Holding

The contract is a contract for sale, not a works‑contract, so Section 5G deduction of labour charges is not applicable.

Summary

The State of Andhra Pradesh challenged the claim by Mis Kone Elevators (India) Ltd. that its contracts for supplying, installing and commissioning lifts were works‑contracts, allowing deductions of labour charges under Section 5G of the Andhra Pradesh General Sales Tax Act, 1957. The assessee argued that installation required skill and that ownership transferred only after commissioning, making the transaction a works‑contract. The Court examined the contractual terms, noting that the customer was responsible for site preparation and that the lift supply, including installation, was the sole obligation of the assessee. It held that the material component of the lift was the dominant element and the skill used was merely incidental, making the transaction a contract for sale. Consequently, Section 5G (and the related composition under Section 5F) did not apply, and the deduction of labour charges was disallowed. The appeal by the State was allowed, setting aside the earlier Tribunal and High Court decisions.

Issues considered

Whether the contract for supply and installation of lifts is a contract for sale or a works‑contract under the Andhra Pradesh General Sales Tax Act, 1957.
Whether the assessee is entitled to deduction of labour charges under Section 5G (and composition under Section 5F) of the Act.

Legislation cited

Andhra Pradesh General Sales Tax Act, 1957s. 2(1)(e), s. 2(1)(n), s. 2(1)(t), s. 5F, s. 5G

Subjects

sales taxcontract for saleworks contractlabour charge deductionSection 5GSection 5Fproperty transferlift installationinterpretation of contract

Judgment

A STATE OF ANDHRA PRADESH
v.
MIS. KONE ELEV ATORS (INDrA) LTD.

FEBRUARY 17, 2005

B [S.N. VARIAVA, DR. AR. LAKSHMANAN AND S.H. KAPADIA, JJ.]

Andhra Pradesh General Sales Tax Act, 1957; Ss. 2(l)(n) & (t), 5F and
5G, Entry 82 of the First Schedule to the Act :

C Contract for sale and installation of lifts between assessee/seller and
customer-levy of sales tax-Deductions towards labour charges-Claim of
-Held: Claim of the deductions depends upon the terms/nature of contract-
True effect ofan accretion made pursuant to a contract could be judgedfrom
the intention of the parties-Transfer of Property and delivery of possession
D is the essence ofcontract for sale but the essence ofcontract for works is work
and labour-Thus, it is substance and not the form of the contract which is
material in determining the nature of a contract-Onus of preparation and
making the site ready for installation oflift is on customer but major component
of the end product supplied by the assessee-Hence, the contract in question
is contract for sale and not a works contract-Section 5G of the Act not
E attracted-Deductions of labour charges not allowed

The questions which arose for determination in this appeal were as
to whether contracts entered into and executed by the assessee,
manufacturer of lifts and elevators, were contracts for sale or works
F contract and to determine assessee's claim of deductions of labour charges
under Section 5G of the Andhra Pradesh Sales Tax Act.

It was contended by the appellant-State that the main object of the
contract in question was selling of the lifts and installation work was only
incidental to the main contract; and that the High Court erred in holding
G that the installation of the lift involved skill and technical know-how and
thus could appropriately be treated as works-contract.

Respondent-company submitted that they were engaged in the
manufacture, supply, erection, installation and commissioning of lifts by
undertaking works-contract; that installation and commissioning of lifts
II 152
STATE v. KONE ELEVATORS (INDIA) LTD. 153
involved skill and only after installation and commissioning of the lifts, A
the ownership in the lifts is transferred to the customer. The assessee
'

became entitled for deduction of labour charges from sales tax in terms
of Section 5G of the Act; and that since contract in question satisfies
requirements of works-contract, Section 5F of the Act is attracted.

Allowing the appeal, the Court B

HELD : 1.1. There is no standard formula by which one can
distinguish a "contract for sale" from a "works-contract". The question
is largely one of fact depending upon the terms of the contract including
the nature of the obligations to be discharged thereunder and the
surrounding circumstances. The true effect of an accretion made pursuant C
to a contract has to be judged not by artificial rules but from the intention
of the parties to the contract. In a "contract of sale", the main object is
the transfer of property and delivery of possession of the property, whereas
the main object in a "contract for work" is not the transfer of the property
but it is one for work and labour. (157-D-E-F] D
1.2. It is settled law that the substance and not the form of the
contract is material in determining the nature of transaction. No definite
rule can be formulated to determine the question as to whether a contract
is a contract for sale of goods or is a works-contract. Ultimately, the terms
of a contract would be determinative of the nature of the transaction/ E
contract. (157-H; 158-A-BI

