Kerala High Court
M/S. Siemens Limited vs The State Of Kerala on 23 February, 2024
Bench: A.K.Jayasankaran Nambiar, Kauser Edappagath
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH
FRIDAY, THE 23RD DAY OF FEBRUARY 2024/4TH PHALGUNA, 1945
S.T.REV.NO.1 OF 2019
AGAINST THE ORDER DATED 30.6.2018 IN T.A.NO.18/2015 OF KERALA
AGRL.INCOME TAX & SALES APPELLATE TRIBUNAL, ADDITIONAL
BENCH,ERNAKULAM
PETITIONER/APPELLANT:
M/S. SIEMENS LIMITED,
SREEKANDATH ROAD, RAVIPURAM, ERNAKULAM,
NOW AT 'JOMER SYMPHONY', CHALIKKAVATTOM,
PONNURUNNY NORTH, VYTTILA, ERNAKULAM - 682 019,
REPRESENTED BY G.VASANTHI, MANAGER-INDIRECT TAXATION.
BY ADV.SRI.JOSE JOSEPH
RESPONDENT/RESPONDENT:
THE STATE OF KERALA,
REPRESENTED BY THE DEPUTY COMMISSIONER (LAW),
COMMERCIAL TAXES, REVENUE TOWER, ERNAKULAM.
BY SRI.V.K.SHAMSUDHEEN, SR.GOVERNMENT PLEADER
THIS SALES TAX REVISION HAVING COME UP FOR HEARING ON
23.02.2024 ALONG WITH ST.REV.NO.13/2018, THE COURT ON THE
SAME DAY DELIVERED THE FOLLOWING:
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE A.K.JAYASANKARAN NAMBIAR
&
THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH
FRIDAY, THE 23RD DAY OF FEBRUARY 2024/4TH PHALGUNA, 1945
ST.REV.NO.13 OF 2018
AGAINST THE ORDER DATED 28.2.2018 IN T.A.NO.247/2010 OF KERALA
AGRL.INCOME TAX & SALES TAX APPELLATE TRIBUNAL, ADDITIONAL
BENCH,ERNAKULAM
PETITIONER/APPELLANT:
M/S.SEIMENS LIMITED,
PREETHI BUILDINGS, M.G.ROAD,ERNAKULAM,
NOW AT 'JOMER SYMPHONY' CHALIKKAVATTOM,
PONNURUNNY NORTH, VYTTILA, ERNAKULAM - 682 019,
REPRESENTEDBY G.VASANTHI MANAGER - INDIRECT TAXATION
BY ADV.SRI.JOSE JOSEPH
RESPONDENT/RESPONDENT:
THE STATE OF KERALA,
REPRESENTED BY THE DEPUTY COMMISSIONER (LAW),
COMMERCIAL TAXES, REVENUE TOWER, ERNAKULAM.
BY SRI.V.K.SHAMSUDHEEN, SR.GOVERNMENT PLEADER
THIS SALES TAX REVISION HAVING COME UP FOR HEARING ON
23.02.2024 ALONG WITH ST.REV.NO.1/2019, THE COURT ON THE
SAME DAY DELIVERED THE FOLLOWING:
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ORDER
Dr. A.K. Jayasankaran Nambiar, J.
As the issue involved in both these S.T. Revisions is the same, they are
taken up together for consideration and disposed by this common order.
2. The brief facts necessary for disposal of these Revision Petitions
are as follows:
The petitioner in both the Revision Petitions is a company registered
under the Companies Act, 1956 with its registered Office at Mumbai and
branches in various States including one at Ernakulam, Kerala. It is a
manufacturer cum dealer of medical equipments, electronic and electric
items etc. and also undertakes the execution of works contract for various
clients. It is also a dealer registered as such under the Kerala General Sales
Tax Act, 1963 [hereinafter referred to as the "KGST Act"] and Central Sales
Tax Act, 1956 [hereinafter referred to as the "CST Act"]. During the
assessment years 2000-01 and 2004-05, it had taken up works contracts for
KINFRA and had accordingly entered into contract with the said company
for the construction of a 110KV Sub Station. The tender documents
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comprised of general conditions of contract, special conditions of contract
and the formal contract agreement, and the terms and conditions therein
specified the items that had to be supplied by the petitioner for the purposes
of incorporation into the works contract that was undertaken by it for
KINFRA. The terms of the contract made it clear that while the technical
specifications and the make of the individual items/component parts as
specified therein had to be adhered to by the petitioner while affecting the
supply of the said parts, a choice was left to the petitioner to source the
parts either from within the State or from outside the State.
