Works contract taxation requires contract-wise segregation of materials before applying any concessional rate to turnover.

In a works contract involving multiple materials taxed at different rates, the concessional rate for plywood could not be applied to the entire turnover merely because plywood was one input. The taxable value had to be segregated contract-wise and material-wise, with only the portion properly referable to plywood or other qualifying items eligible for the lower rate and the balance taxed at the higher rate. As the record lacked contract-wise accounts showing purchases, use and closing stock, the assessment and appellate orders were set aside and the matter remitted for fresh assessment on proper records.

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Issues: (i) whether the turnover arising from works contracts involving plywood used in interior decoration work was taxable at 2% under the Fifth Schedule or at 12% under the Fourth Schedule; (ii) whether the assessment required to be set aside and redone on the basis of proper records showing purchase, use, and closing stock of materials.

Issue (i): Whether the turnover arising from works contracts involving plywood used in interior decoration work was taxable at 2% under the Fifth Schedule or at 12% under the Fourth Schedule.

Analysis: The turnover in question arose from interior decoration works involving several kinds of materials purchased and used at different stages and attracting different rates of tax. The lower rate applicable to plywood at the last sale point could not be applied to the entire works contract turnover merely because plywood was one of the materials used. The applicable rate depended on the nature of each contract and on whether plywood was supplied in the same form or after conversion, and the taxable turnover attributable to plywood had to be separated from the turnover attributable to other materials.

Conclusion: The entire works contract turnover was not entitled to assessment at 2%; only the portion properly referable to plywood or other qualifying items could get the benefit of the lower rate, and the rest remained taxable at the higher rate.

Issue (ii): Whether the assessment required to be set aside and redone on the basis of proper records showing purchase, use, and closing stock of materials.

Analysis: The record did not show that any individual contract had been examined with reference to the relevant accounts. Without production of documents showing purchases, use, and closing stock, the assessing authority could not correctly bifurcate the turnover attributable to plywood and other materials. The earlier authorities had not considered the claim on the basis of such records, so a fresh assessment was necessary after allowing production of work orders, purchase bills, and other accounts.

Conclusion: The assessment and the appellate orders were set aside and the matter was remitted for fresh assessment on production of the relevant records.

Final Conclusion: The controversy was not finally determined on the existing record and was sent back for reconsideration by the assessing authority, with the tax liability to be recomputed on the basis of contract-wise and account-based verification.

Ratio Decidendi: In a works contract involving multiple materials taxable at different rates, the concessional rate applicable to one material cannot be extended to the entire turnover unless the assessee furnishes contract-wise accounts enabling proper segregation of the taxable value attributable to each material.

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