Works contract classification for rolling shutters meant no tax on finished goods and deduction was allowed.

Manufacture of rolling shutters from steel and other base materials supplied or purchased for contractual execution was treated as a works contract rather than a sale of finished goods. The Madras HC applied the later Division Bench approach and held that, where the activity is carried out in the course of a works contract and the statutory conditions are met, tax under section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 is not attracted. The assessee was therefore entitled to the deduction under section 3B(2)(b), and the writ appeal failed.

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Issues: Whether the assessee, engaged in manufacturing rolling shutters from raw materials supplied or purchased in connection with the contract, was liable to pay tax under section 3(2) of the Tamil Nadu General Sales Tax Act, 1959 or entitled to deduction under section 3B(2)(b) of that Act as a works contractor.

Analysis: The dispute turned on the true nature of the activity carried on by the assessee. The Court noted that the assessee purchased steel and other base materials and converted them into rolling shutters in execution of contractual work. In the light of the later Division Bench decisions relied upon, the Court accepted that where the activity is undertaken as works contract and the raw materials are used in that process, the assessee is not liable to be taxed on the finished goods under section 3(2) and is entitled to the deduction contemplated by section 3B(2)(b).

Conclusion: The assessee was not liable to pay tax under section 3(2) and was entitled to deduction under section 3B(2)(b).

Final Conclusion: The writ appeal failed, and the order allowing the writ petition and granting relief to the assessee stood affirmed.

Ratio Decidendi: Where the manufacture of goods is carried out in the course of a works contract and the statutory conditions for deduction are satisfied, the transaction is not taxable as a sale of finished goods under section 3(2), and the deduction under section 3B(2)(b) must be allowed.

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