Works contract classification turns on fabrication as a distinct element, bringing the plant contract within the lower composition rate.

A works contract for fabrication and installation of a water chilling plant had to be classified by its actual and essential components under the composition scheme in Section 55A of the Sales Tax Act, 1969. Because the work order required the plant to be designed and fabricated to specified parameters, with layout details and foundation drawings to be supplied, the contract was not treated as mere installation. The Court held that fabrication and installation were distinct elements, that the description of the works contract controlled the applicable composition rate, and that a taxing entry must be construed on its clear language. The contract therefore fell within Entry 5 and attracted tax at 5%.

---

---

Issues: Whether the assessee's works contract for fabrication and installation of a water chilling plant fell under Entry 5 of the composition notification attracting tax at 5%, or under Entry 2 attracting tax at 15%.

Analysis: The composition scheme under Section 55A of the Sales Tax Act, 1969 required the rate to be fixed with reference to the nature of the works contract. The work order showed that the plant was not a readymade installation but was to be designed and fabricated to specified parameters, with layout details and foundation drawings to be supplied. The expression "fabrication" in Entry 5 therefore had decisive significance. The Court held that fabrication and installation were distinct elements, that the contract could not be reduced to mere installation, and that the description of the works contract had to control the rate of composition. A taxing entry must be construed on its clear language, the burden being on the revenue to show the higher levy.

Conclusion: The works contract fell under Entry 5 and was taxable at 5%.

Ratio Decidendi: Where a taxing notification fixes composition rates by reference to the nature of the works contract, the contract must be classified according to its actual and essential components, and a distinct element of fabrication cannot be disregarded in favour of a broader installation entry.

---