
 again depends upon the fulfillment of the agreed  conditions  fastened  on
 the Purchaser. It also provides for extending  the  contract  periods.  To
 recapitulate the said regime of the contract, it can be  stated  that  the
 parties agreed as per the agreement wherein the Purchaser is bound to  pay
 90% of the agreed sum at the time of signing of the  contract  itself  and
 the balance 10% within 90 days  from  the  day  the  Petitioner  gets  the
 materials ready for dispatch in its premises, if it could  not  commission
 as agreed or within 30 days of its readiness to commission. Therefore, the
 whole of the valuable consideration becomes payable and was  relatable  or
 as agreed upon by the parties merely for  the  Petitioner’s  readiness  to
 take up the contract of supply of the ELEVATOR and for  its  endeavour  to
 effect the manufacture, procure the entire materials for  a  LIFT/ELEVATOR
 and keep it ready for dispatch in its premises. In other words, the moment
 the materials for a LIFT/ELEVATOR are made ready and kept for dispatch  in
 the premises of the Petitioner, under a particular contingency  within  90
 days thereof, the majority of the contracted amount is to be paid  to  the
 Petitioner without any corresponding legally enforceable obligation on the
 Petitioner to carry out the erection or installation in  the  premises  of
 the Purchaser.

. 75. In fact, the period actually agreed between the parties, as per  which
 the Petitioner is to carry out the installation part of the LIFT  runs  to
 52 weeks i.e., for one full year, whereas the whole of  the  consideration
 would become payable within 90 days from the date the materials  are  kept
 ready for dispatch in the premises of the Petitioner.  Therefore,  I  fail
 to understand as to how it can be held that there was any sordid agreement
 as between the Petitioner and the Purchaser for any valuable consideration
 only for the purpose of carrying out erection/installation of the LIFT  in
 the premises of the Purchaser. If for any reason after the full payment is
 effectuated by the Purchaser as per the term relating to  the  payment  of
 the contracted amount, due to any fault of the Petitioner, the  supply  of
 the material or erection or installation fails to take place,  the  remedy
 of the Purchaser may at best be for recovery of the material part  of  the
 contract and I do not find any provision in the  terms  of  the  contract,
 which would entitle the Purchaser  to  lawfully  enforce  as  against  the
 Petitioner for the execution part of it, namely, the erection/installation
 of the LIFT in its premises. In my opinion such  a  consequence  would  be
 inevitable having regard to the terms of the contract, which in  spite  of
 my best efforts, was not able to discern any specific clause  which  would
 entitle   the   Purchaser   to   seek    for    such    enforcement    for
 erection/installation. On one hand, a provision from the  contract  states
 that the Purchaser may  be  entitled  to  retain  the  materials  even  in
 uninstalled position in the event of the contract not being  fulfilled  in
 its fullest terms.

. 76. On the other hand, in the event of any failure  on  the  part  of  the
 Purchaser in effectuating the  payment  or  in  fulfilling  certain  other
 aspects, such as construction  of  hoist  way  and  other  works  related,
 obligations to be performed on its part, the Petitioner has retained every
 right to charge interest for such delay, if any, caused at the instance of
 the Purchaser and in the event of the Contract failing  to  fructify,  the
 Purchaser would be liable to pay compensation/damages  to  the  Petitioner
 and not vice versa. Since the above conclusion is the outcome based on the
 relevant terms of the Contract, the mentioning in Clauses 10 and  14  that
 the contract is otherwise indivisible ‘Works Contract’ will not by  itself
 make it indivisible or a ‘Works Contract’. When that is  the  factual  and
 legal outcome as per the terms of the contract, it will have  to  be  held
 that there is no scope to apply Section 2(jj) of the Orissa Sales Tax  Act
 to the case on hand and hold that the manufacture, supply and installation
 of the LIFT by the Petitioner would fall within  the  said  definition  of
 ‘Works Contract’. It may be a different situation if the contract was  one
 for mere fabrication/erection/installation. Certainly a simple activity of
 fabrication cannot be equated to manufacture of parts of a LIFT since such
 fabrication may take place at the  site  with  the  aid  of  material  and
 labour.



. 77. That apart, provisions of  the  Indian  Contract  Act  stipulates  the
 element of offer, acceptance and consideration for a  concluded  contract.
 In the case on hand, the  offer  would  be  for  supply  of  the  LIFT  as
 described in the proposal made by the Petitioner. The  consideration  upto
 90% would become payable the moment the Purchaser agrees to  the  proposal
 made by the Petitioner and the balance 10% can also be  collected  without
 any positive guarantee for completion of erection or installation  of  the
 LIFT under certain contingencies without any corresponding  right  in  the
 Purchaser to seek for enforcement of the  erection/installation.  In  fact
 for payment of the balance 10% under  such  contingencies,  what  all  the
 Petitioner has to show is that the materials meant for the supply  of  the
 LIFTS are ready for dispatch in its  premises,  which  would  mandate  the
 Purchaser to make the payment within 90 days of such readiness as reported
 by the Petitioner. In  effect  such  a  contract  as  agreed  between  the
 Petitioner and its Purchaser as per the provisions of the Indian  Contract
 Act if were to be considered for  the  invocation  of  the  definition  of
 ‘Works Contract’ under Section 2(jj),  it  can  be  found  that  the  said
 contract does not in any way create any legal obligation on the Petitioner
 to effect the erection or  installation  of  the  LIFT  as  a  movable  or
 immovable property, satisfaction of which contract alone will attract  the
 definition of ‘Works Contract’ under Section 2(jj) of the Orissa Sales Tax
 Act.


. 78. Mr. Salve, learned  Senior  Counsel  then  contended  that  the  terms
 contained in the contract for manufacture, supply and installation of  the
 LIFT  as  well  as  the  various  prescriptions  contained  in  the  Field
 Installation Manual show that what was agreed as between the parties would
 fall within the definition of ‘Works Contract’ and therefore, be  held  as
 the same.  In the previous paragraphs, it has been stated as  to  how  the
 contract between the Petitioner and its Purchaser is mainly for the supply
 of the LIFT and the agreement  is  not  in  any  way  conditional  to  the
 installation  part  of  it.  Therefore,  the  reference   to   the   Field
 Installation Manual will be of no assistance to the Petitioner,  since  it
 only describes as to how various steps are to be followed by the personnel
 of the Petitioner while erecting the LIFT.  Since, the agreement,  namely,
 the proposal for the supply and the consideration was  agreed  as  between
 the Parties, without creating any legally enforceable  rights  as  regards
 the installation part of it,  the  reference  to  the  Field  Installation
 Manual, which is an internal document of  the  Petitioner  issued  to  its
 employees for their guidance, does not in anyway advance the case  of  the
 Petitioner.  Therefore, for the very same reasons, the said contention  of
 the learned Senior Counsel is also liable to be rejected.

. 79. I have also highlighted how as  per  the  payment  terms  the  parties
 agreed  specifically  to  the  effect:  ‘under  this  clause   claim   for
 manufactured materials shall be paid along with our material  invoice  and
 claim for installation labour shall be paid along with our final invoice.’
 In fact the copy of the two  invoices  dated  17.12.2009  and  20.09.2010,
 clearly explains the fact that the first one related to material cost  and
 the subsequent one only related to labour cost.

. 80. I have examined the provisions of the Bombay  Lifts  Act,  1939  which
 have been  raised  by  learned  Senior  counsel  for  the  petitioners  in
 paragraph 25 and have extensively dealt with them in paragraph 37 of  this
 judgment.   Based on such examination of the  various  provisions  of  the
 Act, I have found that these provisions are meant for  getting  a  permit,
 licence, registration etc. and for the purpose of  ensuring  that  in  the
 course of the installation, as well as, while the LIFT is in operation  or
 in the course of the maintenance of the LIFT, no damage is caused  to  men
 and materials. Beyond that, based on the said provisions there is no scope
 to reach a conclusion that a contract as between the  Petitioner  and  the
 Purchaser would come  within  the  definition  of  the  ‘Works  Contract’.
 Therefore, the said submission of the learned Senior Counsel  cannot  also
 be accepted.

. 81. The learned  Senior  Counsel  then  referred  to  a  decision  of  the
 Government of India reported in In Re:  OTIS  Elevator  Co.  (India)  Ltd.
 (supra), which has been dealt in paragraph 38 of this judgment.  I fail to
 see any scope to rely on the said decision, as it  is  only  that  of  the
 Department of Government of India.  Even otherwise, the said decision  was
 for the purpose of finding out as to whether ‘excise duty’ was payable  at
 the time when the manufactured parts of elevators/escalators were  cleared
 from the premises of the Petitioner.  I do not find any scope  at  all  to
 apply the said conclusion of the Government of India to the case on  hand,
 apart from the fact that the said conclusion reached under the  provisions
 of the Central Excise Laws cannot be applied to the legal issue with which
 we are concerned.  In any event, such a decision of the authority  of  the
 Government of India cannot even have a persuasive value on this Court.

. 82. A reference was also made to a notice issued by the Central  Board  of
 Excise and Customs dated 15.01.2002, under  Section  37B  of  the  Central
 Excise Act which has been dealt with in paragraph  39  of  this  judgment.
 Here again I fail to see any  acceptable  grounds  to  apply  any  of  the
 reasoning for such conclusion. When I examined the nature of the  contract
 of the Petitioner for manufacture, supply and installation of the LIFTS to
 its Purchaser, I do not find any scope at all to apply those decisions  or
 the conclusions taken by the concerned authority under the  provisions  of
 Central Excise Act.

. 83. The learned Senior counsel for the petitioner  lastly  made  reference
 to sub-Sections 29, 39(a) and  sub-clause  (zzd)  to  sub-Section  105  of
 Section 65 along with a further reference to  sub-Clause  (zzza)  to  sub-
 Section 105 to Section 65, which has been dealt with in  paragraph  41  of
 this judgment. Though in the first blush, the  submission  appears  to  be
 forceful, on a meticulous examination of the  provisions  with  particular
 reference to the contract as between the Petitioner and its  Purchaser,  I
 am compelled to reject the said submission as it has no force.

