Composite contract of manufacture, supply and installation of lifts in buildings amounts to works contract

Composite contract of manufacture, supply and installation of lifts in buildings (involving civil construction) amounts to works contract; however, if there are two contracts - purchase of components of lifts from a dealer and separate contract for installation, same would be 'sale' and 'labour and service' respectively. Facts:

The issue before the Supreme Court was:

Whether a contract for manufacture, supply and installation of lifts in buildings is a "contract for sale of goods" or a "works contract"?

The Supreme Court held as under:

1)Lift is not a plant which is erected at site. It is basically comprised of components like lift car, motors, ropes, rails, etc., which have their own identity even prior to installation of lift. The Lifts cannot be functional without its installation because it is a permanent fixture in a building;

2)Therefore, installation of a lift in a building could not be regarded as a transfer of a chattel or goods and it was to be deemed as composite contract;

3)Thus, composite contract which required installation of lift in a building would be deemed as 'works contract' and liable to tax accordingly.

4)However, if there was two contracts, namely, purchase of components of lift from a dealers, and separate contract for installation, they would be deemed as 'sale' and 'labour and service' respectively. - KONE ELEVATOR INDIA (P.) LTD. V. STATE OF TAMIL NADU [2014] 45 taxmann.com (SC)