Works contract indivisibility bars tax levy where lump-sum contract covers material and labour without segregation.

A pipeline-laying works contract for a consolidated lump-sum covering material and labour could not be split into separate supply and work components where the agreement itself did not segregate them. The contract, not ancillary tender specifications, governed characterization of the transaction, so the notification dated 27.4.1987 was inapplicable to this type of contract. On that basis, the finding sustaining taxability was unsustainable and the levy of tax on the assessee failed.

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Issues: Whether the works contract executed by the assessee could be treated as a divisible contract so as to sustain taxability, and whether the notification dated 27.4.1987 applied to the contract in question.

Analysis: The agreement between the parties provided for a consolidated lump-sum payment covering both material and labour for laying the pipeline. The contract clauses did not segregate the supply of goods from the execution of work. The finding of divisibility was based on the work specification and tender, but the contract itself was the governing document for determining the nature of the transaction. In view of the contractual terms, the contract could not be artificially split into supply and works components for the purpose of tax under the notification.

Conclusion: The contract was not divisible, and the notification dated 27.4.1987 was not applicable. The finding sustaining taxability was unsustainable.

Final Conclusion: The revision succeeded, the Tribunal's order was set aside, and the levy of tax on the assessee failed.

Ratio Decidendi: Where a written contract provides for a consolidated consideration covering both material and labour without segregation, the transaction cannot be split on the basis of ancillary specifications to impose tax under a notification meant for a different class of works contract.

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