. 84. To note the fallacy in the submission, a clear  understanding  of  the
 said provision is required.  At the very outset, it will have to be stated
 that the present attempt is to find out an answer to the question  whether
 manufacture, supply and erection of a LIFT, will fall under  the  category
 of ‘Sale’ or ‘Works Contract’ for the purpose of a levy  under  the  Sales
 Tax Act.  Section 65(29), 65(39a) and 65(105) (zzd) and  (zzzza)  are  all
 provisions for the levy of Service Tax.   It  is  well  known  that  while
 interpreting taxing statutes, strict and literal interpretation should  be
 made. For this proposition of law, reference can be made  to  one  of  the
 earliest decisions of England in Cape Brand Syndicate vs.  Inland  Revenue
 Commissioner, 1921-1 KB 64. The above decision was followed in Income  Tax
 Officer, Tuticorin vs. T.S. Devinatha Nadar, Etc., AIR 1968 SC 623 wherein
 it held that what is applicable to  another  taxing  statute  may  not  be
 applied to a case governed  by  sales  tax  statutes.  Keeping  the  above
 fundamental principle in mind, an examination of Section  65(29),  defines
 ‘commissioning and installation  agency’  to  mean  any  agency  providing
 service in relation to erection, commissioning or  installation.   Section
 65(39a)  further  defines  the  expression  ‘erection,  commissioning   or
 installation’ to mean any service provided by any such agency, in relation
 to, inter alia installation of LIFT and escalation.  Section 65(105) (zzd)
 defines ‘Taxable Service’ inter alia to mean service  provided  or  to  be
 provided to any person by erection, commissioning or  installation  agency
 in relation to commissioning and  installation.   Therefore,  reading  the
 above provisions together, what emerges is that any  service  provided  by
 way of commissioning and installation of LIFT and Escalators by any agency
 would be a Taxable Service.  Once the said position is steered  clear  of,
 the other provision referred to was Section 65(105)(zzzza), which again is
 one other taxable service, namely, a service to any person  by  any  other
 person in relation to the execution  of  ‘Works  Contract’.   It  excludes
 ‘Works Contract’  in  respect  of  roads,  airports,  railways,  transport
 terminals, bridges, tunnels and dams obviously because those are  services
 of the State.  The said sub-clause,  however,  contains  a  definition  of
 ‘Works Contract’ in the  explanation  part.   It,  however,  refers  to  a
 contract which includes transfer of property  in  goods  involved  in  the
 execution of a works contract. In Clause (i) of the Explanation, it  makes
 it clear that such transfer of goods would attract levy of tax as sale  of
 goods, under the relevant statutes,  namely,  Sales  Tax  Acts;  State  or
 Central. In Clause (ii)  of  the  Explanation,  it  specifically  includes
 erection, commissioning or installation of LIFT and Escalator.  It will be
 profitable also to refer to Section 65(50), which defines ‘goods’ to  mean
 what is assigned to it in clause (7) of Section 2 of  the  Sale  of  Goods
 Act, 1930.  Section 2(7) of Sale of Goods Act defines  it  to  mean  every
 kind of movable property other than actionable claim, etc.   Similar  such
 definitions are attributed to ‘goods’ under the  Sales  Tax  Acts.   Since
 Section 65 and the various subsections, namely, (29), (39a), (105), (zzd),
 (zzzza) put together only  relatable  to  Service  Tax,  the  question  of
 importing the said definition of ‘Works Contract’ in  the  explanation  to
 Section (65)(105)(zzzza) to the provisions of Sales  Tax  Acts  cannot  be
 made. Further, clause (i) of the Explanation to sub clause (zzzza) of Sub-
 section 105 to Section 65, distinctly refers to transfer of goods  in  any
 such contract to mean such goods leviable to tax as a sale  of  goods.  It
 will have to be stated that such leviability by itself  may  independently
 attract tax liability under the relevant Sales Tax Statutes.  However,  it
 is not  the  concern  in  this  case  and  it  is  to  be  left  open  for
 consideration as and when  any  need  arrives  to  decide  that  question.
 Therefore, the reference to the above provisions under the Service Tax Act
 are of no assistance to the  Petitioner  to  hold  that  its  manufacture,
 supply and installation of a lift is a ‘Works Contract’.

. 85. The above conclusion is de hors the position that  sub-clause  (zzzza)
 of Sub-section 105 of Section 65 came to be introduced under  the  Finance
 Act of 2007, which came into force w.e.f. 11.05.2007.  It should  also  be
 noted that Section 65(29), 65(39a) and 65(105) (zzd) have  nothing  to  do
 with manufacture  and  supply  which  is  actually  the  activity  of  the
 Petitioner.  It  is  regarding   the   erection/commissioning/installation
 simpliciter, even if the LIFT or Escalator is independently carried out by
 an Agency. According to me, by relying upon Section 65 (29), 65 (39a)  and
 Section 105 (zzd), the case of the Petitioner  cannot  be  comprehensively
 answered and he further cannot possibly contend that the  contract  should
 be construed as  a  works  contract.  Therefore,  on  the  ground  of  any
 liability being cast on the Petitioner under the provisions of the Service
 Tax Act, it will be wrong to hold that the  Petitioner  cannot  be  called
 upon to comply with the  provisions  relating  to  Sales  Tax.   The  said
 submission of the learned Counsel is, therefore, liable to be turned down.



. 86. On examination of the various decisions, which  were  relied  upon  by
 the learned Senior Counsel, the first case was the Division Bench decision
 of the Bombay High Court in OTIS Elevators Co. (India) Ltd. (supra). It is
 true that in the said decision the Bombay High Court dealt with  the  very
 same issue, namely, whether supply, erection, installation of LIFT by  the
 Petitioner would fall within the  definition  of  ‘Works  Contract’  or  a
 ‘Sale’.  The Division Bench of the Bombay High Court posed  two  questions
 for consideration. The questions were:
       “1. Whether on the facts and in the circumstances of  the  case,  the
      Tribunal was justified in holding that the contract  dated  10.06.1958
      between the applicants and M/s Tea Manak and Co. was a  composite  and
      divisible contract, one for the sale of goods in  which  the  property
      has passed and the other  for  labour  and  service  charges  for  the
      installation of the goods so sold.


      2. Whether the said contract was one and indivisible contract for work
      and labour.”




. 87. While examining the above two questions apart from the  various  terms
 of the contract, the Division Bench has referred to a very vital  term  in
 the contract, which again related to the payment  of  consideration.   The
 said term has been extracted at page 531, which reads as under:
        “531. We propose to furnish and  erect  the  elevator,  installation
        outlined in the foregoing specifications for the sum of price of two
        passenger lifts as above  duly  delivered  and  erected  at  site  @
        Rs.28,156/- each.”







. 88. The Division Bench, thereafter, noted clause (iv)  of  the  Agreement,
 which related to the payment of price.  The said clause was as under:

           “30% within 30 days of the builders accepting the  proposal;  60%
           on receipt of shipping documents from the applicants’  factories;
           and the remaining 10% (+) or  (–)  any  adjustments  required  on
           completion of erection or in any case within 6 months of delivery
           of equipment.”







. 89.  After referring to the above clauses in the agreement  and  also  the
 various decisions relied upon by  the  respective  parties,  the  Division
 Bench noted the contention of the Department  and  the  substance  of  the
 contention of the Department was as under:

           “We have already referred to the  contention  of  the  Department
           that in view of the proportion of cost separately  indicated  for
           the material as against labour, and the use of the  word  ‘price’
           in describing the consideration  for  the  supply,  erection  and
           installation of the lifts the intention of  the  parties  was  to
           sell the goods.”







. 90. While dealing with the said contention, the  Division  Bench  observed
 as under:

          “In the ultimate analysis in this case the form in which services
          are rendered does not permit its severance into two compartments.
           In  this  connection,  there  are  certain  factors  which  have
          relevance in determining the intention of the parties.  The time-
          limit fixed for doing the work, the mention of and  all-inclusive
          price for the totality of the materials  and  services  rendered,
          the absence of an agreement for the sale of chattel  as  chattel,
          the point of time when, the property in the goods passed from the
          applicants to the opposite party,  the  nature  of  the  contract
          undertaken by the Applicants under and the indivisibility of  the
          contract, are all factors which would indicate what should be the
          proper construction of the  contract  entered  into  between  the
          parties.”







. 91. The Division Bench then felt it necessary to examine the terms of  the
 contract and the surrounding  circumstances  and  ultimately  reached  its
 conclusion as under:

           “In this connection the mode of payment set out in  clause  4  is
           also pertinent.  Under that clause 30% of the  price  was  to  be
           paid within 30 days from  the  date  of  the  acceptance  of  the
           proposal, 60% was to be paid on  receipt  of  shipping  documents
           from the factories, and the remaining 10% had to be paid, subject
           to adjustments required, on completion of the  erection,  or,  in
           any case, within six months of the delivery of the equipment,  if
           the erection was delayed due to the reasons beyond their control.
            This is more consistent with and all-inclusive price being fixed
           irrespective of the materials supplied from time to time with the
           building contractors.”







. 92.       The answers to the questions were ultimately made at the end  of
 the judgment to the following effect:

           “In the result,  we  answer  the  questions  referred  to  us  as
           follows:-

           Question No.(1) in the negative.

           Question No.(2) in the affirmative.”





