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TMI Blog2014 (1) TMI 1558X X X X Extracts X X X X X X X X Extracts X X X X ..... idual Entry 97 of List I of the Seventh Schedule to the Constitution. We do not find any encroachment by Parliament on the powers of the State Legislature to impose a tax on the sale of goods. The provisions clearly relate only to the service component of the composite contracts referred to in the impugned provisions - The grievance of the petitioner with regard to assessment and computation cannot be equated with the challenge to the constitutional validity of the impugned provisions. It is open to the petitioner to raise issues of computation before the appropriate Adjudicating Authority/Appellate Authority and demonstrate the extent to which service tax can be imposed on the services that are provided by them. To be clear, it is open to the petitioner to demonstrate the extent of the service element included in the composite contract and to pay service tax only on that component - petitioner manufactures the ready-mix concrete and either supplies it to third parties or uses it in its own works. It is not the entire ready-mix concrete which is to be taxed under the provisions of service tax but, only the service element in relation to the use of the ready-mix concrete which wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction against the respondent declaring that the production and supply of ready-mix Concrete (RMC), which is covered under the Tariff Item No.3824 50 10 by specifying Nil rate of duty of excise under the Central Excise Tariff Act, 1985 read with Central Excise Act, 1944, is not a taxable service under the Finance Act, 1994, hence service tax collected on the same is illegal and unconstitutional; C) issue a writ of certiorari/mandamus or any other appropriate writ/order/direction against the respondent declaring that the works contract started prior to 01.06.2007 are also eligible to pay the tax under the works contract services under Section 65 (105) (zzzza) of the Finance Act, 1994 read with Rules made thereunder by Notification No.32/2007-ST, dated 22.05.2007; D) issue such other writ/order/direction against the respondent for refund of the service tax illegally collected from the petitioner for the period from September 2004 till May 2007; E) issue such other writ/order/direction and further orders as the Hon ble Court may deem just and proper in the facts and circumstances of the case. 3. The petitioner in YFC Projects Pvt. Ltd. is, inter alia, engaged in the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ators; or (f) such other similar services . xxxx xxxx xxxx xxxx 10. That the respondent amended the Finance Act, 1994 w.e.f. 10.09.2004 through the Finance (No.2) Act, 2004 by introducing another taxable services as Construction Service (later on renamed as Commercial or Industrial Construction Services ) under sub-clause (zzq) of clause (105) read with clause (25b) of Section 65 of Chapter V of the Finance Act, 1994. To enlarge the scope of this taxable service, aforesaid provisions were amended by the Finance Act, 2005, w.e.f. 16.06.2005 to include completion and finishing services and construction of pipeline under the service tax net. The aforesaid provisions, as amended time to time, are reproduced as under: Section 65 (105)(zzq): Taxable service means any service provided or to be provided, to any person, by any other person, in relation to commercial or industrial construction service. Section 65(25b): commercial or industrial construction service means - (a) construction of a new building or a civil structure or a part thereof; or (b) construction of pipeline or conduit; or (c) completion and finishing services such as glazing, plastering, pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effluent treatment system, located within a premises and the layout of such premises is approved by an authority under any law for the time being in force, but does not include a complex which is constructed by a person directly engaging any other person for designing of planning of the layout, and the construction of such complex is intended for personal use as residence by such person. Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this clause,- (a) personal use includes permitting the complex for use as residence by another person on rent or without consideration; (b) residential unit means a single house or a single apartment intended for use as a place of residence. xxxx xxxx xxxx xxxx 16. That the respondent issued Notification No.1/2006-ST, 01.03.2006 to consolidate the various exemption Notifications issued under service tax including aforesaid Notification No.19/2003-ST, dated 21.08.2003, Notification No.15/2004-ST, dated 10.09.2004 and Notification No.18/2005-ST, dated 07.06.2005. 