Divisible composite contract for shutters: supply was taxable as sale, while erection and installation remained separate and ancillary.

A contract for fabrication, supply, erection and installation of rolling shutters was treated as a divisible composite arrangement rather than an indivisible works contract. The contract terms showed ex works delivery, passing of property on delivery, risk during erection placed on the purchaser, and most of the consideration payable at the delivery stage. The installation component was only incidental and separable from the supply of goods. On that basis, the transaction was split into a sale of shutters and a separate contract for erection and installation, making the sale component taxable.

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Issues: Whether the contract for fabrication, supply, erection and installation of rolling shutters was an indivisible works contract or a divisible composite contract comprising a sale of goods and a separate contract for erection and installation.

Analysis: The terms of the contract showed delivery ex works, rejection claims barred after delivery, risk during erection placed on the purchaser, and 90% of the consideration payable by the stage of delivery. The materials and shutters were manufactured by the assessee, delivered at its factory, and property in the goods passed on delivery. The balance 10% related to erection and installation, which was only incidental to the supply of the shutters and did not convert the entire transaction into a works contract. The surrounding circumstances and the nature of the installation work also indicated that the dominant object was supply of shutters, with a separate element of labour for fixing them at site.

Conclusion: The contract was a divisible composite contract consisting of two contracts, one for sale of the shutters and the other for erection and installation, and the sale component was liable to tax.

Ratio Decidendi: Where a contract for manufacture, supply and installation shows that property in the goods passes on delivery and the installation work is ancillary or separable, the transaction is a divisible composite contract rather than an indivisible works contract.

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