. 93. The Division Bench ultimately held that the contract was  a  composite
 and indivisible contract for work and labour and, therefore,  no  sale  of
 goods can be spelt  out  of  the  contract.  As  observed  from  the  said
 judgment, the Division Bench has noted the agreed terms  of  the  parties,
 which stated  that  the  proposal  was  to  manufacture/erect/install  the
 elevator, for which the price was agreed upon. The payment term also  made
 it clear that the entirety of the payment would be made on  completion  of
 the erection or  in  any  case  within  six  months  of  delivery  of  the
 equipment.  It has further noted that the  price  was  all  inclusive  for
 supply, erection and installation which were the  specific  terms  of  the
 contract.  Therefore, the said  judgment  having  regard  to  the  special
 facts, namely, the specific terms contained in the contract as between the
 parties, can have no application to the facts of this case.  In  the  case
 on hand, the payment has really  nothing  to  do  with  the  erection  and
 installation.  It has also got no relation to the delivery  of  the  LIFT,
 either  in  its  full  form  or  in  any  semi-installed  condition.   The
 contractual terms between the  Petitioner  and  its  Purchaser  have  been
 explained in detail and have no relation to any service to be performed by
 the Petitioner by way of the  agreed  terms  of  the  contract.  The  said
 decision is, therefore, of no assistance to the case  of  the  Petitioner.
 In any event, if it is argued that  the  contract  involved  in  the  said
 decision is identical to the case on hand, as it has been found  and  held
 that the terms of the contract is not  persuasive  enough  to  call  it  a
 ‘Works Contract’, the said decision will no longer hold good.

. 94. Before analyzing the various other decisions  relied  upon  by  either
 side, having regard to the above conclusion that the  manufacture,  supply
 and installation of LIFT by the Petitioner would constitute a  ‘Sale’  and
 not ‘Works Contract’, a reference can be  made  to  the  reasoning,  which
 weighed with the learned Judges in the judgment rendered in Kone Elevators
 (India) Pvt. Ltd. (supra). In the said judgment this very  question  which
 has  been  referred  to  this  Constitution  Bench  directly   arose   for
 consideration. The present Petitioner when submitted its returns under the
 provisions of the Andhra Pradesh General  Sales  Tax  Act,  1957  for  the
 period 1.04.1995 to 31.05.1995 and 01.06.1995 to  31.07.1995,  provisional
 assessments were made  by  the  Commercial  Tax  Officer  by  order  dated
 19.08.1995 and 05.09.1995, respectively.  The claim of the  Petitioner  by
 way of deductions of labour charges for composition of Tax  under  Section
 5G read with Section 5F of the said Act, on the ground that the nature  of
 work undertaken by it constitutes a ‘Works Contract’, was rejected by  the
 Assessing Authority holding that the same amounted to ‘Sale’.  The  appeal
 preferred by the Petitioner was also rejected.  The further appeal to  the
 Tribunal was allowed in favour of the assessee holding that the activities
 of the Petitioner would fall within the expression  ‘Works  Contract’  and
 not ‘Sale’. The Department’s challenge in the High Court also ended  in  a
 failure. In an appeal preferred by the Department before this Court, after
 applying the effect of sub-article (29A)(b) of Article 366  and  also  the
 decisions in Gannon Dunkerley (supra),  Hindustan  Shipyard  Ltd.  (supra)
 etc., and after making a detailed reference to the  contractual  terms  it
 was held as under in paragraph 12:
        “12. 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 the 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  lift  was  on  the
        customer. It was  agreed  that  under  no  circumstances  would  the
        assessee undertake installation of lift if the  site  was  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 delay in providing the required  facilities.  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  installation
        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,
        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 were 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,  the
        transactions in question constitute “sale” in terms of Entry  82  of
        the First Schedule to the said Act and, therefore,  Section  5-G  of
        the said Act was not applicable.”



.  95.  It  can  be  concluded  that  the  reasoning  of   this   Court   in

                             the above-referred decision is  in  tune  with
 the law on the subject and it should  be  held  that  could  be  the  only
 reasoning which can be assigned,  having  regard  to  the  nature  of  the
 contract and the relevant provision of law that  would  apply  to  such  a
 transaction as between the Petitioner and its customers.   Therefore,  the
 said decision should remain as no other view  other  than  what  has  been
 taken in the said decision is possible. I, thus, affirm the said  decision
 and hold that the activity of the Petitioner in  the  manufacture,  supply
 and installation of LIFT/ELEVATOR is a ‘Sale’ and not a ‘Works  Contract’,
 having regard to the specific terms of the  contract  placed  before  this
 Court.

. 96. On behalf of the Petitioners, reliance was  heavily  placed  upon  the
 three Judge Bench decision of this Court in Larsen & Toubro Ltd.  (supra).
 That decision came to be rendered pursuant to a reference by a  two  judge
 Bench of this Court in K. Raheja  Development  Corporation  vs.  State  of
 Karnataka, (2005) 5 SCC 162.  In the order of reference dated  19.08.2008,
 the two  judge  Bench  after  noticing  the  relevant  provisions  of  the
 Karnataka Sales Tax Act, 1957 and the distinction between the ‘contract of
 sale’ and the ‘Works Contract’ felt it necessary to refer the question  to
 a larger Bench.  In the order of reference, it was held that  prima  facie
 it faced difficulty in accepting  the  proposition  laid  down  in  Raheja
 Development (supra), in particular, paragraph 20,  inasmuch  as  Larsen  &
 Toubro being a developer undertook the contract to develop the property of
 one Mr. Dinesh Ranka, owner of the land and subsequently, the  show  cause
 notice issued to the  said  assessee  proceeded  on  the  basis  that  the
 tripartite agreement was a ‘Works Contract’. Further, it noted that in the
 show cause notice there was no allegation  made  by  the  Department  that
 there was any monetary consideration involved in the first contract, which
 was the Development Agreement. The reference came before the  three  Judge
 Bench to which one of us was a party (Honble the Chief Justice  of  India,
 Mr. Justice R.M. Lodha).

. 97. Before referring to the various reasons in the said judgment, it  will
 be appropriate to note the basic  facts  which  were  noted  in  the  said
 judgment in paragraph 3, which reads as under:
        “3. Of the 26 appeals under consideration before us,  14  are  from
        Karnataka and 12 from Maharashtra.  Insofar  as  Karnataka  appeals
        are concerned, it is appropriate that we take the  facts  from  the
        leading case being Larsen and Toubro.  The ECC division  of  Larsen
        and Toubro (for short, “L&T”) is engaged  in  property  development
        along with the owners of vacant sites.  On 19.10.1995, L&T  entered
        into a development agreement with Dinesh Ranka, owner of  the  land
        bearing survey numbers 90/1, 91, 92 (Part), 94, 95 and 96/1  (Part)
        together measuring 34  acres  all  situated  at  Kothanur  Village,
        Bengur Hobli, Bangalore South Taluk, Bangalore, for construction of
        a multi-storeyed apartment complex.  The owner  was  to  contribute
        his land and L&T was to construct  the  apartment  complex.   After
        development, 25% of the total space was to belong to the owner  and
        75% to L&T.  A power of attorney  was executed by the owner of  the
        land in favour of L&T to enable it to  negotiate  and  book  orders
        from the prospective Purchasers for allotment  of  built  up  area.
        Accordingly, L&T entered into  agreements  of  sale  with  intended
        Purchasers.  The agreements provided  that  on  completion  of  the
        construction, the apartments would be handed over to the Purchasers
        who will get an undivided interest in the land also.   Sale  deeds,
        thus, were executed in favour of the intended Purchasers by L&T and
        the owner.”







. 98. In the said case on behalf of Larsen and Toubro, it  was  argued  that
 the Developer and the owner were on the one side, while the Purchaser  was
 on the other side, that there was no monetary consideration so far as  the
 contract between the Developer was concerned and the owner  and  that  the
 only transaction was by the Developer/Owner to the  prospective  Purchaser
 after the construction of the flat and, therefore, there was only  a  sale
 element of the Flat along with the undivided share of the land jointly  by
 the Developer/Owner in favour of the prospective Purchaser. Hence, it  was
 claimed that the agreement can only be  construed  as  ‘Sale’  and  not  a
 ‘Works Contract’. It was also contended on the above footing as under:

           “21. ….Conversely a suit by an owner/developer against  the  flat
           Purchaser would be for payment  of  consideration  of  the  flat/
           fractional interest in the land.  Such suit would  never  be  for
           payment of work done at the behest  of  the  flat  Purchaser  and
           payment of consideration therefor.  It is, thus,  submitted  that
           the judgment in Raheja Development does not lay down good law and
           deserves to be overruled.”







. 99. On the other  hand,  another  learned  counsel  submitted  that  in  a
 composite works contract transfer of immovable property will not denude it
 of its character of ‘Works Contract’ and that  Article  366(29A)(b)  takes
 care of such situations where the goods are transferred  in  the  form  of
 immovable property.


. 100.      While dealing with the reference, the various  contentions  were
 noted in the first instance and while examining the implication of Article
 366(29A)(b), it was observed in paragraph 60:

        “60.….in other words goods which have by incorporation become  part
        of immovable property or deemed as goods the definition of  Tax  on
        the sale and purchase of sale includes tax on the transfer  of  the
        property in the goods as goods or which have lost its form as goods
        and have acquired some other form  involved  in  the  execution  of
        works contract.”





.  101.        Thereafter, in  paragraph  61  it  was  further  observed  as
 under:

        “61. Viewed thus, a transfer of property in goods under clause  29-
        A(b) of Article 366 is deemed to be a sale of the goods involved in
        the execution of a works contract by the person making the transfer
        and the purchase of those goods by the person to whom such transfer
        is made.”






. 102.      In paragraph 63 while interpreting the  effect  of  Article  366
 (29A)(b), which was brought into the Constitution by the  46th  Amendment,
 the Bench held that tax on the sale or purchase of goods may include a tax
 on the transfer in goods as goods or in a form other than  goods  involved
 in the execution of the works contract.  It was also held that it would be
 open to the  States  to  divide  the  works  contract  into  two  separate
 contracts by legal fiction, namely:

      . (ii)     Contract for Sale of Goods involved in the works  contract
        and

      . (ii)     For supply of the labour and service.


. 103.      It was then observed that by implication of the 46th  Amendment,
 States have been empowered to bifurcate the contract and to levy sales tax
 on the value of the material in the execution of  the  works  contract  by
 holding it to be a deemed sale.

