Incidence of Central Sales Tax occurs where the goods are appropriated to the contract – SC

Incidence of Central Sales Tax occurs where the goods are appropriated to the contract. Supreme Court dismissed SLP of VAT Department

ABCAUS Case Law Citation:
ABCAUS 3221 (2020) (01) SC

Important case law relied upon by the parties:
Larsen and Tourbo Limited Vs. State of Karnatka (2014) 1 SCC 708.
Thyseenkrupp Elevator (India) Private ltd. Vs. Assistant Commissioner of Commercial Taxes & Anr
Kone Elevators India Pvt. Ltd. vs. State of Tamil Nadu and Ors. (2014) 7 SCC 1

The question of law involved in this case was as to whether the supply of the goods from Mumbai to Delhi to execute the works contract constitute inter-state sales within the meaning of the expression under the Central Sales Tax Act, 1956.

The Assessee was is engaged in the business of supply, erection, commissioning and installation of lifts/elevators in various classes of places including residential buildings, government offices and hospitals. It was also a registered dealer under the provisions of Delhi Sales Tax Act, 1975. However, it had its manufacturing facilities at Mumbai, where its components were produced.

The Mumbai unit also stored the products so manufactured. The Delhi Sales Tax Authorities sought to assess transactions for three distinct periods covering three Assessments Years. The Assessing Authority sought to hold that the burden of the local sales tax levy was laid upon the dealer, upon an analysis of the contracts entered into. What prevailed with the adjudicating authority was that the contracts were indivisible work contracts, title of each of the elevators passed onto the customer upon payment, and that for the purposes of dispute resolution, the Courts of Delhi had exclusive jurisdiction.

The assessments were subjected to appeal; the Appellate Authority dismissed the asseessee’s contentions. Aggrieved, the assessee approached the VAT Tribunal, which by its common order set aside the orders of the First Appellate Authority. In so holding the Tribunal found that the goods were appropriated to the contract, which was concluded in Mumbai, upon acceptance of the offer/placing orders.

The Delhi High Court upheld the order of the Tribunal. The Hon’ble High Court opined that the placement of an order by the agent for procurement of the lifts in this case was merely an offer. It was only upon its acceptance and further steps taken by the supplier that an offer crystallized into a binding promise or contract which in this case took place at Mumbai.

The Hon’ble High Court stated that It is too far well settled that the incidence of Central Sales Tax or even sale of goods, occurs where the goods are appropriated to the contract. In this case, the place where the appropriation took place.

Aggrieved the VAT Department filed a Special Leave Petition before the Hon’ble Supreme Court, which their Lordships decline to interfere and accordingly dismissed it.

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