3. It would appear that in respect of those parts that were sourced by
the petitioner from within Kerala, the petitioner discharged his liability to
sales tax under the KGST Act while incorporating the said parts in the works
contract. For the items sourced from outside the State, either from sub-
vendors of the petitioner or from the petitioner's own manufacturing units,
and incorporated in the works contract in Kerala, the petitioner claimed
exemption from tax under the KGST Act by contending that the said supplies
would have to be treated as deemed inter-state sale of goods in the course of
execution of works contract.
4. The claim for exemption was not accepted by the Assessing
Authority, who, for the assessment year 2000-01, found that the petitioner
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had not even discharged the tax liability under the CST Act in respect of
purchases effected from sub-vendors from whom it had procured the parts
after issuing C Forms. Although the petitioner pointed out that the CST Act
had not been amended to make provision for taxation of deemed inter-state
sales, the Assessing Authority was of the view that the incorporation of the
goods sourced from outside the State, in the works contract in Kerala, would
necessarily attract tax under the KGST Act.
5. The petitioner carried the matter in further appeals before the
First Appellate Authority and also the Appellate Tribunal, but the said
appeals were dismissed. This led the petitioner to approach this Court
through the S.T. Revisions aforementioned, wherein the main question of law
raised is with regard to the liability to pay tax under the KGST Act on the
value of the goods supplied inter-state for execution of the works contract in
Kerala.
6. We have heard Sri.Jose Joseph, the learned counsel for the
petitioner in both the Revisions and Sri.V.K. Shamsudheen, the learned
senior Government Pleader for the respondent Department.
7. On a consideration of the facts and circumstances of the case as
also the submissions made across the bar, we are of the view that the
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petitioner must necessarily succeed.
8. The Tribunal, in the orders impugned before us, has taken a rather
myopic view of the contractual relationship between the petitioner on the
one hand and the KINFRA on the other, while determining the tax liability of
the petitioner in relation to the goods supplied to KINFRA in the course of
execution of the works contract undertaken by it. A perusal of the order of
the Tribunal makes it abundantly clear that the Tribunal was swayed by the
non-production of the formal contract in original and was therefore of the
view that inter-state movement of the goods had no relation to any
obligation of the petitioner under the said contract. We find, however, that
the Tribunal itself then proceeded to consider the tender documents that
were available before it for the purposes of determining the nature of the
transaction entered into between the petitioner and KINFRA. Given the fact
that the Tribunal itself had virtually accepted the tender documents as
pertaining to the contract between the petitioner and KINFRA, we are of the
view that it ought to have considered the clauses in the tender documents in
a commercial sense and taken note of the clauses in the agreement between
the parties that dealt with the manner of supply of goods for the execution of
the works contract. In particular, the provisions of clauses 4.1.5, 4.31, 5.1.1,
5.3.4, 5.3.5, 5.5, 9.0, Schedule of Requirements & Estimate for the 110 kV
Substation, which are extracted hereunder, ought to have been noticed:
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4.1.5. 'Contract' shall mean and include the tender notice/invitation to
tender, the tender and all pertaining documents, the letter of
intent/the work order, the correspondence exchanged after receipt of
tenders and before issue of the letter of intent, the drawings, technical
specifications and standards relating to the successful
Tenderer/Contractor with the Purchaser.
4.31. Subcontracts
The Contractor shall notify the purchaser in writing of all subcontracts
awarded under the Contract if not already specified in his bid. Such
notification, in his original bid or later, shall not relieve the Supplier
from any liability or obligation under the Contract. The Contractor
shall furnish to the Purchaser/Consultant credentials of the sub
contractor for verification/acceptance.
5.0 SPECIAL TERMS AND CONDITIONS OR TURNKEY CONTRACT
(SCC) (SUPPLY, ERECTION, TESTING & COMMISSIONING)
5.1 General
5.1.1 The following special conditions shall be read in conjunction
with General terms and conditions of Turnkey Contract (GCC) and
amendments/corrections thereto. Where any portion of the GCC are
repugnant to or at variance with any provisions of the GCC, then,
unless a different intention appears, the provision of the SCC shall be
deemed to override the provisions of the GCC only to the extent that
such repugnancy, or variations cannot be reconciled with the SCC and
shall be to the extent of such repugnancy, or variations, prevail; it
being understood that the provisions of GCC shall otherwise prevail.
Wherever it is stated anywhere in this contract that such and such
work is to be carried out, it shall be understood that same shall be
effected/carried out by the Contractor at this own cost, unless a
different intention is specifically and expressly stated herein or
otherwise explicit from the context. The work in general shall be
carried out as per the nomenclature of the individual items and in the
particular specifications. For item of works, not covered above, the
same shall be carried out as per instructions and specifications given
by the Consultant.
5.3.4. Quality of materials
All the materials and equipment supplied by the contractor for this
work shall be new and should confirm to relevant BIS Specifications.
