Audit objection cannot reopen merged assessments; integrated turnkey supply and installation contract qualifies as a works contract.

Reassessment under Section 12(8) of the Orissa Sales Tax Act could not be sustained where the original assessment had already attained appellate finality and merged in the appellate order; an audit objection alone could not provide a fresh basis for reopening. The court also treated the turnkey arrangement for supply, erection, installation and commissioning of a humidification plant as a works contract, not a divisible sale, because the transaction's dominant character was execution of work with integrated installation and allied activities. Both issues were decided in favour of the assessee.

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Issues: (i) Whether reassessment under Section 12(8) of the Orissa Sales Tax Act, 1947 could be sustained on the basis of the audit objection despite prior appellate finality and merger of the original assessment. (ii) Whether the turnkey supply, erection, installation and commissioning agreement amounted to a works contract or a divisible contract of sale for the purpose of sales tax.

Issue (i): Whether reassessment under Section 12(8) of the Orissa Sales Tax Act, 1947 could be sustained on the basis of the audit objection despite prior appellate finality and merger of the original assessment.

Analysis: The assessment for the relevant year had already travelled through the appellate hierarchy and had attained finality. Once the original assessment stood merged in the appellate order, reopening the matter under Section 12(8) on the basis of the audit objection was not justified. The audit note could not lawfully constitute a fresh foundation for reassessment in the circumstances of the case.

Conclusion: The reassessment was not sustainable and this issue is decided in favour of the assessee.

Issue (ii): Whether the turnkey supply, erection, installation and commissioning agreement amounted to a works contract or a divisible contract of sale for the purpose of sales tax.

Analysis: The agreement involved integrated supply, erection, installation and commissioning of the humidification plant, along with foundation and allied execution work. On the facts, the dominant character of the transaction was execution of works and not a mere sale of goods. The earlier decisions in the assessee's own case on similar contracts were also relied upon as supporting the same legal characterisation.

Conclusion: The transaction was held to be a works contract and not a divisible contract of sale, and this issue is decided in favour of the assessee.

Final Conclusion: The revision succeeded because the reassessment could not be sustained and the contract was treated as a works contract attracting the lower tax treatment applied in the assessee's favour.

Ratio Decidendi: A reassessment cannot be founded merely on an audit objection where the original assessment has merged in appellate proceedings, and an integrated turnkey contract for supply, erection, installation and commissioning is to be treated as a works contract when its dominant character is execution of work rather than a sale of goods.

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