2.1. The Andhra Pradesh General Sales Tax Act ordains that transfer
of property in goods for valuable consideration must be "in the course of
trade or business". This is because the incidence of tax falls on a dealer
who "carries on the business of buying, selling, supplying or distributing F
goods". A sale by a person who carries on the business of buying, selling
etc. and a sale in the course of business are the twin requirements to attract
the charge of tax under the Act. f 159-G-H)

State of Madras v. Gannon Dunkerley & Co. (Madras) ltd, AIR (1958) G
SC 560, referred to.

2.2. It is not the bulk of the material alone but the relative
importance of the material qua the work, skill and labour of the payee
which also has to be seen in determining the nature of the contract. If the
major component of the end-product is the material consumed in H
154 SUPREME COURT REPORTS [2005] 2 S.C.R.

A producing the chattel-to be delivered and-skill and labour- are employed
for converting the main components into the end-products, the skill and
labour are only incidentally used, the delivery of the end-product by the
-
seller to the buyer would constitute a sale. On the other hand, if the main'
object of the contract is to avail the s~ill and labour of· the seller though.
some material or components may be incidentally used during the process
B of bringing into existence the end-product by the investment of skill and
labour of the supplier, the transaction would be-a contract-for work and
labour. (160-C-D-El

Hindustan Shipyard ltd. v. State of Andhra Pradesh, (2001) 119 STC
C 533, referred to.
-,.-
3.1. The contract in question consisted of certain obligations on the
part of the customers under the heading "Customers' Contractual·
Obligations". The customer was obliged to undertake the work of certain
civil constructions, also certain obligations were passed on the ·customer
D under the Delivery Schedule. The entire onus of preparation and making
ready of the site for installation of lift was on the customer and under no
circumstances the assessee would undertake installation of lift if the site
is not kept ready by the customer. Further, the assessee reserved the right··
to charge the customer for delays in providing the required facilities. These
facts clearly indicate that the assessee divided the execution of the contract
E into two parts, namely, "the work" to be initially done in accordance with
the specifications laid down by the assessee and "the supply" of lift by the
assessee. "the work" part in the contract was assigned to the customer
and "the supply" part was assigned to the assessee. This-"supply" part
included installation of lift. Therefore, contractual obligation of the
F assessee was only to supply and install the lift, while the customer's
obligation was to undertake the connected work in keeping the site ready
for installation as per the drawings. (160-G~H; 161-8; 162-A-B-C)

- 3.2. The major component of the end-product is the material
consu~ed in producing the lift to be delivered and the skill and labour
G employed for converting the main components into the end-product was
only incidentally used and, therefore, the delivery of the end-product by _
the assessee to the customer constituted a "sale" and not a "works-
contract". Since the <ransaction in question is "sale" in terms of Entry 82
of the first schedule to the Act, Section SG of the Act is not applicable.
(162-G-HJ
H
STATE v. KONE ELEVATORS (INDIA) LTD. [KAPADIA. J.] 155

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6585of1999. A
From the Judgment and Order dated 2. 7. 99 of the Andhra Pradesh High
Court in T.R.C. No. 129 of 1999.

Debojit Borkakati and Guntur Prabhakar for the Appellant.
B
M.N. Rao, J.V. Rao, Ms. Promila, Ms.Sasmita Tripathy, A. Ramesh
and Y. Raja Gopala Rao for the Respondent.

The Judgment of the Court was delivered by

KAPADIA, J. The question involved in this civil appeal filed by the C
department is - whether contracts entered into and executed by the assessee
were contracts for sale and not works-contract.

