Background: Appellant proposes to enter into two agreements: (i) for supply of solar power generating system (viz., supply of goods); and (ii) erection, testing and commissioning (viz., supply of services for setting up the system). As per the service agreement, the appellant accepts responsibility for successful completion & commissioning of the plant and 5% of the payment will be made after successful plant completion.

Issue: Should these be treated as two separate contracts or is it a single indivisible contract? Can this be construed as a composite supply? Whether the erection of solar power generation system can be treated as erection of immovable property?

Ruling: Goods supplied by the appellant are specifically for erection of the system. Appellant is entrusted with the work mainly for their expertise in installation. The terms clearly indicate that the risk shifts to the buyer only after date of commercial operation and not on supply of goods. Similarly, the terms of supply clearly indicate that the timeline is not only for supply of goods but also for erection, testing and commissioning. The function related to supply of goods and rendition of services for erection, etc. are integrally connected & interdependent. Hence, it should be treated as a single indivisible contract for setting up the solar power generating plant.

The entire transaction of providing goods and services are naturally bundled. It is natural and also a practice that a contractor, who supplies the goods, will also supply services along with it. Hence, it is a clear case of composite supply of goods and installation thereof.

When machinery is embedded to earth with no visible intention to dismantle them, and they are intended to be used for a fairly long period of time, they are "immovable property". It may be true that a solar plant can be moved from once place to another, but that is not the intent of the parties. Hence, the agreement leads to erection of a solar power generating system which is immovable property.