. 104.      As far as the implication of Article 366(29A)(b) after the  46th
 Amendment as held above is concerned, the same cannot be faulted. However,
 at this juncture, it will have to be kept in mind that in  that  decision,
 this Court was dealing with a contract relating to development of land  in
 which, the Developer and owner of the land and the  prospective  Purchaser
 after the development in the  form  of  constructed  building  units  were
 parties. By virtue of the nature of the contract and its terms,  immovable
 property in the form of a building  ultimately  emerged  in  the  land  in
 question where substantial use of materials  in  the  form  of  goods  was
 involved for which equal amount of labour was also  employed.  It  was  in
 that context the said judgment came to be rendered. In  fact,  this  court
 has noted that in the peculiar facts of  that  case,  the  goods  employed
 became part of the immovable property and in the ultimate process lost its
 form as goods.

. 105.      In the  above-stated  background  of  the  said  case,  what  is
 relevant to be examined is, in order to invoke Article  366  (29A)(b),  it
 will have to be found out whether a contract will  fall  within  the  four
 corners of the expression ‘Works Contract’. Therefore, the endeavour is to
 find out the principles that have been stated in  the  various  decisions,
 including in the decision of Larsen & Toubro Ltd. (supra),  so  that  such
 principles can be applied to the case on hand to ascertain the  nature  of
 the contract. Keeping the said perception in mind, a detailed  reading  of
 the decision in Larsen & Toubro Ltd. (supra) can be made.

. 106  In paragraph 65 of the said decision reference  was  made  to  Bharat
 Sanchar (supra), wherein sub-clause (d) of Clause 29A of Article 366  came
 to be considered.  It was laid down therein that all  the  sub-clauses  of
 Article 366(29A) serve to bring transactions where  essential  ingredients
 of a ‘Sale’ as defined in the Sale of Goods Act, 1930 are  absent,  within
 the ambit of sale or purchase for the purposes of levy sales tax. The said
 proposition stated in Bharat Sanchar (supra) would only go  to  show  that
 before invoking Article 366 (29A), the concerned transactions ought to  be
 examined  individually  with  particular  reference   to   the   essential
 ingredients contained therein to find out as to whether  such  ingredients
 would lead to a conclusion of a ‘Sale’ as defined in  the  Sale  of  Goods
 Act, 1930 are present or not.  In the event of such element of ‘Sale’  not
 being present, then alone Article 366(29A)(b) would get attracted for  the
 purpose of applying the principle of deemed sale. I find no  relevance  in
 paragraph 76 of the said decision where this Court laid down  as  to  what
 nature of contract can be called as a ‘Works Contract’ falling  under  the
 said definition vis-a-vis  Article 366 (29A)(b).  Paragraph  76  reads  as
 under:
           “76.  In our opinion,  the  term  ‘Works  Contract’  in  Article
           366(29A)(b) is amply wide and cannot be confined to a particular
           understanding of the term or to  a  particular  form.  The  term
           encompasses a wide range and many  varieties  of  contract.  The
           Parliament had such wide meaning of ‘Works Contract’ in its view
           at the time of Forty-sixth Amendment. The object of insertion of
           clause 29A in Article 366  was  to  enlarge  the  scope  of  the
           expression ‘tax of sale  or  purchase  of  goods’  and  overcome
           Gannon Dunkerley-13. Seen thus, even if in a  contract,  besides
           the obligations of supply of goods and materials and performance
           of labour and services, some additional obligations are imposed,
           such  contract  does  not  cease  to  be  works  contract.   The
           additional obligations in  the  contract  would  not  alter  the
           nature of contract so  long  as  the  contract  provides  for  a
           contract for works and  satisfies  the  primary  description  of
           works contract. Once the characteristics or  elements  of  works
           contract are  satisfied  in  a  contract  then  irrespective  of
           additional obligations, such contract would be  covered  by  the
           term ‘Works Contract’. Nothing in Article 366(29A)(b) limits the
           term ‘Works Contract’ to contract for labor  and  service  only.
           Learned Advocate  General  for  Maharashtra  was  right  in  his
           submission that the term ‘Works Contract’ cannot be confined  to
           a contract to provide labour and services but is a contract  for
           undertaking or bringing into existence some ‘works’. We are also
           in agreement with the submission of Mr. K.N. Bhat that the  term
           ‘Works Contract’ in Article 366(29A)(b) takes  within  its  fold
           all genre of works contract and is not restricted to one  specie
           of contract to  provide  for  labour  and  services  above.  The
           Parliament had all genre of works contract in view  when  clause
           29A was inserted in Article 366.” (Underlining is mine)





. 107.       While examining the above reasoning to ascertain a contract  as
 to whether it is ‘Works  Contract’  or  ‘Sale’,  it  is  stated  that  the
 characteristics of ‘Works Contract’  would  be  satisfied  in  a  contract
 irrespective of any additional obligations. In other words, while applying
 Article 366(29A)(b), it should not be limited to a contract for labour and
 service only. It was further held that it  could  not  be  confined  to  a
 contract to provide  labour  and  services,  but  if  a  contract  is  for
 undertaking and bringing into existence some element  of  ‘works’,  though
 the contract may  be  for  supply  of  goods,  it  will  become  a  ‘Works
 Contract’. With great respect, it  will  have  to  be  held  that  such  a
 sweeping interpretation  may  not  be  appropriate  for  invoking  Article
 366(29A)(b). I say so because if a contract can be  ascertained  based  on
 its definite terms and can be held to be a contract for supply  of  goods,
 then in the course of implementation of the said contract, namely,  supply
 of the goods certain services are to be rendered, it will have to be  held
 that insignificant services rendered alone, cannot be the  basis  to  hold
 the entire contract to be a ‘Works Contract’.

. 108.      In this context, it  will  be  relevant  to  note  that  in  the
 execution of the present contract, the property in  the  goods  would  not
 loose its form as ‘goods’ as compared to a contract for development  of  a
 land into flats. What would be available after the ultimate conclusion  or
 implementation of the contract would be an immovable property in the  form
 of a building and the goods employed in the course of  execution  of  such
 contract, might have lost its character as goods such as  bricks,  cement,
 sand, steel, fittings etc. Therefore, as a general proposition of law,  it
 will not be appropriate to hold that  wherever  an  element  of  works  is
 involved irrespective of its magnitude, all contracts should be held to be
 ‘Works Contract’. Since the argument  made  by  the  Advocate  General  of
 Maharashtra, which weighed with the learned Judges in  the  said  decision
 does not appear to be an appropriate reasoning, it will have  to  be  held
 that such a proposition laid in paragraph 76 to  hold  every  contract  as
 ‘Works Contract’ based on a minuscule element of ‘works’  involved  cannot
 be accepted.

. 109.      In paragraph  66  of  Larsen  &  Toubro  Ltd.  (supra),  it  was
 observed that in Bharat Sanchar (supra), this Court  reiterated  what  was
 stated earlier in Associated Cement Companies  Ltd.  vs.  Commissioner  of
 Customs (2001) 4 SCC 593 that ‘Dominant Nature Test’ has no application to
 a composite transaction  covered  by  the  Clauses  of  Article  366(29A).
 Therefore, it was concluded that there was no ambiguity  in  stating  that
 after the 46th Amendment the sale element of  those  contracts  which  are
 covered by six sub-clauses of Clause 29A of Article 366 are separable  and
 may be subjected to sales tax by the States under Entry 54 of List II  and
 there is no question of the ‘Dominant Nature  Test’  being  applied.  With
 great respect, it will have to be stated  that  what  was  omitted  to  be
 considered, was as to in the first instance, whether a contract would fall
 within the four corners of ‘Works Contract’ by  virtue  of  the  essential
 ingredients of that very contract. Even by  referring  to  Bharat  Sanchar
 (supra), before finding out the application of Article 366(29A),  it  will
 have to be seen whether  the  transaction  and  essential  ingredients  of
 ‘Sale’ as defined in the Sale of Goods Act are present or absent  for  the
 purpose of levy of sales tax. In other words, if the essential ingredients
 of ‘Sale’ as defined in the Sale of Goods Act are present, then  going  by
 the ratio laid down in Bharat Sanchar (supra), the application of  Article
 366(29A) will not be available. Therefore, in every contract what is to be
 seen in the first instance is the  relevant  terms  of  the  contract  and
 finding out as to whether the essential ingredients of those  terms  would
 lead the Court to hold whether the  element  of  ‘Sale’  that  would  fall
 within the definition of ‘Sale’ under the Sale of Goods Act is present. In
 this event, the question of construing  the  said  contract  as  a  ‘Works
 Contract’ covered by Article 366(29A) cannot be  made.  In  fact,  in  the
 earlier part of this judgment a detailed reference has been  made  to  the
 various terms of the contract to find out as to  whether  the  element  of
 sale was present or not.  It has been held that by virtue of the essential
 ingredients of the contract, what was agreed between the parties was  only
 sale of the LIFT and for that purpose the Petitioner also agreed to  carry
 out the installation exercise.

. 110.        In Larsen & Toubro Ltd. (supra), this Court rightly  noted  in
 paragraph 72 that to attract Article 366(29A)(b) there has to be a  ‘Works
 Contract’ and what is its meaning should also be found out. It was further
 held that the term ‘Works Contract’ needs to be  understood  in  a  manner
 that the Parliament had in its view at the time of  introducing  the  46th
 Amendment and which is more appropriate to Article 366(29A)(b).  Reference
 can be made to paragraph 76, which has been extracted in paragraph 102  of
 this judgment.

