2015 (1) TMI 222 - HC - VAT and Sales Tax

Requirement to furnish security and 20% of amount as pre-deposit Decision relied upon overruled by subsequent decision of SC - Held that - On merely establishing a prima facie case, interim order of protection should not be passed - but if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand - Petitions for stay should not be disposed of in a routine manner unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand - there can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved - Merely because the Court has indicated the principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest - where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens faith in the impartiality of public administration, interim relief can be given - since the assessing authority has made the assessment relying exclusively on the earlier judgment of the Supreme Court in State of Andhra Pradesh Vs. M/S Kone Elevator 2005 (2) TMI 519 - SUPREME COURT OF INDIA which has now been overruled by the Constitution Bench of the Supreme Court in Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu 2014 (5) TMI 265 - SUPREME COURT , the revisionist is entitled to complete stay of the demand amount thus, the order dated 28.7.2014 passed by the Tribunal is modified and a direction is issued to the Appellate Authority to decide the appeal of the revisionist expeditiously in accordance with law within a period of two months from the date of receipt of the certified copy of this order - Till then no recovery shall be made from the revisionist of the remaining amount of 20% of the tax for the AY 2010-11 Decided in favour of revisionist assessee.

Issues Involved:
1. Nature of the contract: Whether it is a sale contract or a works contract.
2. Validity of the assessment order and the demand imposed.
3. Consideration of stay application by the Appellate Authority.
4. Application of the Supreme Court's judgment in Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu.

Detailed Analysis:

1. Nature of the Contract:
The primary issue is whether the works contract entered into between the revisionist Company and a customer is a sale contract or a works contract. The assessing authority had classified the contract as a sale contract based on the precedent set by the Supreme Court in State of Andhra Pradesh Vs. Kone Elevators (2005), which stated that the materials and parts of a lift are assembled and kept in the godown and transported to the site after the contract is executed. The revisionist argued that the contract is a composite one involving both sale and installation of lifts, with significant labor and service components, thereby qualifying as a works contract.

2. Validity of the Assessment Order and the Demand Imposed:
The assessing authority imposed a total demand of Rs. 5,64,76,626/- on the revisionist, considering the contract as a sale contract. The revisionist challenged this assessment, arguing that the contract is a works contract involving substantial labor and service elements. The revisionist cited the Supreme Court's recent decision in Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu (2014), which overruled the earlier judgment and recognized such contracts as works contracts.

3. Consideration of Stay Application by the Appellate Authority:
The revisionist filed an appeal against the assessment order, and the Additional Commissioner (Appeals) partially stayed the demand, directing the revisionist to deposit 50% of the amount. The Commercial Tax Tribunal further modified this order, granting an 80% stay on furnishing security and requiring the deposit of the remaining 20% within 30 days. The revisionist argued that the Appellate Authority should have considered the stay application in light of the Supreme Court's recent judgment, which supports their claim that the contract is a works contract.

4. Application of the Supreme Court's Judgment in Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu:
The revisionist relied on the Supreme Court's judgment in Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu (2014), which clarified that contracts for the supply and installation of lifts, involving significant labor and service elements, should be treated as works contracts. The Court noted that the earlier decision in State of Andhra Pradesh Vs. Kone Elevator (2005) was incorrect in treating such contracts as sale contracts. The revisionist argued that this judgment should be applied to their case, and the assessment should be reconsidered accordingly.

Conclusion:
The High Court allowed the revision, modifying the Tribunal's order and directing the Appellate Authority to decide the appeal expeditiously within two months. The Court also stayed the recovery of the remaining 20% of the tax demand until the appeal is decided, recognizing the relevance of the Supreme Court's recent judgment in Kone Elevator India Pvt. Ltd. Vs. State of Tamil Nadu (2014) to the revisionist's case.

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