### Fabrication and Erection Costs in Works Contracts Form Part of Taxable Value of Transformed Unspecified Goods Summary of the Judgment: The Patna High Court dismissed writ petitions filed by Ircon International Ltd., affirming that structural steel converted into "steel superstructure/triangulated girders" through fabrication, transportation, and erection constitutes a commercially distinct, unspecified commodity. The Court ruled that under the Bihar Value Added Tax Act, 2005, and Article 366(29-A)(b) of the Constitution, the taxable event occurs at the point of incorporation into the work. Consequently, costs associated with transforming raw material into the final structure (fabrication and related charges) are not deductible as labour but form part of the taxable value of the "unspecified goods," attracting a higher tax rate of 13.5% rather than the 5% applicable to declared goods (iron and steel). The Court also clarified that the principle of *res judicata* does not apply to taxation proceedings across different assessment years.

The Petitioner, a Public Limited Company, was awarded a works contract by East Central Railways for the construction of a rail-cum-road bridge superstructure across the River Ganga

The Petitioner filed VAT returns for the period 2014-15, claiming its turnover related to "iron and steel" (declared goods) taxable at 5%

The Respondent No. 2 (Assessing Authority) issued a notice under Section 31 of the Bihar Value Added Tax (BVAT) Act, 2005, for reassessment

The Authority held that the Petitioner did not merely sell "iron and steel" but transferred "fabricated steel structures/girders," which are unspecified goods taxable at 13.5%

Consequently, the Respondent disallowed deductions for fabrication and transportation costs amounting to ₹1,72,15,39,774.61, treating them as part of the cost of the final taxable commodity

1. Whether the goods transferred in the execution of the works contract were "iron and steel" under Section 14(iv) of the CST Act or a distinct, unspecified commodity (steel superstructure) taxable at a higher rate

2. Whether the Assessing Authority was justified in disallowing deductions for fabrication, transportation, and erection charges under the BVAT Act

3. Whether the reassessment under Section 31 of the BVAT Act was valid in the absence of a "change of opinion" or failure of disclosure

The court applied Section 14 and 15 of the Central Sales Tax (CST) Act, 1956, which defines "declared goods" of special importance and caps their tax rate

It relied on Article 366(29-A)(b) of the Constitution regarding the "deemed sale" of goods in works contracts

Section 2(zc) of the BVAT Act

Key precedents included *Gannon Dunkerley and Co. v. State of Rajasthan* (1993) 1 SCC 364, which established that the value of goods at the time of incorporation into the works (not cost of acquisition) is the measure for tax

*B. Narasamma v. Dy. Commr. Commercial Taxes* (2016) 15 SCC 167, regarding the point of accretion

The "transformation and marketability" tests from *Quippo Energy Ltd. v. Commr. of Central Excise* (2025) 152 GSTR 264 were also applied

The court reasoned that the taxable event in a works contract is the transfer of property at the time of incorporation into the structure

Upon review of the contract, the court found that structural steel underwent extensive fabrication in specialized workshops to become "triangulated steel girders"

This process satisfied the "transformation test" because the raw iron and steel lost its original identity to become a distinct commercial commodity with a specific functional utility for the bridge

Since "bridge superstructures" are not listed as declared goods under Section 14 of the CST Act, they fall under the "unspecified goods" category under Section 14(1)(d) of the BVAT Act, attracting a 13.5% rate

Following *Gannon Dunkerley*, the court held that while labor for incorporation is deductible, the costs incurred *prior* to the transfer (fabrication, transportation to site, and assembly) form part of the value of the fabricated goods at the time of their deemed sale/accretion to the immovable property

The disallowance of ₹172.15 Crores in deductions was upheld as these costs were embedded in the value of the goods at the point of incorporation

The court further held that the reassessment was not a mere change of opinion but a correction of an under-assessment regarding the nature of the goods

No relief was granted to the Petitioner