. 111.        In fact, I find that in the abovesaid paragraph  in  Larsen  &
 Toubro Ltd. (supra), it was ultimately held by accepting the  argument  of
 the learned Advocate General of Maharashtra that the term ‘Works Contract’
 cannot be confined to a contract to provide labour and services alone. The
 said conclusion having regard to the nature of contract  which  was  dealt
 with in the said judgment could not be in any way  contradicted  since  as
 noted earlier, in Larsen & Toubro Ltd. (supra)  the  contract  related  to
 development of a property which consisted of the developer, the owner  and
 the prospective Purchasers of the ultimate building units constructed.  In
 that context, whatever held in paragraph 76 to the effect that a  contract
 which was undertaken to bring into existence some element of works,  would
 be sufficient to hold the said as a ‘Works Contract’, would  be  perfectly
 in order. The question is as to  whether  such  a  ratio  can  be  applied
 universally to every other contract where some miniscule or  insignificant
 element of works is involved. In fact, in the case on hand when  the  very
 contract itself was for supply of LIFT to its  Purchaser,  simply  because
 there was some work element involved for the purpose  of  installation  of
 the LIFT, it cannot be held that the whole contract is a ‘Works  Contract’
 falling within the ambit of Article  366(29A).  Therefore,  the  principle
 stated in paragraph 76 of Larsen & Toubro Ltd. (supra) would apply in  the
 peculiar facts relating to that case where it related to construction of a
 building by virtue of the contract between the developer and owner on  the
 one side and the prospective Purchaser on the other side. It is  difficult
 to apply the said ratio rendered in the context of the  said  contract  as
 applicable universally in all sorts of contracts  where  some  element  of
 work is involved and state that such contract would also fall  within  the
 definition of ‘Works Contract’.

. 112.        The said conclusion is also fully supported by  the  reasoning
 in Larsen & Toubro Ltd. (supra), as held in paragraph 94, which is to  the
 following effect:
           “94.   For sustaining the levy of tax on the goods deemed to have
           been sold in execution of a works contract, in our opinion, three
           conditions must be fulfilled: (i) there must be a works contract,
           (ii) the goods should have been involved in the  execution  of  a
           works contract, and (iii) the property in  those  goods  must  be
           transferred to a third party either as goods  or  in  some  other
           form. In a building contract or any contract to do  construction,
           the above three things are fully met. In a contract  to  build  a
           flat there will necessarily be a sale  of  goods  element.  Works
           contracts also include building contracts and  therefore  without
           any  fear  of  contradiction  it  can  be  stated  that  building
           contracts are species of  the  works  contract.  (Underlining  is
           mine)





. 113.        A  reading  of  the  above  paragraph,  thus  discloses  three
 conditions and that at the foremost a contract must be a ‘Works  Contract’
 and in that contract in the course of its execution, goods must have  been
 applied and the property in those goods ultimately gets transferred either
 as goods or in some other form. If the said condition  is  not  fulfilled,
 the other two conditions will have no application.  Therefore,  the  above
 principles stated in paragraph 94 of Larsen  &  Toubro  Ltd.  (supra)  are
 applied to the contract-necessarily an exercise has to be carried  out  to
 find out whether the contract was a ‘Works Contract’ or not. Having regard
 to the essential ingredients of the contractual terms, it is difficult  to
 hold that the supply of LIFT by the Petitioner to  its  Purchaser  can  be
 called as  a  ‘Works  Contract’  and,  therefore,  since  the  very  first
 condition is not fulfilled, the other conditions are of no consequence  in
 order to invoke Article 366(29A)(b) to the case on hand.

. 114.       Even when the ultimate conclusion as noted in paragraph  101(x)
 is applied, the  supply  of  LIFT  by  the  Petitioner  to  its  Purchaser
 satisfies the definition of ‘Sale’ as defined under the Sale of Goods Act,
 and, therefore, the question of deemed sale does not arise.  Analyzing the
 decision from all frontiers it can be concluded that the ratio  laid  down
 in Larsen & Toubro Ltd. (supra) which related to a construction  contract,
 cannot be applied to the case on hand,  and  therefore,  would  not  be  a
 sufficient reasoning to hold the present contract as ‘Works Contract’.

. 115.        Once the application of Larsen & Toubro Ltd. (supra)  judgment
 to the facts of this case has been steered clear, next it is to  be  found
 out as to whether the other judgments relied upon by  the  learned  Senior
 Counsel for the Petitioner  support  his  submission,  claiming  that  the
 transaction, namely, manufacture, supply and installation  of  LIFT  is  a
 ‘Works Contract’ or not. Reliance was placed upon  the  decision  of  this
 Court in Richardson Cruddas Ltd. (supra). In order to note the distinction
 as to the nature of the contract in that case as compared to  the  present
 one, the relevant paragraph in page 249 can be  usefully  extracted  which
 reads as under:
         “249.There  is  no  formal  contract  in  the  present  case   for
         fabrication and erection of the steel structures required  by  the
         society.  The agreement between the parties has to be  ascertained
         from the correspondence between them.  The correspondence  may  be
         briefly referred  to.   By  letter  dated  December  4,  1956  the
         Corporative Society informed the Respondents that they had  placed
         an order for a sugar plant and machinery for manufacture of  sugar
         and they had to design the factory.” (Underlining is mine)







. 116.        Therefore, the above  passage  in  the  said  judgment  itself
 discloses that the contract itself had  to  be  understood  based  on  the
 correspondence as between the parties.  There was no  formal  contract  in
 any event. What was required to be fulfilled by the Respondent was setting
 up of a sugar plant and machinery for the manufacturing of sugar and  that
 too to be decided by the contractor.  It is difficult to understand as  to
 how the conclusion reached in the said case based on  the  above  contract
 could be applied to the case on hand.  In the present case,  the  contract
 was put into writing containing various clauses and conditions which  were
 elaborate  and  definite  to  the  effect  that  the   Petitioner   should
 manufacture, supply and then erect a product,  namely,  the  LIFT.   Apart
 from setting up of a  sugar  plant  in  Richardson  Cruddas  (supra),  the
 parties also agreed for supply of fabrication and installation  of  bottle
 cooling equipment at the premises of the customer.  While  describing  the
 said contract, it was held in page 251 that the contractor fabricated  the
 component parts according to the requirements  and  specification  of  the
 customer and installed the same on a suitable base and foundation  at  the
 premises of the customer.  It was held that the installation of the bottle
 cooling unit in the premises of the customer was not merely  ancillary  or
 incidental to the supply of the unit.  Here again it was  noted  that  for
 the installation of bottle cooling equipment also,  there  was  no  formal
 written contract and the terms of the contract had to be gathered from the
 correspondence.  Having regard to such a  nature  of  contract  which  was
 dealt with in that decision, it will have to be held that it will  not  be
 safe to apply the said ruling to the facts of this case where the contract
 is definite and the terms of the contract sufficiently demonstrate that it
 is one for supply of LIFT and not a contract for works.


. 117.        Mr. Dwivedi, learned Senior Counsel  appearing  for  State  of
 Orissa in support of his submission relied  upon  the  Constitution  Bench
 decision of this Court in M/s. Patnaik and Company (supra).  In  paragraph
 28 as a proposition of law, the Constitution Bench has held as under:
          “28. In Commissioner of Sales Tax, U.P. v. Haji Abdul Majid [1963]
          14 STC  435  (All),  the  Allahabad  High  Court  arrived  at  the
          conclusion that in the circumstances of the case  the  transaction
          was a contract for the sale of bus bodies and not a  contract  for
          work and labour. Desai, C.J., rightly pointed out at p.  443  that
          “since it makes no difference whether an article is a ready-  made
          article or is prepared according to the customer's  specification,
          it should also make no difference whether the assessee prepares it
          separately from the thing and then fixes it  on  it  or  does  the
          preparation and the fixation simultaneously in one operation.”




. 118   Thereafter, while repelling the contention made  on  behalf  of  the
 Appellant in that case, it was held as under:

         “31. To constitute a sale there must therefore be an agreement  and
         in performance of the agreement property  belonging  to  one  party
         must stand transferred to the other party for money  consideration.
         Mere transfer of property in goods used in  the  performance  of  a
         contract is, however, not sufficient: to constitute  a  sale  there
         must be an agreement — express or implied —  relating  to  sale  of
         goods and completion of the agreement by passing of  title  in  the
         very goods contracted to be sold. It  is  of  the  essence  of  the
         transaction that the agreement and sale should relate to  the  same
         subject-matter i.e. the goods agreed to be sold and  in  which  the
         property is transferred.” (Emphasis Added)


. 119.         Going by the above dictum of the Constitution Bench  of  this
 Court, the contract as a whole will have to be examined to see as to  what
 was the real intention of the parties.  In  my  opinion,  the  said  legal
 principle will continue to apply  even  after  the  46th  Amendment  while
 examining each case to find out as to whether the contractual terms  would
 persuade the Court to hold that the said contract as a  whole  would  fall
 within the definition of ‘Works Contract’.  This  Court  in  paragraph  31
 rejected the submission of the  counsel  for  the  Appellant  and  clearly
 pointed out the distinction as between a building contract and a  contract
 for supply of a chattel as a chattel. I am  in  full  agreement  with  the
 proposition of law laid down in the said decision, which fully supports my
 conclusion.


. 120.          The learned Senior Counsel also relied upon the decision  in
 M/s. T.V. Sundaram Iyengar (supra). Paragraph 7 is relevant for  the  case
 on hand where the principle has been laid down, which reads as under:



       “7. The question with which we are concerned, as  would  appear  from
       the resume of facts given above, is whether the construction  of  the
       bus bodies and the supply of the  same  by  the  assessees  to  their
       customers was in pursuance of a contract  of  sale  as  distinguished
       from a contract for work and labour. The distinction between the  two
       contracts is often a fine one. A contract of sale is a contract whose
       main object is the transfer of the property in, and the  delivery  of
       the possession of, a chattel as a chattel to  the  buyer.  Where  the
       main object of work undertaken by the payee of the price is  not  the
       transfer of a chattel qua chattel, the contract is one for  work  and
       labour. The test is whether or not the work and labour  bestowed  end
       in anything that can properly become the subject of sale; neither the
       ownership of the materials, nor the value of the skill and labour  as
       compared with the value of the  materials,  is  conclusive,  although
       such matters may be taken into consideration in  determining  in  the
       circumstances of a  particular  case,  whether  the  contract  is  in
       substance one for work and labour or one for the sale of a  chattel.”
       (Emphasis Added)



. 121.       When the above principles are applied  to  the  facts  of  this
 case, it can be aptly held that the present  contract  is  nothing  but  a
 contract for ‘Sale’ and not a ‘Works Contract’.