They shall be of such design, size and material as to function
satisfactorily under the rated conditions of operation and to withstand
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the environmental conditions at site. The copies of purchase vouchers
& gate passes should be produced along with the materials. The type
test certificates, routine test certificates and acceptance test
certificates are also to be submitted.
5.3.5. Inspection of material and Equipment
The materials should be be inspected/tested prior to the despatch from
the manufacture by Purchaser/Consultant. The inspection call should
be given at least fifteen days in advance so as to deputy the officials of
Purchaser/Consultant for the inspection.
Such inspection will be of the following categories:
1. Inspection of materials/equipment to be witnessed at the
manufacturers premises in accordance with relevant
BIS/Agreement Inspection Procedure.
2. To receive materials at site with manufacturers Test
Certificate(s).
3. To receive materials after physical inspection at site.
Similarly, for fabricated equipment, the contractor will first submit
dimensional drawings for approval before fabrication is taken up in the
factory. Suitable state inspection at factory also will be made to
ensure proper use of materials, workmanship and quality control.
All the materials and equipment supplied by the contractor for this
work shall be new and should confirm to relevant BIS Specifications.
They shall be of such design, size and material as to function
satisfactorily under the rated conditions of operation and to withstand
the environmental conditions at site. The copies of purchase vouchers
& gate passes should be produced along with the materials. The type
test certificates, routine test certificates and acceptance test
certificates are also to be submitted.
5.5. Samples
5.5.1 The Contractor shall be required to produce samples of all the
materials sufficiently in advance to obtain approval of the Engineer-in-
charge.
5.5.2 Approved samples shall be retained by the Engineer-in-charge until the
completion of the work and all materials and workmanship
incorporated in the work are to conform to the approved samples in all
respects. Rejected materials shall be removed from the site
immediately under the supervision of Engineer-in-charge.
5.5.3 If on handing over the site or at any time thereafter during the
execution of work, the contractor considers that any drawing or
information necessary for the execution of the work has not been
provided, he shall inform the Engineer-in-charge in writing giving full
details required. All materials or workmanship, which in the opinion
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of the Engineer-in-charge is defective or is unsuitable shall be
removed immediately from the site within a reasonable time to be
fixed by the Engineer-in-charge depending on the requirement in each
case, failing which, the same shall be removed at the risk and cost of
the Contractor. No claim whatever shall be entertained on this
account.
5.5.4 Whenever B.I.S. codes are referred to in other particular specifications
attached, the latest B.I.S. codes prevalent at the time of tendering
shall be followed.
9.0. MAKE OF MATERIALS
9.1 Scope
The scope of this section covers the recommended makes of
equipment, material components. The final choice of makes shall be
indicated at the time of finalisation of order.
The makes of material offered by the contractor shall be indicated at
the space provided for proper evaluation of the offer and shall be one
of the recommend makes. In the absence of such indication, the
decision rests with the Purchaser/consultant.
9.2. Makes recommended
The makes of material recommended are exhibited in respective
section. The offers shall be strictly on the basis of the makes
recommended. However, the bidders can offer alternative makes
under deviation. Such deviations shall follow with technical literature
of the material/equipment offered. Such deviation shall be considered
only if the offer is furnished for the specified make as per the tender.
Where specified make and model nos. are indicated in the schedule of
requirements, the bidder should quote for the same items.
9.3. LIST OF APPROVED MAKES OF EQUIPMENT AND MATERIALS
Sl. Item Make of Materials/Equipment
No.
A. 110kV Equipment
1 Power Transformer TELK, ABB, Crompton Greaves, BHEL
2 Capacitive Voltage TELK, ABB, Crompton Greaves.
Transformer
3 Potential Transformer TELK, ABB, Crompton Greaves.
4 Current Transformer TELK, ABB, Crompton Greaves.
................................. .................................................
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SCHEDULE OF REQUIREMENTS & ESTIMATE FOR THE 110 kV SUBSTATION
Based on KPWD 96 & market rates 1999
PART A : ELECTRIFICATION WORK
____________________________________________________________________________________________________________
Item No. Description Unit Qty Rate Amout (Rs.)
____________________________________________________________________________________________________________
Part I - 110 kV Equipment
1.0 Supply, Installation, Testing
and Commissioning of Outdoor
type 10 MVA, 3 Ph., 50 c/s
ONAF Power Transformer with
OLTC having separate
compartments with
manual/motorised controls of
taps + 5% to - 25% in steps of
2.5% conforming to IS:
2026/77, RTCC panel, oil
conservator, oil impregnated
condenser type bushings, first
fill of oil, and all accessories
and having following
specifications:
Voltage Ratio : 110/11 kV
Type of Winding: Paper
insulated rectangular copper
conductor.
