Turnkey works contract treatment denied exemption for bio-gas plant components and penalty reduction.

A turnkey contract to design, fabricate, erect and commission an effluent treatment plant was treated as an integrated works contract, not a separate supply of exempt bio-gas plant goods. The bio-gas plant formed only one component within the overall execution of the plant, and the parts and components used in that process could not be excluded from taxable turnover or penalty computation on the footing that the bio-gas plant was exempt. The claim for reduction of penalty to the extent of the alleged bio-gas plant value was rejected.

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Issues: Whether the value of the bio-gas plant could be excluded from the taxable turnover or penalty computation on the footing that bio-gas plant was exempt from tax, when the contract was for establishment of an effluent treatment plant on turnkey basis.

Analysis: The contract required the contractor to design, fabricate, erect and commission the effluent treatment plant at site, and the bio-gas plant was only one component to be fabricated and commissioned as part of that integrated works contract. It was not a separate bio-gas plant supplied as independent goods; rather, various parts and components were used in execution of the works contract. In such a situation, the exemption relating to bio-gas plant as goods did not apply to the value of the components used in the turnkey execution of the plant.

Conclusion: The claim for reduction of penalty to the extent of the alleged value of bio-gas plant was rejected.

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