If you say that contract for manufacture, supply, installation of Lifts, is a Contract of Sale, then Sales Tax is payable. Tax payable may be in millions of rupees.
But if you say that it is "Works Contract", chiefly a sale of services, then the Sales Tax by State Governments cannot be levied.
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Hence, the point was debated and argued in several courts, and finally, recently, a 5 Hon'ble Judges Bench decided the question.
Four Lordships held that it is a "Works Contract" and therefore State Govts cannot charge sales tax.
One Lordship gave a dissenting judgement and held that it a Contract of Sale and therefore, sales tax can be charged by States.
Majority judgement prevails.
Three Points
1) When some property value is transferred, it is Contract of Sale.
2) When contract involves supply of some parts, but mainly some service is to be provided, than it is a Works Contract. Sales tax cannot be charged on Works Contract.
3) Sale of Lift, includes sale of several parts like cabin, ropes, motor etc. But mainly service is being provided.
Haresh Raichura
29/07/2014
Reference Case: Kone Elevators India Pvt Ltd. Vs State of T.N.
Decided on 6/5/2014
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