Composite supply in transformer repair: replacement parts do not make the activity job work, and repair service remains the principal supply.
Repairing and servicing transformers with replacement of worn or burnt parts is not job work where the supply is not confined to treatment or process on another person's goods and the value of goods forms a substantial part of the transaction. The activity is instead a composite supply when the goods and services are naturally bundled, with repair service as the principal supply because the dominant element is the service of restoring the transformers rather than transfer of title in spare parts. The service is classifiable as repair of transformers under SAC 998719 and taxable under the applicable rate entry; separate charging of goods and services may affect that treatment.
Issues: (i) Whether repairing and servicing of transformers owned by another person constitutes job work; (ii) whether such activity is a composite supply and, if so, what is the principal supply and applicable classification.
Issue (i): Whether repairing and servicing of transformers owned by another person constitutes job work.
Analysis: Job work under section 2(68) requires treatment or process undertaken on goods belonging to another registered person. The activity in question involved replacement of worn out or burnt materials and, therefore, transfer of property in goods. The supply was not confined to labour or skill alone, and the value of goods formed a major portion of the supply. On that basis, the activity did not answer the statutory description of job work.
Conclusion: It is not job work.
Issue (ii): Whether such activity is a composite supply and, if so, what is the principal supply and applicable classification.
Analysis: Repairing and servicing of defective transformers was treated as a supply of goods and services naturally bundled in the ordinary course of business. The replacement parts were ancillary to the main object of repairing the transformers, and the dominant element was the service of repair, not transfer of title in the spare parts. The service was held classifiable as repair of transformers under SAC 998719 and taxable under Sl No. 25(ii) of the applicable rate notification.
Conclusion: The activity is a composite supply unless the contract separately charges goods and services, and the principal supply is the service of repair of transformers.
Final Conclusion: The ruling accepts composite-supply treatment with service as the principal supply, but rejects characterization of the activity as job work.
Ratio Decidendi: Where repair of movable goods involves replacement of parts as an incidental element, the supply is not job work if the value of goods is substantial, and it is a composite supply with repair service as the principal supply when the service element predominates.
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