Mis Kone Elevators (India) Ltd. (hereinafter referred to as "the assessee")
is a unit of M/s Kone Corporation, Finland who are one of the pioneers in
the manufacture of Hi-tech New Generation Elevators in the world. M/s D
Kone Corporation, Finland has its operations spread over 37 countries in the
world: The assessec herein is a registered dealer falling in the jurisdiction of
the Commercial Tax Officer, R.P. Road Circle, Secunderabad, having its
head office at 50, Vanagaram Road, Aynambakkam, Madras, with branches
at Vijaywada and Vizag. The assessee filed monthly returns in form A-2 for E
the months of April and May, 1995. It was assessed by the said Commercial
Tax Officer provisionally for the period 1.4.1995 to 31.5.1995 and for the
period from 1.6.1995 to 31.7.1995 under the Andhra Pradesh General Sales
Tax Act, 1957 (hereinafter referred to for the sake of brevity as "the 1957
Act"). The said two provisional assessments were made by the Commercial
Tax Officer vide orders dated 19.8.1995 and 5.9.1995 respectively. The F
assessee claimed deductions of labour charges for composition of tax under
section 5G read with section SF of the said Act saying that nature of the work
undertaken by it constituted "works-contract" involving manufacture, supply,
installation and commissioning of elevators and lifts. The assessing authority
however did not allow the deduction sought for and passed the provisional
assessment orders giving rise to two appeals against the said assessment G
orders. By judgment and order dated 9.10.1995, the Deputy Commissioner,
Secunderabad Division, Hyderabad, in turn dismissed the appeals filed by the
assessee and thereby confirmed the aforestated assessment orders. Both the
lower authorities treated the disputed turnover of the assessee as falling under
Entry 82 of the First Schedt:le to the said 1957 Act, which was objected to H
156 SUPREME COURT REPORTS [2005) 2 S.C.R.

A by the assessee by filing two separate appeals bearing T.A. Nos.676 and 677
of 1995 before the Sales Tax Appellate Tribunal, Hyderabad. The point that ·
arose before the Tribunal in the aforestated two appeals, heard and disposed
of jointly, was whether the transactions related to "works-contract" or to
"sale" of lifts. By judgment and order dated 22.12.1995, the said appeals
B bearing T.A. Nos.676 and 677 of 1995 \Vere allowed in favour of the assessee
s<!tting aside the impugned orders of the lower authorities by holding that the
disputed turnover related to the manufacture, supply, fabrication and erection
involved in the works-contract and that the said transaction did not amount
to a contract of sale. The original assessing authority was accordingly directed
to allow the deduction of labour charges and to complete the assessment
C under section 5G read with section 5F of the 1957 Act, as amended, without
treating it under Entry 82 of the first schedule to the Act. Aggrieved by the
decision of the Tribunal dated 22.12.1995, the department preferred Tax
Revision Case no. 129 of 1999 under section 22(1) of the 1957 Act, to the
High Court. By impugned judgment and order dated 2.7.1999, the Tax
Revision Case filed by the department was dismissed. Hence, this civil appeal.
D
Shri Debojit Borkakati, learned counsel for the department submitted
that the main object of the contract in question was to sell the lifts and the
works done by the assessee for installation was incidental to the sale of lifts.
It was urged that the Legislature had classified the commodity "lift" under
E Entry 82 of the first schedule to the Act keeping in mind that the word
"installation" was ancillary to the "sale" of lifts. It was urged that the High
Court had erred in holding that the installation of the lift involved skill and
technical know-how, which was to be treated as works-contract.

