Recently in Thirumalai Ready Mix Concrete vs. State of Puducherry, the High Court held that the mere absence of the word ‘Works contract’ in the Agreement, the transactions shall not be treated as ‘Sale’. The transaction of providing ready mix concrete mixture along with material and labour shall be regarded as composite work contract.   

Facts of the case:

The appellant was a manufacturer of the ready mix cement concrete. It also provided materials and men to lay concrete mixture on area specified by the purchaser. The appellant used to treat the transaction as a work contact and claimed exemption on this.

The assessment made was revised by the Department stating that supply of ready mix concrete was not Works contract and entire turnover was liable to assessed to tax at 3 per cent. In this regard, the appellant produced the copies of the Agreement executed between the dealer and the purchaser. However, the Assessing Officer rejected the contention of the Appellant. As the Appellant could not produce the invoice copy showing price of the material and labour charges separately, the assessment was completed by treating the transaction as ‘sale’.

The appellant went to the Commissioner. The said appeal was rejected by the Commissioner and treated the transaction as ‘sale’.

Thereafter, the appeal was filed to the Sales Tax Appellate Tribunal. The Tribunal, after scrutiny of invoices and the agreement, stated that the Agreement did not include the word ‘Works contract’, the transaction is to be treated as ‘Sale’.

Being aggrieved, the appellant appealed to the High Court.

It was held that:

The High Court highlighted the main features of the Agreement:

• The nature of works entrusted to the Appellant is not restricted to supply of ready mix concrete mixture only. The Appellant was to provide materials and labour in laying concrete mixture on the area specified by the purchaser.
• The supply had to be done through staff of the Appellant and that the Appellant was responsible for quality of the concrete and the laying also.
• In the event of any leakage arising therefrom in future, the responsibility was cast upon the Appellant to compensate the same.
• The Tribunal’s view that on the mere absence of the word ‘Works contract’ in the Agreement, the transactions have to be treated as ‘Sale’ is not justifiable ground.

Thus, the High Court held that the transaction is a composite Works contract involving material and labour.

Hence, the appeal was in favour of the Appellant.