Composite works contract treatment applied to crane supply, with turnover reworked and telescopic spreader assessment sustained.

A contract covering design, manufacture, supply, erection, commissioning and handing over of cranes at site was treated as a composite works contract, not a pure sale, because the transaction was completed only upon erection and commissioning. The assessment was remitted for re-working of taxable turnover and labour/service deduction under the statutory scheme, as the assessee had not produced full books or adequate material to prove actual labour expenditure. The Tribunal's treatment of the additional telescopic spreader was left undisturbed and the assessment on that component was sustained.

---

---

Issues: (i) Whether the contract for design, manufacture, supply, erection, commissioning and handing over of cranes was a composite works contract or a pure sale liable to tax as such; (ii) whether the assessment required re-working of turnover by allowing labour and service deduction under the statutory scheme; (iii) whether the tax treatment of the additional telescopic spreader required interference.

Issue (i): Whether the contract for design, manufacture, supply, erection, commissioning and handing over of cranes was a composite works contract or a pure sale liable to tax as such.

Analysis: The agreement was for a single composite activity involving design, manufacture, supply, erection, commissioning and handing over of cranes at the port site. The machinery was to be assembled and erected at the site, and the sale was completed only upon such erection. On the terms of the contract and the manner of execution, the transaction was not a simple sale but a composite works contract attracting the statutory provisions governing such contracts.

Conclusion: The contract was held to be a composite works contract and not a pure sale.

Issue (ii): Whether the assessment required re-working of turnover by allowing labour and service deduction under the statutory scheme.

Analysis: The assessee did not produce the full books of account or sufficient material to substantiate actual labour expenditure. In the absence of such particulars, the statutory scheme contemplated a standard deduction, and the matter had to be re-determined on that basis. The assessment was therefore set aside to the limited extent necessary for re-working the taxable turnover and the permissible deduction.

Conclusion: The assessment was remitted to the Assessing Officer for re-working the turnover and allowing deduction in accordance with law.

Issue (iii): Whether the tax treatment of the additional telescopic spreader required interference.

Analysis: The order of the Tribunal was found to be correct insofar as the supply of the additional telescopic spreader was concerned, and no reason was found to interfere with that part of the assessment.

Conclusion: The Tribunal's order on the additional telescopic spreader was confirmed.

Final Conclusion: The revision succeeded only in part, with the principal transaction treated as a composite works contract and the matter remitted for limited re-computation, while the assessment relating to the additional telescopic spreader was sustained.

Ratio Decidendi: A contract that, on its terms and execution, combines design, manufacture, supply, erection and commissioning of goods at site is a composite works contract taxable under the provisions governing such contracts, and where actual labour expenditure is not proved, the assessment may be reworked by applying the statutory standard deduction.

---