F
Shri M.N. Rao, learned. senior counsel for the assessee, on the other
hand, submitted that the assessee was engaged in the manufacture, supply,
erection, installation and commissioning oflifts by undertaking works~contract;
-
.
that the fifts/elevators as such cannot .be delivered to the customer; that various
accessories and components were required to be.taken to the site where after
c;arrying out the civil work, lifts were installed and commissioned. It was
further urged that only after all the parts stood assembled at site, the lifts
G came into being; that installation and commissioning of lifts involved skill
and only after installation and commissioning of the lifts, the ownership
stood t;:ansferred to the customer. Consequently, the assessee was e~titled for ---
deducti~n of labour charges and was entitled to composition of tax under
section 5G of the said Act. It was urged that the assessing authority had erred
H in treating the tra1Jsaction as a sale assessable to tax under Entry 82 of the
STATE v. KONE ELEVATORS (INDIA) LTD. [KAPADIA, .I.] 157
first schedule to the said Act. It was further submitted on behalf of the A
assessee that manufacture, supply; erection, installation and commissioning
of lift came under definition of the words "works-contract" under section
2( I )(t) of the said Act and, therefore, the tax leviable fell under section SF
of the said Act. It was urged that lifts and elevators cannot be delivered like
A/Cs as standard units; that manufacture, supply, erection, installation and B
commissioning of lifts involved skill and labour as well as technical know-
how. Reliance was placed, in support of above contentions, on various invoices
raised by the assessee for manufacture, supply, erection, installation and
commissioning of lifts. Reliance was also placed on the copy of the contracts
entered into by the assessee. Reliance was also placed on Indian Standards
Institution's specifications and code of practice for installation of lifts and C.
elevators to show the amount of skill, labour and technical know-how involved
in the manufacture, supply, erection, installation and commissioning of lifts.
In the circumstances, it was submitted that no interference was called for in
this matter.
D
It can be treated as well settled that there is no standard formula by
which one can distinguish a "contract for sale" from a "works-contract". The
question is largely one of fact depending upon the terms of the contract
including the nature of the obligations to be discharged thereunder and the
surrounding circumstances. If the intention is to transfer for a price a chattel
in which the transferee had no previous property, then the contract is a E
contract for sale. Ultimately, the true effect of an accretion made pursuant to
a contract has to be judged not by artificial rules but from the intertion of
the parties to the contract. In a "contract of sale", the main object is the
transfer of property and delivery of possession of the property, whereas the
main object in a "contract for work" is not the transfer of the property but p
it is one for work and labour. Another test often to be applied to is : when
and how the property of the dealer in such a transaction passes to the customer:
is it by transfer at the time of delivery of the finished article as a chattel or
by accession during the procession of work on fusion to the movable property
of the customer? If it is the former, it is a "sale"; if it is the latter, it is a
"works-contract". Therefore, in judging whether the contract is for a "sale" G
or for "work and labour", the essence of the contract or the reality of the
transaction as a whole has to be taken into consideration. The pre-dominant
object of the contract, the circumstances of the case and the custom of the
trade provides a guide in deciding whether transaction is a "sale" or a "works-
contract". Essentially, the question is of interpretation of the "contract". It is H
158 SUPREME COURT REPORTS · [2005] 2 S.C.R. ·

A settled law that the substance and not the·form of the. contract is· material in
determining the nature of transaction .. No definite ruie ca11 be formulated to
determine the question as to whether a particular· given contract is a contract
for sale·of goods or is a works-contract. Ultimately, the terms of a given
contract would. be determinative of the nature of the transaction, whether it
B is a "sale" or a "works-contract.Therefore, this question has to be ascertained
on facts of each case, on proper construction ·Of terms and conditions of the
contract between the parties.

Before proceeding further, an insight into the relevant•provisions more
especially the definitions of. "sale'' and "works-contract" have 1to,be noticed.
C Section 2(I)(n) which .defines "sale" and section~2(l)(t) which defines the
"works-contract" are extracted hereunder :

"2(l)(n).'Sa/e' with all its grammatical vanat1ons and cognate
-
expressions means.every·transfer of the property ,in goods (whether
as such goods or in ·any other. · form in. pursuance of a contract or
D otherwise),by one person to another in the .course o(trade or business,
for cash, or. for deferred payment, or, for any other valuable
consideration or in the supply or distribution of goods by a soci~ty
(including a co-operative -society), club, firm or .association to its
members, but does not include a mortgage, hypothecation or pledge
E of, or a charge. on ·goods.

Explanation VI : Whenever any.,. goods· are supplied or used in the
execution of a works contract, there shaltbe,deemed to.be a transfer
of property in such goods, whether or not the value .of the goods·so
, supplied·or used in the-course of execution of such works contract is
F shown separately and whether or .not the value .of sue~ goods or
material can be·separated from the.: contract for the. service and the
work done.

2(l)(t). 'Works Contract includes ~ny_agreement for_c3:rty~ng out for
_cash· or for deferred payment or for ~ny_other valuable consideration,
.G the building constru~tion, · manufacture; processing,. fabrication,
erection, installation, fitting· out, ·improvement,. modification, repair
or-commissioning· of-~ny movable·or. immovabl~·prop~rty ."

We also quote•hereinbelow·Entry·s2·of the·First·Schedule to the 1957
H Act:
STATE v. KONE ELEVATORS (INDIA) LTD. [KAPADIA, J.) 159

I SI. Description of Point of Rate of Tax Effective A
No. Goods Levy D from

82. Lifts, electrical At the point 10 paise in 1.8.1986
or hydraulic of first sale the rupee
(1082) in the State.
16 paise in 1.4.1995 B
the rupee

