Commissioner, Delhi VAT vs. ABB Ltd, Civil Appeal Nos. 2989 – 3008 of 2016, dated 5th April, 2016, 2016 NTN (Vol-60) – 363 (SC)

FACTS
The respondent is a Public Limited Company engaged, inter alia, in manufacture and sale of engineering goods including power distribution system and SCADA system. On 15.05.2003, DMRC invited tenders for supply, installation, testing and commissioning of traction electrification, power supply, power distribution and SCADA system for its Line 3 i.e. Barakhamba Road- Connaught Place-Dwarka Section. DMRC short listed the respondent and then executed the contract under which the respondent had to provide transformers, switch-gears, high voltage cables, SCADA system and also complete electrical solution, including control room for operation of trains. The respondent company claimed exemption from payment of tax on the ground of sale in course of import in respect of the importation of equipment which was strictly as per requirement and specification set-out by DMRC in their contract and only to meet such requirement of supply of specified goods which were imported, hence, the event of import and supply was clearly occasioned by the contract awarded to the respondent by the DMRC. There was a similar contention in respect of procurement of goods within the country and their movement from one State to another. The assessing authority rejected the claim and levied tax which was confirmed by the Tribunal. After carefully considering the relevant provisions of the contract, specifications of goods, requirement of inspection of goods at more than one occasion and right of rejecting the goods even on testing after supply, the High Court allowed appeal to accept the contentions advanced on behalf of respondent that the transactions leading to import of goods as well as movement of goods from one State to another were occasioned by the contract awarded by the DMRC to the respondent, hence, the transactions were not covered by the Delhi VAT Act but the CST Act. The department filed SLP before Supreme Court.

HELD
Based upon facts of the case, the SC held that the movement of goods by way of imports or by way of inter-state trade in this case was in pursuance of the conditions and/or as an incident of the contract between the assessee and DMRC. The goods were of specific quality and description for being used in the works contract awarded on turnkey basis to the assessee and there was no possibility of such goods being diverted by the assessee for any other purpose. Hence the law laid down in K.G. Khosla’s case has rightly been applied to this case by the High Court.

Accordingly, the appeal filed by the department was dismissed and the judgment of the High Court was upheld by the SC.