2017 (8) TMI 522 - HC - Service Tax

Refund claim - works contract - Section 11B of the Central Excise Act, 1944 - Held that - reliance placed in the case of Commissioner, Central Excise & Customs Versus M/s Larsen & Toubro Ltd. and others 2015 (8) TMI 749 - SUPREME COURT , where it was held that works contract cannot be vivisected into various components. It cannot be taxed under different Acts - The work contract service involved in the present case, the Erection, Commissioning and Installation, would not be leviable to service tax as demand was made prior to 1 June 2007. Hence, the Appeal deserves to be allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of Application for refund of service tax under Section 11B of the Central Excise Act, 1944.
2. Interpretation of "Works Contract - Indivisible works contracts" and related principles.
3. Whether works contract can be vivisected into various component services prior to 1/6/2007.
4. Applicability of service tax on indivisible works contracts.
5. Assessment of service tax on Erection, Commissioning, and Installation services.

Analysis:
1. The writ petition challenged the rejection of the Application for refund of service tax under Section 11B of the Central Excise Act, 1944. The Appellant relied on the Supreme Court judgment in Commissioner of C. Ex & Cus., Kerala v. Larsen & Toubro Ltd. The Court emphasized the importance of correctly bifurcating indivisible works contracts to determine the service element subject to service tax.

2. The Court analyzed the interpretation of "Works Contract - Indivisible works contracts" based on the Supreme Court judgment. It highlighted the necessity for specific provisions in the Finance Act, 1994, to levy service tax only on works contracts containing a service element. The judgment clarified that the charge to tax should not extend to the entire cost of establishment, expenses, and profit earned by the contractor.

3. The issue of vivisecting works contracts into component services before 1/6/2007 was addressed. The Court referred to the decision in Larsen & Toubro Ltd vs. Commr. Of S. Tax Delhi, emphasizing that for contracts involving services like Erection, Commissioning, and Installation, service tax liability arises only if the service is covered under specific categories.

4. The Court examined the applicability of service tax on indivisible works contracts, emphasizing that such contracts cannot be vivisected into different components for taxation under various Acts. The judgment highlighted the importance of correctly identifying the service element within a works contract to determine the levy of service tax.

5. Regarding the assessment of service tax on Erection, Commissioning, and Installation services, the Court followed the Supreme Court's findings that such services would not be leviable to service tax if the demand was made prior to 1 June 2007. The Appeal was allowed based on the unsustainable nature of the impugned order and the Supreme Court's precedent on the taxation of works contracts.

In conclusion, the judgment provided a detailed analysis of the issues related to the rejection of the Application for refund, interpretation of works contracts, vivisection of works contracts, applicability of service tax on indivisible works contracts, and assessment of service tax on specific services, ultimately allowing the Central Excise Appeal.