The bracketed words and the transactions brought within the purview
of sale by the aforestated Explanation-VI appended to section 2(1)(n) are
meant to cover non-conventional sale transactions which are now specified C
in Clause (29A) of Article 366 introduced by the Constitution 46th Amendment
Act. Before the inclusive definition of the "tax on sale or purchase of goods"
was introduced by the 46th Amendment, the expression "sale of goods"
occurring in Entry 48 of List II of the Government of India Act was interpreted
by this Court in the classical case of State of Madras v. Gannon Dunkerley D
& Co. (Madras) ltd reported in AIR (l 958) SC 560 as a tenn of well-
recognized legal import in the general law and as mentioned in the Sale of
Goods Act. The expression "sale of goods" in Entry 48 was described as
"nomen juris ", its essential ingredients being an agreement to sell movables
for a price and property passing therein pursuant to that agreement. It was
held that in a building contract which is composite and indivisible, there is E
no sale of goods as there could be no agreement to sell materials as such and
moreover, the property does not pass as movables. In order to enla,ge the
concept of sale and to arm the State Legislatures with power to tax the
transactions simulating sales but not conforming to the concept of sale under
the Sale of Goods Act, clause (29A) was inserted in Article 366 by the 46th F
Constitutional Amendment. The Andhra Pradesh State Legislature fell in line
with this amendment and changed the definition of "sale" so as to bring
within the tax net the transactions which are not stricto sensu sales as per the
law laid down in Gannon Dunkerley 's case (supra). It is important to note
that the 1957 Act ordains that transfer of property in goods for valuable
consideration must be "in the course of trade or business" [vide section G

-- 2(1 )(n)]. This is because the incidence of tax falls on a dealer who "carries
on the business of buying, selling, supplying or distributing goods" [vide
section 2(l)(e)). A sale by a person who carries on the business of buying,
selling etc. and a sale in the course of business are the twin requirements to
attract the charge of tax under the said 1957 Act. The crucial question is H
·I
160 SUPREME COURT REPORTS [2005] 2 S.C.R.

A whether these -two requirements rare "satisfied. Is there an element of business r
present in the disputed transactions? Assuming there was a sale" of goods,, did
such sale take place in the course of business and by a person who carries
on the business of buying and selling goods? -

In the case of Hindustan Shipyard ltd. v. State of Andhra Pradesh,
B reported in (200 I) I 19 STC 533, this Court held that if the thing to be
delivered has any individual existence·before the delivery as the sole property
of the party who is to deliver it, then it is a sale. If the bulk of material used
in construction belongs to the manufacturer who sells the ·end-product for a
price, the~ it • is a stro~g pointer
••
to the conclusion
~ !
that the contract is.•. in
C substance one for the sale o.f goods ~n~. not one for labour. However, the test
is not decisive. It is not the bulk of the material alone but the relative
importance of the materi_al qua.the work, skill and .labour of the payee which
also has to be seen. If the major component of the end-product is the material
consumed in producing the chattel to be delivered and skill and labour are
employed for converting the main components into the end-products, the
D skill and labo~r.are ~mly incid~ntai.1y used,.the 'cielivery of the end~product by
the seller to the buyer would constitute a sale. On the other hand, ifthe main
object of the contract is to avail the skill and labour of the seller though some
material or components may be incidentally used during the process of the
end-product being brought into existence by the investment of skill and labour
E of the supplier, the transaction would be a contract for work and labour.

Applying the above tests, we may ~ow proceed to notice the relevant
recitals' of the contracts in questions. Under th~ "P~ice Schedule'', the assessee
agreed to supply and install a Kone Elevator for Rs.3,30,000. 1t'wis agreed
that the customer shall approve the drawings and shall make machine-room
F Hoistway and the Lift Shaft including power supply for th~ asse~see to
commence installation at the time of the delivery of the lift. The contractual
obligations of the assessee regarding installation included employing Jabour
to complete the mechanical erection, electrical wiring testing_ and
commissioning of the lift. The assessee agreed that it shall commence
installation only after the lifts arrived at the site and upon intimation from the
G customer that the site was ready as per the drawings. As soon as the. lift stood
installed, the customer was to take over. It was further agreed that any material
supplied by the assessee shall remain their; property till the lift was handed
over to the customer. The contract in question consisted of certain obligations
on the part of the customers under the heading "Customers' Contractual
H Obligations". Under this clause, the customer was obliged to undertake the
STATE v. KONE ELEVATORS (INDIA) LTD. [KAPADIA. J.] 161
work of civil constructions consisting of :- A
(a) A properly enclosed lift Hoistway;

(b) A lift pit of proper depth;

(c) Properly lighted machine room; and
B
(d) Private pockets on the lift well walls.