Fittings: Standard fittings as
per
IS:2026/77
(Refer section 6.3)
Supply No. 2 4,600,000.00 9,200,000.00
Erection No. 2 25,000.00 50,000.00
9. A perusal of the tender documents would therefore clearly reveal
that the scope of the petitioner's obligation under the contract was to source
the goods, forming part of the electric Sub Station, from specified vendors
or from its own manufacturing units outside the State and make them
available for incorporation in the works contract carried out in the State. It
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will also be apparent that the goods in question were 'non-standard goods'
which had to be in accordance with the designs and specifications supplied
by KINFRA. The goods to be supplied were not standard goods which the
petitioner company could have fabricated based on its own designs and
specifications. It follows therefore that when such goods, as were covered
by the contract entered into between the petitioner and KINFRA, were
sourced from outside the State, the mere fact that there was an initial
transaction whereby the petitioner obtained possession/title of the goods in
Kerala from a movement of the goods that originated from outside of Kerala,
could not have made a difference while determining the nature of the sale
transaction namely 'inter-state' or 'intra-state'. Whether it was goods
sourced from a sub-vendor outside the State or goods sourced from their
own manufacturing units outside the State, the movement of the goods from
outside the State into the State and thereafter till their incorporation in the
works contract carried out by the petitioner had to be seen as incidental to
the contract entered into between the petitioner and the KINFRA. There
was no break in the movement of the goods and the petitioner's Office in
Kerala had to be seen merely as a conduit through which the goods passed
on their way to KINFRA. It would have been a different matter if the goods
that were despatched from the manufacturing unit of the petitioner outside
Kerala were of a general nature [standard goods] that were brought into the
State for sale in the open market without reference to any contract entered
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into with KINFRA. In that event, the transaction would have definitely been
viewed as an 'intra-state sale' when sold to the buyer within the State since
the inter-state movement would not be seen as incidental to any contract of
sale entered into between the petitioner and its buyer.
10. In the instant case, as already noticed, the movement of the
goods, in respect of which the petitioner had claimed exemption from tax
under the KGST Act, was clearly incidental to their obligations under the
contract entered into with KINFRA. The goods themselves were not
standard goods but goods that answered to the specifications and make that
was prescribed in the contract entered into between the petitioner and
KINFRA. Under such circumstances, we are of the view that merely because
there was an intervening event that broke the chain of movement of the
goods from outside the State to within the State, prior to their incorporation
in the works contract, the transaction could not have been viewed as an
'intra-state sale'. We are fortified in the view that we have taken by the
judgment of the Supreme Court in Sahney Steel and Press Works Ltd.
and Another v. Commercial Tax Officer and Others - [60 STC 301
(SC)] and Commissioner, Delhi Value Added Tax v. ABB Ltd. - [91 VST
188) (SC)].
In the result, we allow these S.T. Revisions by setting aside the
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impugned orders of the Appellate Tribunal and answering the questions of
law raised in these Revision Petitions in favour of the petitioner assessee
and against the Revenue.
Sd/-
DR. A.K.JAYASANKARAN NAMBIAR
JUDGE
Sd/-
DR. KAUSER EDAPPAGATH
JUDGE
prp/24/2/24
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APPENDIX OF S.T.REV.NO.1/2019
PETITIONER'S ANNEXURES:
ANNEXURE I TRUE COPY OF ASSESSMENT ORDER UNDER THE
KGST ACT FOR THE YEAR 2004-05.
ANNEXURE II TRUE COPY ORDER OF THE DEPUTY COMMISSIONER
(APPEALS) IN STA NO.337/2011.
ANNEXURE III TRUE COPY OF ORDER OF THE KERALA AIT & ST
APPELLATE TRIBUNAL IN TA NO.18/2015.
RESPONDENT'S ANNEXURES: NIL.
//TRUE COPY//
P.S. TO JUDGE
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APPENDIX OF ST.REV.NO.13/2018
PETITIONER'S ANNEXURES:
ANNEXURE I TRUE COPY OF ASSESSMENT ORDER UNDER
THE KGST ACT FOR THE YEAR 2000-01.
ANNEXURE-II TRUE COPY ORDER OF THE DEPUTY
COMMISSIONER (APPEALS) IN STA
ANNEXURE-III TRUE COPY OF ORDER OF THE KERALA AIT &
ST APPELLATE TRIBUNAL IN
ANNEXURE-IV TRUE COPY OF JUDGMENT IN S.T.REV.NO.19
OF 2014
ANNEXURE-V TRUE COPY OF ORDER OF THE KERALA AIT &
ST APPELLATE TRIBUNAL IN
T.A.NO.247/2010.
RESPONDENTS ANNEXURES: NIL.
//TRUE COPY//
P.S. TO JUDGE