5. It may be pointed out at this juncture that w.e.f. 01.06.2007 a further amendment to the Finance Act, 1994 was made whereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said decision reads as under:- 2. Contentions of the petitioners can be crystallized as under:- (i) Service tax levied from time to time by Finance Act, 1994 and subsequent amendments is in exercise of power under residual entry 97 of List I of the Seventh Schedule of the Constitution of India. It is levied on taxable service as defined in Section 65(105) read with definition clauses. (ii) Service tax is applicable only in respect of service element and the Central Government does not have any power under the residual entry to impose tax on entries under List II of the Seventh Schedule of the Constitution. (iii) The Parliament cannot impose service tax on material or goods used in execution of works/composite contract. Central Sales Tax is payable and levied on material used in works contract with effect from 11th May, 2002 after amendment of the Central Sales Tax Act, 1956 vide Finance Act, 2002. (iv) The composite or works contracts are excluded from the ambit of levy of service tax under Section 65(105)(zzq) and (zzzh). (v) Section 65(105)(zzq) and (zzzh) apply only to service contracts and not to composite or works contract, therefore, exemption unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vice provider for such services provided or to be provided . Service tax can be charged only for the specified taxable services as defined in sub-clauses of Section 65(105). Tax can be only on the value of services and not beyond. There is no provision for a notional value or to enable the authorities to reduce or subtract value of material or goods. The gross amount charged or the value of service cannot include value of goods and material supplied/used. (xi) Vagueness or uncertainty makes a levy invalid and illegal. 8. It was submitted by Mr Mehra that the very issue with regard to the applicability of service tax only on the service element had been specifically raised in that batch of matters. In fact point Nos. (ii), (iii) and (iv) are specific to that aspect of the matter. 9. Adverting further to the said decision in G.D. Builders (supra), Mr Mehra also drew our attention to the following paragraphs:- 17. It was accepted and stated on instructions by the respondents that the notifications in question (or rather partly in question) are optional and an assessee need not take benefit of the said notifications, if he so desires, but the service tax is to be levie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ower to levy sales tax or value added tax on the sales of goods is with the State Governments. xxxx xxxx xxxx xxxx 31. The contention of the petitioners that the impugned notifications override the statutory provisions contained in Section 65(105), which defines the term taxable service , Section 66, which it is claimed is a charging section, and Section 67, the valuation provisions of the Finance Act, 1994, has to be rejected. We have, as already stated above, rejected the argument of the petitioners on bifurcation/vivisect and held that as per the provisions of Section 65(105)(zzq) and (zzzh), service tax is payable and chargeable on the service element of the contract for construction of industrial and commercial complexes and contract for construction of complexes as specified and in case of a composite contract, the service element should be bifurcated and ascertained and then taxed. The contention that the petitioners are paying sales tax or VAT on material in relation to execution of the contract under composite contracts for construction of industrial/commercial complexes and construction contracts as specified under Section 65(105) (zzq) and (zzzh) therefore fails ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. The aforesaid judgments and discussion highlight the following facets/principles:- (1) After 46th Amendment to the Constitution, composite contracts can be bifurcated to compute value of the goods sold/supplied in contracts for construction of buildings with labour and material. The service portion of the composite contracts can be made subject matter of service tax. Aspect doctrine is applied for bifurcating/vivisecting the composite contract. (2) Service tax can be levied on the service component of any contract involving service with sale of goods etc. Computation of service component is a matter of detail and not a matter relating to validity of imposition of service tax. It is procedural and a matter of calculation. Merely because no rules are framed for computation, it does not follow that no tax is leviable. (3) The notifications in question are in alternative and optional. An assessee may take advantage or benefit of the notifications, but cannot be compelled to pay service tax on the proportion or value of a composite contract as per the notification. This is because the formula framed by way of delegated legislation is presumptuous and based on assumption. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the alternative and optional and it was for the assessees to take advantage or benefit of the said notifications , if the assessees so desired. However, it was also made clear that the assessee cannot be compelled to pay service tax on a proportion or value of a composite contract as per the notification. 15. On going through the impugned provisions, we do not find any encroachment by Parliament on the powers of the State Legislature to impose a tax on the sale of goods. The provisions clearly relate only to the service component of the composite contracts referred to in the impugned provisions. 16. The grievance of the petitioner with regard to assessment and computation cannot be equated with the challenge to the constitutional validity of the impugned provisions. It is open to the petitioner to raise issues of computation before the appropriate Adjudicating Authority/Appellate Authority and demonstrate the extent to which service tax can be imposed on the services that are provided by them. To be clear, it is open to the petitioner to demonstrate the extent of the service element included in the composite contract and to pay service tax only on that component. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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