Further, certain obligations were passed on the customer under the
Delivery Schedule which are reproduced herein below :-

"The General Agreement Drawing in triplicate will be forwarded to C
you in approximately six weeks from the date of receipt of complete
site details along with the order and advance payment. The purpose
of this drawing is to clearly indicate to you pertinent dimensional
details of the lift shaft, pit, machine room, car and landing entrances
etc., if any modification is required by you in our General Arrangement
Drawing it is advisable to hold on construction till the revised General D
Arrangement Drawing is approved by you.

Within six weeks from the date of receipt of all the site details, the
same should be returned to us within two weeks from the date of
submission, duly approved by )OU. We reserve the rights to charge
extra for subsequent GAD revisions if full site particulars are not E
made available to us at the time of placing of the order (or) any
modification is desired regarding the building structure resulting in

- revision of GAD's.

We shall deliver the materials for each Elevator by the end of 6
months from the date of receipt of approved General Arrangement F
Drawing and shall complete the installation thereafter by the end of
2 months provided the lift shaft including power supply as per our
requirements is made ready for us to commence installations at the
time of delivery of materials.

We shall commence the installation after the materials arrive at the
G
job site and upon intimation from you that the site is ready as per the
approved General Arrangement Drawing. If the site is not ready for
taking up installation when the materials arrive at the job site, we
shall depute an installation team on hearing from you that the site,
is ready in all respects as required by us." H
162 SUPREME COURT REPORTS [2005] 2 S.C.R.

A On a careful study of the aforestated clause in the Delivery.Schedule,
it is clear that the customer was required to do the actual work at site for
installation of lift On reading the· above clause, it may be observed that the
entire onus of preparation and making ready of the site for installation of lift
was on the customer. It was agreed that under no.circumstances, the assessee
B shall undertake installation of tift·ifthe site is not kept ready by the customer.
Under Clause 4(g) of the "Customers' Contractual Obligations", the assessee
res.erved the right to charge the customer for delays in providing the required
facilities. These facts clearly indicate that the assessee divided the execution
of the contract into two parts; namely, "the work" to be initially done in
-
accordance with the specifications laid·down·by the assessee and "the supply"
C of lift by the assessee. "'The work" part in the contract was assigned to the
customer and "the supply" part was assigned to the.assessee. This ·"supply"
part included installation of lift. Therefore, contractual obligation of the
assessee was only fo supply and install the lift, while the customer's obligation
was to undertake the word connected in keeping the site ready for installation
_as per the drawings. In view of the contractual ·obligations of the customer
D and the fact that the assessee undertook··exclusive installation of the Jifts
manufactured and brought to the site in knocked-down state to be assembled
by the assessee; it is clear that the transaction· in question was a contract of
"sale" and not a "works-contract". Moreover, on perusal of the brochure of
the assessee Company, one finds· that the assessee is· in the business of
. E manufacturing of .various types of lifts, namely, Passenger lifts, Freight
elevators, Transport· elevators and Scenic lifts. A combined study of the
above models, mentioned in the brochure, indicate that the assessee has been
exhibiting various models of lifts for sale. These lifts are sold in various
colours with various capacities and variable voltage. According to the brochure,
it is open for a prospective buyer to place purchase order for supply of lifts
·-F as per his convenience and choice. Therefore, the assessee satisfies, on facts,
the twin requirements to ·attract the charge of tax under the 1957 Act, namely,
that it carries on business of selling the lifts and elevators-and it has sold the
lifts and elevators during the relevant period in the course of its business. In
the present case, on facts, we find that the major component of the end-
G product is the material consumed in producing the lift to be delivered and the
skill and labour employed for converting the main components into the end-
product was only incidentally used-and, therefore, the delivery of the end-
product by the assessee to the customer constituted a "sale" and not a "works-
contract". Hence, transactions .in question constitute "sale" in terms of entry
_82 of the first schedule to the said Act and, therefore, section SG. of the.said
H Act was not applicable.
STATE v. KONE ELEVATORS (INDIA) LTD. [KAPADIA . .I.) 163

For the aforestated reasons, the department's appeal is allowed; the · A
impugned judgment and order of the High Court dated 2.7.1999 passed in
Tax Revision Case No.129 of 1999 and the judgment and order of the Sales
Tax Appellate Tribunal dated 22.12.1995 passed in T.A. Nos. 676 & 677 of
1995, are set aside. However, in the facts and circumstances of this case,
there will be no order as to costs.
B
S.K.S. Appeal allowed.