2026-VIL-459-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Laying of optical fibre cables for Railways, Vivisection of Contract - Works Contract Service (WCS) or Business Support Service (BSS) - Laying of optical fibre cables and related telecom work including provisions for establishment charges, procurement charges, and project management charges – Receipt of consideration by way of 13% over and above the cost - Department alleged that the 13% charges constituted a separate BSS, while the appellant claimed it was a composite WCS – HELD - The contract should be read as a whole and cannot be vivisected into different services. The scope of work included material, labour, supervision, and administration charges - For execution of the work, the appellants were either awarding this work to some other sub-contractor or were undertaking certain work on their own. Since the work order was essentially OFC laying and maintenance and therefore, there is clearly material portion involved. It is not correct for the department to pick one clause out of the said composite contract to allege that they were separately providing BSS. From reading of the entire contract, it does not appear that the contract was given only for the purpose of supervision or for any support service. It is essentially given for the execution of entire work - The 13% charges are a mode of cost determination, not consideration for a separate BSS. The nature of work allotted to the appellant is a composite works contract, which cannot be vivisected into two parts viz., WCS and BSS. Even otherwise, the predominance of contract is works contract, which is imparting essential character to the work allotted. Therefore, once it is considered as WCS, it will exclude the works contract provided to Railways and therefore, to that extent, it will not be subjected to any service tax under the category of WCS – The demand is set aside and the appeal is allowed
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