. 122.  A profitable reference can also  be  made  to  another  Constitution
 Bench decision of this Court in Commissioner of Commercial  Taxes  Mysore,
 Bangalore (supra). The question that arose for  consideration  was  as  to
 whether construction of railway coaches from the  materials  belonging  to
 railways under a contract is a sale or works contract.  Dealing  with  the
 said question, this Court held as under in paragraphs 12 and 13:
         “12. On these facts we have to decide whether there  has  been  any
         sale of the coaches within the meaning of  the  Central  Sales  Tax
         Act. We were referred to a number of cases of this  Court  and  the
         High Courts, but it seems to us that the answer  must  depend  upon
         the terms of the contract. The answer to the question whether it is
         a works contract or it is a  contract  of  sale  depends  upon  the
         construction of the terms of the  contract  in  the  light  of  the
         surrounding circumstances. In this case the salient features of the
         contract are as follows:
         ‘(1) ……..
         (2) ………
         (3) ………
         (4) ………
         (5) ………
         (6) ………
         (7)     …….’
         13. On these facts it seems to us that it is a pure works contract.
         We are unable to agree that when  all  the  material  used  in  the
         construction of a coach belongs to the Railways there  can  be  any
         sale of the coach itself. The difference between  the  price  of  a
         coach and the cost of material can only be  the  cost  of  services
         rendered by the assessee. If it is necessary to  refer  to  a  case
         which is close to the facts of this case, then this case is more in
         line with the decision of this Court in State of Gujarat v. Kailash
         Engineering Co. than any other case.” (Emphasis Added)



. 123.  It can be discerned from the abovementioned case that having  regard
 to the specific terms of the contract, which inter alia  states  that  the
 material used for construction of coaches before its use was the  property
 of the railways and the contract substantially related to the  service  or
 works to be rendered  by  the  contractor  for  the  construction  of  the
 coaches, it was, therefore, held that it was a ‘Works Contract’ and not  a
 ‘Sale’. However, it was categorically held that  the  question  whether  a
 contract is a ‘Works Contract’ or a contract of ‘Sale’  depends  upon  the
 conception of the terms of the contract in the light  of  the  surrounding
 circumstances. Therefore, applying the above  principle  to  the  case  on
 hand, I am convinced that by virtue of the terms as has been noted in  the
 earlier part of this judgment, the manufacture, supply and installation of
 a LIFT is a contract for ‘Sale’ and not a ‘Works Contract’.

. 124.       Mr. Dwivedi, learned Senior Counsel also placed  reliance  upon
 the three Judge  Bench  decision  of  this  Court  in  The  Central  India
 Machinery Manufacturing Company Limited (supra). An identical question has
 arisen for our consideration, namely, whether manufacture  and  supply  of
 wagons by way of a contract between  Union  of  India  and  Central  India
 Machinery Manufacturing Company Limited was a contract of ‘Sale’ or ‘Works
 Contract’. Dealing with the said  question,  this  Court  after  making  a
 detailed reference to the various terms of the  contract  as  between  the
 Appellant and Respondent therein, held as under in paragraphs 31 and 32:
         “31. The upshot of the above discussion is that with the  exception
         of wheelsets (with axle boxes and couples), substantially  all  the
         raw materials required for the construction of  the  wagons  before
         their use belong to the Company and not  to  the  President/Railway
         Board. In other words with the  exception  of  a  relatively  small
         proportion of the components supplied under  Special  Condition  6,
         the entire wagons  including  the  material  at  the  time  of  its
         completion for delivery is the property of the Company. This  means
         that the general test suggested by Pollock and  Chalmers  has  been
         substantially albeit not absolutely satisfied  so  as  to  indicate
         that the contract in question was one for the sale of wagons for  a
         price, the Company being the seller and the President/Railway Board
         being the buyer. It is  true  that  technically  the  entire  wagon
         including all the material and components used in its  construction
         cannot be said to be the sole property of the  Company  before  its
         delivery to the Purchaser. But as pointed out by Lord  Halsbury  in
         the above  quoted  passage  from  his  renowned  work  neither  the
         ownership of the materials nor the value of the skill and labour as
         compared with the value of the materials used in the manufacture is
         conclusive. Nevertheless, if the bulk of the material used  in  the
         construction belongs to the manufacturer who sells the end  product
         for a price that will be a strong pointer to  the  conclusion  that
         the contract is in substance one for the sale of goods and not  one
         for work and labour.


         32. Be that as it may clause (1) of Standard Condition  15  dispels
         all doubt with regard to the nature of the  contract.  This  clause
         stipulates in unmistakable terms that as soon as a vehicle has been
         completed, the Company will  get  it  examined  by  the  Inspecting
         Officer and submit to the Purchaser an “On Account” Bill for 90% of
         the value of the vehicle and within 14 days of the receipt of  such
         bill together with a certificate of  the  Inspecting  Officer,  the
         Purchaser will pay 90% bill and on such  payment,  the  vehicle  in
         question will become the property of the Purchaser. There could  be
         no clearer expression of the intention of the  contracting  parties
         than this clause that the contract was, in substance, one  for  the
         sale of manufactured wagons by the Company for a stipulated price.”
         (Emphasis Added)



. 125.        I find that the ratio laid therein mutatis mutandis  apply  to
 the facts of this case. In fact, in the  said  decision  the  Constitution
 Bench decision of this Court in  M/s.  Patnaik  and  Company  (supra)  was
 followed. Therefore, it has now become  clear  to  the  effect  that  such
 contract for manufacture, supply and installation of LIFT is nothing but a
 ‘Sale’ and not a ‘Works Contract’.


. 126.         Mr. Salve, learned Senior Counsel in his  submissions  placed
 reliance upon a Division Bench judgment of  this  Court  in  M/s  Vanguard
 Rolling Shutters and Steel Works  (supra).  That  was  a  case  where  the
 question of law was as to ‘whether under the circumstances of the case and
 under the terms of the contract the supply of shutters  related  and  iron
 gats worth Rs.1,08,633.08/- was sale or amounted to ‘Works Contract’.  The
 Appellant therein was a  contractor  dealing  in  fabrication  of  rolling
 shutters and steel works who used to manufacture iron  shutters  according
 to specifications given by the parties and fix the same at the premises of
 the customers. This Court after considering the terms of the contract took
 the view that the same would amount to a ‘Works Contract’ and not  ‘Sale’.
 However, in paragraph 2, the principle to be applied to find an answer  to
 such a question has been set out as under:
         “2…….The question as to under what circumstances a contract can be
         said to be a work contract is not free from difficulty and has  to
         depend on the facts of each case. It is difficult to lay down  any
         rule of universal application, but there are some well  recognised
         tests which are laid down by decided cases  of  this  Court  which
         afford guidelines for determining as  to  whether  a  contract  in
         question is a work contract or a contract for supply of goods. One
         of the important tests is to find  out  whether  the  contract  is
         primarily a contract for supply of materials at a price agreed  to
         between the parties for the materials so supplied and the work  or
         service rendered is incidental to the execution of  the  contract.
         If so, the contract is one for sale  of  materials  and  the  sale
         proceeds would be eligible to sales tax. On the other  hand  where
         the contract is primarily a  contract  for  work  and  labour  and
         materials are supplied in execution of such contract, there is  no
         contract for sale of  material  but  it  is  a  work  contract…….”
         (Emphasis Added)







. 127.         Therefore, even as per the  above  principle  stated  in  the
 said decision and applying the same to the  facts  of  this  case,  it  is
 found, based on the contractual terms as between the  Petitioner  and  its
 Purchaser that the value of the LIFT upto the extent of  90%  is  payable,
 under certain contingencies, even when such materials are made  ready  and
 available for dispatch at the premises of the Petitioner. It has also been
 found based on the terms of the contract that  the  value  of  the  labour
 content  referable  to  the  remaining  10%,  becomes  payable  after  the
 installation of the LIFT. That apart in the said decision the Constitution
 Bench decision of this Court in  M/s.  Patnaik  and  Company  (supra)  and
 Commissioner of  Commercial  Taxes  Mysore,  Bangalore  (supra)  were  not
 brought to the notice of  the  learned  Judges.  Therefore,  the  reliance
 placed upon the said decision is of no assistance to the Petitioner except
 to the general proposition of law propounded in paragraph  2  referred  to
 above.


. 128.         The learned Senior Counsel also relied  upon  a  three  Judge
 Bench decision of this Court in Purshottam Premji (supra). That was also a
 case where the assessee was to quarry stones from the  quarries  belonging
 to the South-Eastern Railways  and  thereafter  break  those  stones  into
 pieces and convert them into ballast of a specified size  and  thereafter,
 supply them to the South-Eastern Railway. Dealing with the said  contract,
 it was held that it was a ‘Works Contract’ and not a ‘Sale’. In  paragraph
 7, the principle was stated as under:
          “7. The primary difference between a contract for work or  service
          and a contract for sale of goods is that in the former there is in
          the person performing work or rendering service no property in the
          thing produced as a whole notwithstanding that a part or even  the
          whole of the materials used by him may have been his property.  In
          the case of a contract for sale, the thing produced as a whole has
          individual existence  as  the  sole  property  of  the  party  who
          produced it, at  some  time  before  delivery,  and  the  property
          therein passes only under the contract relating thereto  in  goods
          used in the performance of the  contract  is  not  sufficient;  to
          constitute a sale there must be an agreement  express  or  implied
          relating to the sale of goods and completion of the  agreement  by
          passing of title in the very  goods  contracted  to  be  sold…...”
          (Emphasis Added)


. 129.        Even applying the above principle to the case on hand, I  find
 that the whole of the materials manufactured for the installation  of  the
 LIFT belong to the Petitioner and after the installation of the  LIFT  and
 after receipt of the full payment, the title to the LIFT passes on to  the
 Purchaser. Hence, it will have to be held that the contract as between the
 Petitioner and the Purchaser was nothing but a ‘Sale’  and  not  a  ‘Works
 Contract’.


