Dominant nature test treats wig supply as sale of goods, with ancillary fitting and maintenance remaining incidental service elements.

The dominant character of the transaction was the supply of the wig, not a taxable service under the Finance Act, 1994. Manufacturing the wig was the central element, while scalp preparation, fitment, colouring and maintenance were only incidental steps that facilitated use of the product. Because the wig had already been treated as manufactured goods and the fitting activity was merely adjunct to its supply, the assessment treating the entire turnover as service was unsustainable. The transaction was therefore to be classified by its predominant nature as a sale of goods, with only incidental service elements.

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Issues: Whether the activity of manufacturing, fitting and maintaining a wig for clients is a sale of goods or a taxable service under the Finance Act, 1994.

Analysis: The transaction was examined on its intrinsic character. The wig was the central and indispensable component of the arrangement, while scalp preparation, fitment, colouring and maintenance were only auxiliary steps facilitating use of the product. The activity of manufacturing the wig had already been treated as manufacture for excise purposes, and the fitting process could be availed independently only as an adjunct to the supply of the wig. Applying the distinction between sale and service, the dominant nature of the transaction was the supply of the wig, not rendition of service.

Conclusion: The impugned assessment treating the entire turnover as taxable service was unsustainable, and the issue is decided in favour of the assessee.

Final Conclusion: The assessment order was set aside and the writ petition succeeded because the transaction was held to be predominantly a sale of goods with only incidental service elements.

Ratio Decidendi: Where a transaction is dominated by the supply of a product and the associated activities merely facilitate its use, the transaction is to be treated according to its dominant character and not as a taxable service merely because ancillary services are involved.

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