No Sales Tax on Supply of Goods from Mumbai to Delhi for Works Contract: SC dismisses Revenue’s Appeal [Read Order]

The Supreme Court has dismissed an appeal by Delhi Sales Tax Authorities and upheld the final judgment and order passed by the High Court Of Delhi that sales tax cannot be imposed on the basis of work contract of supply of goods from Mumbai to Delhi

The Assessee 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 is also a registered dealer under the provisions of the Delhi Sales Tax Act, 1975. It, however, has its manufacturing facilities at Mumbai, where its components are produced. The Mumbai unit also stores the products so manufactured.

The Delhi Sales Tax Authorities sought to assess transactions for three distinct periods. 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.

The adjudicating authority has prevailed that the contracts were indivisible work contracts, the 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 two-judge bench comprising of Justices A.M. Khanwilkar and Dinesh Maheshwari of Supreme Court made an order on a special leave petition filed by Commissioner of Value Added Tax, Delhi.

The bench opined that the placement of an order by the agent for the procurement of the lifts, in this case, was merely an offer. It is only upon its acceptance and further steps taken by the supplier that an offer crystallizes into a binding promise or contract. That took place in Mumbai. It is now 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.

While dismissing the appeal, the Court observed that the place where the appropriation took place, is undoubtedly Mumbai so the incidence of central sales tax or sale of goods, occurs in Mumbai.