The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed service tax demand and noted that the composite contract involving service and material not to be taxed before 01.06.2007. Revenue on the basis of the show cause notices alleged that the appellant has provided ‘Commercial Construction Services’ as defined under clause (25b) of Section 65 & classified under sub-clause (zzq) of clause (105) of Section 65 of the Act, form September 2004 to September 2006 without taking any ST registration number, nor filed ST-3 returns as prescribed under the Finance Act, 2004.
The counsel for the appellant submitted that in the present case, the Respondent has confirmed the demand of Service Tax under the taxable head of construction services, whereas the construction services provided by the appellant are in the nature of composite services involving supply of material and the composite contract was not vivisect able and that in the order-in-original, the adjudicating authority has admitted that the appellant had provided services along with material to Nestle India Ltd. under a Works Contract.
The counsel further submitted that the issue regarding taxability of composite contract prior to 01.06.2007 has been decided by the Supreme Court in the case of Commissioner of Central Excise & Customs, Kerala Vs. M/s Larsen & Toubro Ltd. cited wherein the Apex Court has held that composite contracts were not taxable under Service Tax prior to 01.06.2007.
A Two-Member Bench of the Tribunal comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “Further, we find that this issue has been settled by the Apex Court in the case of Commissioner of Central Excise & Customs, Kerala Vs. M/s Larsen & Toubro Ltd. cited wherein it has been categorically held by the Apex Court that composite contract were not taxable under service tax prior to 01.06.2007. By following the ratio of the above said decision, we hold that in the present case, it was a composite contract involving service and material and therefore, could not have been taxed before 01.06.2007 i.e. before enactment of works contracts service.”