Telangana High Court
The State Of A.P., Re. By The Rep. Before ... vs M/S. Silpa Flooring Super Market, Hyd. on 2 July, 2025
Author: P.Sam Koshy
Bench: P.Sam Koshy
THE HONOURABLE SRI JUSTICE P.SAM KOSHY
AND
THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA
TAX REVISION CASE No.64 of 2009
ORDER:
(per the Hon'ble Sri Justice P.Sam Koshy)
The instant is a Tax Revision Case filed by the petitioner - State under
Section 22(1) read with Rule 40 of the APGST Rules under the APGST Act
assailing the order passed by the Sales Tax Appellate Tribunal, Andhra Pradesh,
Hyderabad (for short, the 'STAT') in Tribunal Appeal No.48 of 2008, decided
on 19.09.2008.
2. Heard Mr. T.Chaitanya Kiran, learned Additional Government Pleader
representing Mr. Swaroop Oorilla, learned Special Standing Counsel for
Commercial Tax for the petitioner - State, and Ms. S.N. Sreedevi, learned
counsel representing Mr. S.R.R. Viswanath, learned counsel for the respondent.
3. Vide the impugned order, the STAT had allowed the appeal preferred by
the respondent herein and has accepted the contention of the respondent that the
nature of work executed by the respondent insofar as laying of marbles and
flooring is concerned, it amounts to "works contract" and would not fall within
the purview of "contract of sale".
4. It is this decision of the STAT which has been assailed by the petitioner -
State in the instant Tax Revision Case.
5. Assailing the impugned order, the learned Additional Government
Pleader heavily relied upon a decision of the Hon'ble Supreme Court in the case
of Kone Elevator India Limited vs. State of A.P. 1.
6. Learned counsel for the respondent brought to the notice of this Court a
larger Bench judgment of the Hon'ble Supreme Court in the case of M/s. Kone
Elevator India Pvt. Ltd. vs. State of T.N. & Ors. 2 wherein the three Judge
Bench decision of the Hon'ble Supreme Court has been overruled by the larger
Bench in the aforesaid case and held in paragraph No.64 of its judgment as
under:
"64. .........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
140 STC p.22
(2014) 7 SCC 1
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."
7. In view of the fact that the larger Bench of the Hon'ble Supreme Court
has already laid to rest the said issue and thereby overruled the earlier decision
rendered in the case of M/s. Kone Elevator India Pvt. Ltd. vs. State of T.N.
& Ors. (three Judge Bench decision of the Hon'ble Supreme Court) and the
STAT also relying upon a decision of the Unified High Court of A.P. in the case
of M/s. United Mosaics vs. The State of Andhra Pradesh3 while reaching to
the said conclusion, which again still holds good and has not been challenged
before any forum, we do not find any substance in the instant case filed by the
petitioner - State and the Tax Revision Case accordingly stands rejected.
8. As a sequel, miscellaneous petitions pending if any, shall stand closed.
________________
P.SAM KOSHY, J
_______________________________
NARSING RAO NANDIKONDA, J
Date: 02.07.2025
GSD
53 STC 124
