Works contract classification fails where pre-stressed concrete sleepers are regularly manufactured and supplied as ordinary sale goods.

Supply of pre-stressed concrete sleepers manufactured for Indian Railways and other dealers was not a works contract under Section 2(t) of the APGST Act, 1957, because the decisive test is whether the goods are created specifically under the agreement and not merely manufactured in the ordinary course of business. The record did not show agreement-specific manufacture, and the sleepers were supplied regularly to Indian Railways and other dealers. Manufacture to customer specifications was relevant but, on these facts, insufficient to convert the transaction into a works contract. The turnover was therefore taxable as a contract of sale, and the assessment applying the works contract rate was set aside.

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Issues: Whether the supply of pre-stressed concrete sleepers manufactured by the petitioner for Indian Railways and other dealers constituted a works contract under Section 2(t) of the APGST Act, 1957, or a sale liable to tax at the lower rate.

Analysis: The inclusive definition of works contract covers agreements involving construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair or commissioning of movable or immovable property. The decisive enquiry is whether the goods are created or manufactured specifically under the agreement so as to bring the transaction within that definition, or whether they are products regularly manufactured in the ordinary course of business. The assessment order did not record findings showing that the sleepers were made exclusively as an agreement-specific manufacture. The materials on record showed regular manufacture and supply, not only to Indian Railways but also to other dealers. Though manufacture to customer specifications is a relevant factor, it was insufficient, on these facts, to convert the transaction into a works contract.

Conclusion: The supply of PSC sleepers was not a works contract; it was a contract of sale. The assessment treating the turnover relating to sleepers as taxable at the works contract rate was unsustainable and was set aside.

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