The classification of assembly and fabrication as a works contract rather than a sale of goods is upheld.

THE HONOURABLE DR.JUSTICE ANITA SUMANTH and THE HONOURABLE MR.JUSTICE MUMMINENI SUDHEER KUMAR T.C.No.60 of 2025 The State of Tamil Nadu, Represented by the Joint Commissioner (CT), Erode Division (Erstwhile Salem Division), Erode. .. Petitioner vs Tvl.Periyasamy Hydraulic Equipments, No.24-A, P.N.Road, Kunnathur. .. Respondent Prayer : Petition filed under Section 60 of the TNVAT Act, 2006 to set aside the order dated 12.10.2023 passed by the Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench) Coimbatore in CTSA.No.44 of 2018 and confirm the order passed by the Assistant Commissioner (ST), Perundurai Assessment Circle dated 30.10.2017.

For Petitioner : Mr.C.Harsha Raj Special Government Pleader ORDER (Delivered by Dr. ANITA SUMANTH.,J)

The State is in appeal challenging the order passed by the Tamil Nadu Sales Tax Appellate Tribunal (in short 'Tribunal'/'STAT') dated

12.10.2023 raising the following substantial question of law:-

'Whether the order of the learned Tribunal in treating Rig Mounting as 'works contract' stands vitiated in as much as it fails to take into account the relevant facts and has taken into account facts that are wholly irrelevant in deciding whether mounting of Rig would amount to 'works contract' in terms of Section 5 of the TNVAT Act, 2006 ?'

2. The order of the Tribunal is common to assessment years 2011-

12 to 2015-16. However, the present Tax Case pertains to assessment year 2011-12 only.

3. The issue that arises for consideration is the applicable rate of tax in respect of a transaction of fabrication work involving assembling of chassis, lorry and compressor, together constituting a Rig. The assessee had adopted the stand at the time of assessment that the transaction involved works contract insofar as the activity engaged in by it was only fabrication work. Essentially the assessee had fabricated the body of the Rig, encompassing the lorry and compressors supplied by the purchaser on a moulding iron sheet and fitted the same on a chassis.

4. The assessee had relied on Circular No.VAT Cell/20344/2007 dated 25.05.2007 (VCC No.582) that reads as follows:

'Water borehole drilling rigs: Water borehole drilling rigs are taxable at 4% vide entry No.138 of Part-B to First Schedule to TNVAT Act 2006 with effect from 01.01.2007.'

5. The Assessing Authority, however, did not concur with the assessee on the ground that the aforesaid clarification had not been issued specifically in the case of the assessee. On the contrary, he relied the Advance Ruling issued by the Commissioner of Commercial Taxes in ACAAR No.080/2013-14/dated 22.07.2014 to Hydraulic Machinery that clarifying that any kind of machinery which fits the description of Hydraulic Machinery and that did not find place in First or Fourth Schedules would be liable to tax at the rate of 14.5%.

6. Hence, he adopted the rate of 14% as against the rate of 5% as claimed by the assessee. The assessment came to be completed by the Assessing Authority relying on the aforesaid Advance Ruling as well as the decision in Nokia India Pvt. Ltd. V. State of Punjab (2011-12 (16) KCTJ 16) and was carried in appeal, where it was reversed by the Appellate Deputy Commissioner which order was confirmed by the Tribunal as well.

7. Thus, the State, before us, is faced with two concurrent orders where, both the first and second appellate authorities concur on the position that the transaction engaged in by the assessee would only be one of 'works contract' as it was a mere assembly/fabrication of the body of a Rig where the lorry and compressor had been supplied by the purchaser.

8. To be noted, there is no factual dispute on the position that what has been undertaken by the assessee is only fabrication and that the iron sheets, lorry and compressor have, in fact, been supplied only by the con