. 130.       Dr. Singhvi, learned Additional Advocate General for  Rajasthan
 in his submissions contended that to find out an answer  to  the  question
 whether the present contract for supply of LIFT and its installation is  a
 sale or works contract, the test which were  invoked  prior  to  the  46th
 Amendment continue to remain.  In  support  of  the  said  submission  the
 learned Additional Advocate  General  relied  upon  a  three  Judge  Bench
 decision of this Court in Bharat Sanchar (supra). Paragraph 43 of the said
 judgment is relevant for the case on hand, which reads as under:



         “43. Gannon  Dunkerley  survived  the  Forty-sixth  Constitutional
         Amendment in two respects. First with regard to the definition  of
         “sale” for the purposes of the Constitution in general and for the
         purposes of Entry 54 of List II in particular except to the extent
         that the clauses in  Article  366(29-A)  operate.  By  introducing
         separate categories of “deemed sales”, the  meaning  of  the  word
         “goods” was not altered. Thus the  definitions  of  the  composite
         elements of a sale  such  as  intention  of  the  parties,  goods,
         delivery, etc. would continue to be  defined  according  to  known
         legal connotations. This does not mean that  the  content  of  the
         concepts remain static. The courts must move with the  times.  But
         the Forty-sixth Amendment does not give a licence, for example, to
         assume that a transaction is a sale and then to  look  around  for
         what could be the goods. The word “goods” has not been altered  by
         the Forty-sixth Amendment. That ingredient of a sale continues  to
         have the same definition.  The  second  respect  in  which  Gannon
         Dunkerley has survived is with reference to  the  dominant  nature
         test to be applied to  a  composite  transaction  not  covered  by
         Article 366(29-A). Transactions which are mutant sales are limited
         to the clauses of Article 366(29-A). All other transactions  would
         have to qualify as sales within the meaning of the Sales of  Goods
         Act, 1930 for the purpose of levy of sales tax.” (Emphasis Added)



. 131.        I am in full agreement with the proposition of law  stated  in
 the said paragraph as regards the tests  to  be  applied  even  after  the
 introduction of Article 366(29A) into the Constitution.  Therefore,  I  am
 convinced that the various tests laid down  in  the  earlier  Constitution
 Bench decisions, in particular, the ones  which  have  been  relied  upon,
 namely, M/s. Patnaik  and  Company  (supra),  Hindustan  Aeronautics  Ltd.
 (supra), The Central India Machinery Manufacturing Company Limited (supra)
 still hold good. Consequently the ultimate conclusion is that the  present
 contract between the Petitioner and its Purchaser is one  for  ‘Sale’  and
 not ‘Works Contract’, is justified.

. 132.        Dr. Singhvi, learned Additional Advocate General  also  relied
 upon the decision of this Court in Hindustan Shipyard Ltd. (supra) wherein
 reference to Halsbury’s Laws of England (4th Edn. Vol.41,  para  603)  has
 been noted to understand the distinction  between  contract  of  sale  and
 contract for work and labour. The said paragraph as extracted in paragraph
 8 of the said judgment can be usefully referred to, which reads under:



          “8. We will shortly revert back to analysing the  abovesaid  terms
          and conditions of the contract and in between try to find out  the
          tests which would  enable  determination  of  the  nature  of  the
          transactions covered by such contracts.  The  distinction  between
          contract of sale and contract for work  and  labour  has  been  so
          stated in Halsbury’s Laws of England  (4th  Edn.,  Vol.  41,  para
          603):
            “603. Contract of sale distinguished from contract for work  and
            labour.—A contract of sale of goods must be distinguished from a
            contract for work and labour. The distinction is  often  a  fine
            one. A contract of sale is a contract the main object  of  which
            is the transfer of the property in,  and  the  delivery  of  the
            possession of, a chattel as such to the buyer.  Where  the  main
            object of work undertaken by the payee of the price is  not  the
            transfer of a chattel as such, the contract is one for work  and
            labour. The test is whether or not the work and labour  bestowed
            end in anything that can properly become the  subject  of  sale.
            Neither the ownership of the materials, nor  the  value  of  the
            skill and labour as compared with the value of the materials, is
            conclusive,  although   such   matters   may   be   taken   into
            consideration  in  determining  in  the   circumstances   of   a
            particular case whether the contract is  in  substance  one  for
            work and labour or one for the sale of a chattel.”

. 133.        It must be stated that when the said principle to ascertain  a
 contract of ‘Sale’ and ‘Works Contract’ is applied to the case on hand, it
 can be held that under the contract of the Petitioner with its  Purchaser,
 what was agreed was to ultimately supply its product of LIFT/ESCALATOR  to
 its customers.  Therefore, after execution of the installation part of it,
 what is transferred by the Petitioner to its Purchaser is the  LIFT  as  a
 chattel and this contract is nothing but a contract of ‘Sale’.

. 134.        Mr. K.N. Bhatt,  learned  Senior  Counsel  appearing  for  the
 State of Karnataka submitted that the  question  posed  for  consideration
 before this Bench no longer survives in the light of the  46th  Amendment,
 as well as, the judgment of this Court in Larsen &  Toubro  Ltd.  (supra).
 The learned Senior Counsel relied upon Builders’ Association of India  and
 others v. Union of India and others, (1989) 2 SCC 645,  which  is  also  a
 Constitution Bench judgment, wherein in paragraph 41 it was held as under:
           “41.  ……..The case-book is full  of  the  illustrations  of  the
           infinite variety of  the  manifestation  of  ‘works  contracts’.
           Whatever might be  the  situational  differences  of  individual
           cases, the constitutional limitations on the taxing power of the
           State as are applicable  to  ‘works  contracts’  represented  by
           ‘building contracts’ in the context of the expanded  concept  of
           ‘tax on the sale  or  purchase  of  goods’  as  constitutionally
           defined under Article 366(29-A), would equally  apply  to  other
           species of ‘works  contracts’  with  the  requisite  situational
           modifications.” (Underlining is mine)




. 135.         The learned Senior counsel,  fairly  brought  to  our  notice
 paragraph 94 of the judgment in Larsen & Toubro Ltd.  (supra),  which  has
 been dealt with in paragraph 112 of this judgment,  wherein  it  has  been
 concluded  as  a  case  dealing  with  building  contracts  and  hence  is
 inapplicable to the case on hand.


. 136.   While considering this submission  of  Mr.  Bhatt,  learned  Senior
 Counsel for Karnataka, it can be found in paragraph 94 of Larsen &  Toubro
 Ltd. (supra), that the first condition stated therein is that it must be a
 ‘Works Contract’. Therefore, while all building contracts have  been  held
 to be ‘Works Contract’ by virtue of the  Constitution  Bench  decision  in
 Builders’ Association of India (supra), when it comes to the  question  of
 other contracts, if the ingredients of Article 366(29A) are to be applied,
 the first exercise to be carried out is to find out  as  to  whether  such
 contract would fall within the definition of ‘Works Contract’. It must  be
 stated at the risk of repetition that simply because some element of  work
 is involved in a contract, it cannot be straight away concluded that  such
 contract would become a works contract,  irrespective  of  the  nature  of
 contract, which if probed into would show that it is a contract for  sale.
 Therefore, even going by the decision reported in Builders Association  of
 India (supra), as well as, the conditions set out in paragraph 94  of  the
 Larsen & Toubro Ltd. (supra), it shall be ascertained whether the contract
 of the Petitioner with its Purchaser falls within the definition of ‘Works
 Contract’, in order to apply the implication of Article  366(29A).  Hence,
 the said submission of the learned  Senior  Counsel  therefore,  does  not
 appeal to us.

. 137.        A useful reference can also be made to one other  decision  of
 this Court in Commissioner of Sales Tax, Gujarat vs. M/s.  Sabarmati  Reti
 Udyog Sahakari Mandali Ltd. reported in (1976) 3 SCC 592. In paragraph  6,
 this Court has laid down as to how to find an answer to a question whether
 a particular transaction is a contract of sale or a  works  contract.  The
 said paragraph is as under:



          “6. It is well-settled that whether a particular transaction is a
          contract of sale or  a  works  contract  depends  upon  the  true
          construction of all the terms and  conditions  of  the  document,
          when there is one. The question will depend upon the intention of
          the parties executing the contract. As we have  observed  in  our
          judgment in Civil Appeal Nos. 1492 and 1493 of 1971 which we have
          just delivered there is no standard  formula  by  which  one  can
          distinguish a contract of sale  from  a  contract  for  work  and
          labour. The question is not always easy  and  has  for  all  time
          vexed jurists all over. The distinction  between  a  contract  of
          sale of goods and a contract for work and labour is often a  fine
          one. A contract of sale is a contract whose main  object  is  the
          transfer of the property in, and the delivery of  the  possession
          of, a chattel as a chattel to  the  buyer.  (Halsbury’s  Laws  of
          England, 3rd edn., Vol. 34, p. 6) (Emphasis Added)



.  138.         The  above  paragraph  sufficiently  demonstrates  that  the
 question will depend upon the  intention  of  the  parties  executing  the
 contract and that there can be  no  standard  formula  by  which  one  can
 distinguish a contract of sale from a contract of  work  and  labour.  The
 said principle stated in the above said paragraph can be applied under all
 situations and since after the 46th Amendment as held in Larsen  &  Toubro
 Ltd. (supra), the first condition to be found  out  is  as  to  whether  a
 contract is a ‘Works Contract’.  It has to be necessarily  examined  based
 on the terms agreed between the parties as to what is the intention of the
 parties. Therefore, applying the above tests, since it is found  that  the
 present contract is a contract for sale, it cannot be held to be a  ‘Works
 Contract’.

