Works contract classification for bus body fabrication prevailed over sale treatment under composite supply principles.

Fabrication and manufacture of bus bodies on chassis supplied by the corporation was treated as a works contract under the Rajasthan Value Added Tax Act, 2003, read with Article 366(29-A)(b). The contract was composite, involving fabrication, assembling, erection, installation and fitting out, and the presence of supplied chassis, seats and air-conditioning equipment did not convert it into a sale. The dominant nature test was found inapplicable, and the latest Constitution Bench ruling on works contract was applied as governing law. On that basis, the contract was characterised as a works contract rather than a sale, and the assessee succeeded on the question of law.

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Issues: Whether the contract for fabrication and manufacture of bus bodies on chassis supplied by the corporation was a works contract or a sale.

Analysis: The contract involved fabrication, assembling, erection, installation, fitting out and related work on chassis supplied by the corporation. The statutory definition of works contract under the Rajasthan Value Added Tax Act, 2003, read with Article 366(29-A)(b) of the Constitution of India, was applied in the light of the law laid down that a composite contract does not cease to be a works contract merely because goods are supplied by one party and additional obligations such as fitments or specifications are also present. The Court held that the dominant nature test is not applicable, and that ownership of the chassis, seats and air-conditioning system remaining with the corporation did not alter the character of the contract. The latest Constitution Bench ruling on works contract was treated as governing.

Conclusion: The contract was held to be a works contract and not a sale, and the assessee succeeded on the question of law.

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