2026-VIL-1575-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax – Works Contract – Taxability Prior to 01.06.2007 – Appellant carried out execution of civil contracts for construction of buildings and tower foundations for government departments and religious institutions. Service tax authority demanded service tax under the categories of Commercial or Industrial Construction Service, Erection, Commissioning or Installation Service for the period from 2004-2005 to March 2006. The Adjudication Authority confirmed the demand and imposed penalties. The Commissioner (Appeals) upheld the demand and penalties – Whether the composite contract entered by the Appellant including supply of material and labour should be classified as Works Contract Service and whether service tax was chargeable on such activities during the period prior to 01.06.2007 when Works Contract Service was introduced in the service tax regime – HELD – The composite contract entered by the Appellant including supply of material is falling under the category of Works Contract and no demand is sustainable before the introduction of service tax on works contract with effect from 01.06.2007. The issue is settled as per the decision of Hon'ble Supreme Court in Commissioner v. M/s Larsen & Toubro holding that composite contracts including supply of material are taxable under Works Contract Service. Service tax on works contracts was introduced only from 01.06.2007 and therefore, the demand made prior to 01.06.2007 for services rendered on construction of government buildings and civil structures is unsustainable. The demand made by invoking extended period of limitation for the period prior to 01.06.2007 is accordingly set aside. The penalties imposed under Sections 77 and 78 of the Finance Act, 1994 for the period prior to 01.06.2007 are also set aside as the demand itself is unsustainable. However, the appropriation of the amount paid by the Appellant with interest from 01.06.2007 to March 2008 under the category of Works Contract is upheld as the service was taxable from that date – The impugned order is modified to this extent – Appeal is partially allowed with consequential relief in accordance with law
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