. 139.           In support of my conclusion, reliance can  also  be  placed
 upon the majority view of the judgment of this Court in  Govt.  of  Andhra
 Pradesh vs. Guntur Tobaccos Ltd. reported in AIR 1965 SC  1396.  Paragraph
 18 is relevant for the case on hand, which reads as under:
          “18.   The fact that in the execution of a contract for work some
          materials are used and property in the goods so  used  passes  to
          the other party, the contractor undertaking to do the  work  will
          not necessarily be deemed on that account to sell the  materials.
          A contract for work in the execution of which goods are used  may
          take one of three forms. The contract may be for work to be  done
          for  remuneration  and  for  supply  of  materials  used  in  the
          execution of the works for a price: it may be a contract for work
          in which the use of materials is accessory or incidental  to  the
          execution of the work: or it may be a contract for work  and  use
          or supply of materials though not accessory to the  execution  of
          the contract is voluntary or gratuitous. In the last class  there
          is no sale because though property passes it does not pass for  a
          price. Whether a contract is of the first  or  the  second  class
          must depend upon the circumstances: if it is of the first; it  is
          a composite contract for work and sale of goods: where it  is  of
          the second category, it is a contract for execution of  work  not
          involving sale of goods.”




 The above ratio also demonstrates as to how to find out whether a contract
 is a ‘Works Contract’ or one for ‘Sale’.


 140.  In light of the above discussions, it will have to be held that even
 after the 46th Amendment, if Article 366 (29A)(b) is to be invoked,  as  a
 necessary concomitant, it must be shown that the  terms  of  the  contract
 would lead to a conclusion that it is a ‘Works Contract’. In other  words,
 unless a contract is proved to be a ‘Works  Contract’  by  virtue  of  the
 terms agreed as between the parties, invocation of Article 366 (29A)(b) of
 the Constitution, cannot be made.  Alternatively,  if  the  terms  of  the
 contract disclose or lead to a definite conclusion that it is not a ‘Works
 Contract’, but one of outright sale, the same will have to be declared  as
 a ‘Sale’ attracting the provisions of the relevant sales  tax  enactments.
 Therefore, based on the conclusions arrived  at  and  having  applied  the
 above principles to the case on hand, and having regard to the  nature  of
 the terms of the contract displayed, it will have  to  be  held  that  the
 manufacture, supply and installation of LIFTS/ELEVATORS  comes  under  the
 definition of ‘Sale’ and not ‘Works Contract’ and  the  decision  in  Kone
 Elevators (India) Pvt.  Ltd.  (supra)  has  been  correctly  decided.  The
 Reference is, therefore, answered on the above terms.






                                                      ………..…………………………………..J.

                                          [Fakkir Mohamed Ibrahim Kalifulla]




 New Delhi

 May 06, 2014














                    IN THE SUPREME COURT OF INDIA


                    CIVIL ORIGINAL/APPELLATE JURISDICTION


                      WRIT PETITION (C) NO. 232 OF 2005




      M/S. Kone Elevator India Pvt. Ltd.                … Petitioner


                                   Versus


      State of Tamil Nadu and Ors.                … Respondents


                                   WITH


      Writ Petition (Civil) Nos. 298/2005,     487/2005,
      528/2005,   67/2006,   511/2006,        75/2007,
      519/2008,   531/2008,  548/2008,      569/2008,
      186/2009,   23/2010,   62/2010,       232/2010,
      279/2010,   377/2010,  112/2011,      137/2011,
      181/2011,   207/2011,  278/2011,       243/2011,
      372/2011,   398/2011,  381/2011,      468/2011,
      547/2011,   107/2012,  125/2012,      196/2012,
      263/2012,   404/2012,  567/2012,      145/2013,
      241/2013,   454/2013,  404/2013,      723/2013,
      440/2012,   441/2012,  156/2013,      533/2013,
      403/2012,   824/2013,  428/2009,    1046/2013,
      1047/2013,  1048/2013, 1049/2013,  1050/2013,
      1051/2013   1052/2013, 1098/2013,
                                   WITH
                              Civil Appeal Nos.  5116-5121   of 2014
              (Arising out of SLP (C) Nos. 14148-14153/2005)
                                    WITH
                           Civil Appeal Nos. 5135-5141    of 2014
              (Arising out of SLP (C) Nos. 14961-14967/2005)
                                    WITH
                     Civil Appeal Nos. 5142-5147 of 2014
                [Arising out of SLP (C) Nos. 17842-17847/2005
                                    WITH
                       Civil Appeal No. 5152   of 2014
                    [Arising out of SLP (C) No. 5377/2006
                                    WITH
                     Civil Appeal No.       5153 of 2014
                    [Arising out of SLP (C) No. 7037/2006
                                    WITH
                     Civil Appeal No.       5154 of 2014
                   [Arising out of SLP (C) No. 30272/2008
                                    WITH
                       Civil Appeal No. 5156   of 2014
                   [Arising out of SLP (C) No. 30279/2008
                                    WITH
                       Civil Appeal No. 5157   of 2014
                    [Arising out of SLP (C) No. 5289/2009
                                    WITH
                    Civil Appeal Nos. 5159-5160   of 2014
                 [Arising out of SLP (C) Nos. 6520-6521/2009
                                    WITH
                    Civil Appeal Nos. 5162-5164   of 2014
                 [Arising out of SLP (C) Nos. 4469-4471/2010
                                    WITH
                       Civil Appeal No. 5165   of 2014
                   [Arising out of SLP (C) No. 11258/2010
                                    WITH
                       Civil Appeal No. 5166   of 2014
                   [Arising out of SLP (C) No. 17228/2010
                                    WITH
                    Civil Appeal Nos. 5167-5168   of 2014
                [Arising out of SLP (C) Nos. 17236-17237/2010


                                    WITH
                    Civil Appeal Nos. 5170-5172  of 2014
                [Arising out of SLP (C) Nos. 23259-23261/2010
                                    WITH
                       Civil Appeal No. 5174   of 2014
                   [Arising out of SLP (C) No. 15732/2011
                                    WITH
                     Civil Appeal No.       5175 of 2014
                   [Arising out of SLP (C) No. 16466/2011
                                    WITH
                       Civil Appeal No. 5178   of 2014
                   [Arising out of SLP (C) No. 16137/2011
                                    WITH
                       Civil Appeal No. 5179   of 2014
                    [Arising out of SLP (C) No. 5503/2011
                                    WITH
                       Civil Appeal No. 5180   of 2014
                   [Arising out of SLP (C) No. 11147/2011
                                    WITH
                    Civil Appeal Nos. 5181-5192   of 2014
                [Arising out of SLP (C) Nos. 11227-11238/2012
                                    WITH
                       Civil Appeal No. 5193   of 2014
                   [Arising out of SLP (C) No. 19901/2013
                                    WITH
                     Civil Appeal Nos. 5195-5206 of 2014
              [Arising out of SLP (C) Nos. 36001-36012/2013 and
                                    WITH
                                    Civil Appeal No. 6285/2010


                                  O R D E R



            Keeping in view the conclusions of the  majority,  expressed  in
      the judgment of Dipak Misra, J., it is held that the decision rendered
      in State of A.P. v. Kone Elevators[46] does not correctly lay down the
      law and it is accordingly overruled.

      2.    It is directed that the  show-cause  notices,  which  have  been
      issued by taking recourse to  reopening  of  assessment,  shall  stand
      quashed.  The assessment orders which have been framed and  are  under
      assail before this Court are set aside.  It is necessary to state here
      that where the assessments have been framed and have attained finality
      and are not pending in appeal, they shall  be  treated  to  have  been
      closed,  and  where  the  assessments  are  challenged  in  appeal  or
      revision, the same shall be decided in accordance  with  the  decision
      rendered by us.

      3.    The writ petitions and the civil appeals are disposed of with no
      order                  as                  to                   costs.
                             ………………………………….....…CJI.
                                                                [R.M. Lodha]


                                                        …………………………………….………J.
                                                              [A.K. Patnaik]


                                                        ……………………………………….……J.
                                          [Sudhansu Jyoti Mukhopadhaya]


                                                        ……………………………………….……J.
                                                               [Dipak Misra]


                                                        ……………………………………….……J.
                                             [F.M. Ibrahim Kalifulla]




      New Delhi;
      May 06, 2014.


-----------------------
[1]    (2010) 14 SCC 788

[2]    (2005) 3 SCC 389
[3]    (1969) 1 SCC 567
[4]    (1970) 26 STC 268 (SC)
[5]    (1977) 2 SCC 250

[6]    (2006) 3 SCC 1
[7]    (2014) 1 SCC 708

[8]    (1969) 24 STC 525 (Bom)

[9]    (1989) 2 SCC 645

[10]   (1965) 2 SCR 782
[11]   (1975) 3 SCC 424
[12]   (1977) 2 SCC 847
[13]   (1953) 1 All ER 15
[14]   (1944) 1 All ER 618
[15]   (2007) 3 SCC 533
[16]   (1989) 1 SCC 172
[17]   (2003) 9 SCC 133
[18]   (1989) 4 SCC 244
[19]   (2001) 7 SCC 525
[20]   (1922) 1 KB 343
[21]   (1978) 4 SCC 260
[22]   (1979) 1 SCC 487
[23]   (1998) 1 SCC 400
[24]   (2010) 5 SCC 122
[25]   58 L.Ed. 1166

[26]   (1989) 3 SCC 634

[27]   (2000) 6 SCC 579

[28]   AIR 1958 SC 560

[29]   AIR 1961 SC 1615
[30]   AIR 1967 SC 547

[31]  (1968) 21 STC 245 (SC)
[32]   (1843) 11 M & W. 243
[33]   (1972) 1 SCC 472

[34]   Halsbury’s Laws of England 3rd Ed., Vol. 34, 6-7.
[35]   (1976) 3 SCC 500
[36]   (1970) 2 SCC 287
[37]   (1984) 2 SCC 16
[38]   (1993) 1 SCC 364

[39]   (2001) 4 SCC 593
[40]   (2005) 13 SCC 37
[41]   (2000) 2 SCC 385
[42]   (2005) 5 SCC 162
[43]   (2007) 7 SCC 320

[44]   (1875) LR 10 CP 271

[45]   (1989) 1 SCC 172

[46]   (2005) 3 SCC 389



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