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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 ..... (105) (zzd), Section 65 (105) (zzq) and Section 65 (105) (zzzh) of the Finance Act, 1994. The prayers made in YFC Projects Pvt. Ltd. are as under:- "A) Issue a writ of certiorari/mandamus or any other appropriate writ/order/direction against the respondent by quashing the impugned provisions viz. Section 65(105) (zzd) read with section 65(29) and section 65(39a), Section 65(105)(zzq) read with section 65 (25b), section 65(105)(zzzh) read with section 65(30a) and section 65(91a) of Chapter V of the Finance Act, 1994 as much as levying the service tax on the works contract and Ready-mix Concrete (RMC) as unconstitutional and also quashing of clarification given through Instruction No.C.No.IV/16/56/07/STC dated 7-11-2007 (at Annexure P-3) and under Reference Code No.097.03/04.01.08 of the Circular No.98/1/2008-ST, dated 04.01.2008 (at Annexure P-4) issued by the respondent as illegal and unconstitutional by declaring that "works contract" of the petitioner were not subject to tax prior to the enactment of the Finance Act, 2007 as levied on "works contract services" under Section 65(105)(zzzza) of Chapter V of the Finance Act, 1994; B) issue a writ of certiorari/mandamus or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther pre-fabricated or otherwise under the service tax net. The aforesaid provisions, as amended time to time, are reproduced as under:- Section 65(105) (zzd): "taxable service means any service provided or to be provided, to a customer, by a commissioning and installation agency in relation to erection, commissioning or installation". Section 65(29): "commissioning and installation agency means any agency providing service in relation to erection, commissioning or installation". Section 65(39a): "erection, commissioning or installation" means any service provided by a commissioning and installation agency, in relation to, - (i) Erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise; or (ii) Installation of - (a) electrical and electronic devices, including wirings or fittings therefore; or (b) plumbing, drain laying or other installations for transport of fluids; or (c) hearing, ventilation or air-conditioning including related pipe work, ductwork and sheet metal work; or (d) thermal insulation, sound insulation, fire proofing or water proofing; or (e) lift and escalator, fire escape staircases or travelat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (30a) and (91a) respectively of Clause (105) of Section 65 of the Finance Act, 1994. The aforesaid provisions are reproduced as under: Section 65(105)(zzzh): "Taxable service means any service provided or to be provided, to any person, by any other person, in relation to construction of complex". Section 65(30a): "construction of complex" means - (a) construction of a new residential complex or a part thereof; or (b) completion and finishing services in relation to residential complex such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services; or (c) repair, alteration, renovation or restoration of, or similar services in relation to, residential complex. Section 65 (91a): "residential complex" means any complex comprising of - (i) a building or buildings, having more than twelve residential units; (ii) a common area; and (iii) any one or more of facilities or services such as park, lift, parking space, community hall, common water supply or effluent treatment system, located within a pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the learned counsel for the petitioner is that while this clear-cut bifurcation has been made out in the constitutional scheme, Parliament has encroached upon the exclusive powers of State Legislatures by imposing service tax on a composite contract which necessarily includes the sale of goods component. 7. On the other hand, Mr Rajeeve Mehra, learned Additional Solicitor General of India, submits that Parliament has not encroached upon the powers of the State Legislature, inasmuch as, the provisions which are being impugned in these writ petitions are relatable only to the service component of composite contracts. Mr Mehra submitted that this has also been held by another Division Bench of this Court in G.D. Builders vs. UOI and Anr.; 2013(32) STR 673 (Del). He submitted that the very issues that are sought to be raised by Mr Mittal, who appears on behalf of the petitioners, were also raised before that Bench. This, according to Mr Mehra, would be evident from paragraph 2 of the said decision in G.D. Builders (supra) wherein the contentions of the petitioners in those matters have been crystallized. Paragraph 2 of the said decision reads as under:- "2. Contentions of the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te contracts" and "works contracts" are not covered under Section 65(105)(zzq) or (zzzh) Central Government cannot grant exemption by way of notification. (viii) Service tax has been imposed on services involved in execution of "composite/works contract" only with effect from 1st June, 2007 under Section 65(105)(zzzza). Rule 2A of Service Tax (Determination of Value) Rules, 2006 determines value of services involved in works/composite contracts and it is levied @ 2%, enhanced to 4% with effect from 1st March, 2008. The said levy is not applicable to services covered under Section 65(105)(zzq) and (zzzh). (ix) There is a conflict between Section 65(105)(zzzza), (zzq) and (zzzh) and what is covered by Section 65(105)(zzzza) cannot be covered by Section 65(105)(zzq) and (zzzh). The two sets of provisions cannot co-exist. Subsequent legislation shows that the earlier legislation will not cover composite or works contract. (x) Section 66 is the charging section and provisions of Section 67 are the valuation provisions. Value of taxable services under Section 67 is the gross amount charged by the service provider for such "services provided or to be provided". Service tax can be charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... construction of (residential) complexes" services as specified by Finance Act 2004 and Finance Act 2005 respectively. The new levy imposed by Finance Act 2007 does not indicate or show that works contract relating to "construction of industrial and commercial complexes" or "construction of (residential) complexes" as specified, would be only applicable when the contractor was providing labour or service and was paid for the same and not to composite contracts when the contractor was providing labour/services as well as goods used for construction of industrial and commercial complexes or residential complexes as specified. It would cover any and every contract, when the contractor was only supplying labour or undertaking construction services, whether with or without supply of material, i.e. composite contract. The levy is valid when the provisions of Section 65(105)(zzh) and 65 (105)(zzq) of the Act are satisfied. The only condition and requirement is that the service tax should be levied and imposed on the "service" element and not levied and charged on material or goods used, as the power to levy sales tax or value added tax on the sales of goods is with the State Governments." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory or compulsory. Further, it will apply at the option of an assesee. It will be applicable only when the required parameters are met and is not illegal and ultra vires the Act, i.e. the Finance Act, 1994. It is also not contrary to the charging section/provisions of the Finance Act imposing levy of service tax. The aim and purpose of the said notifications is to provide a convenient, alternative, optional and hassle free method for payment of service tax, provided the requirements mentioned in the notifications are satisfied.................." "33. When the charging provisions are attracted, question of computation or measure to compute tax would arise and value of taxable service has to be determined. There is a well settled distinction between subject matter or object of tax; and the measure or computation of the tax imposed. The distinction between the two has to be kept in mind (see Gujarat Ambuja Cements Ltd. vs. Union of India: AIR 2005 SC 3020)." 10. The Division Bench culled out the following principles which are set out in paragraph 36 of G.D. Builders (supra):- "36. The aforesaid judgments and discussion highlight the following facets/principles:- (1) After 46th Ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y addressed the issue which is sought to be raised by the petitioners herein. The Division Bench has clearly and categorically interpreted the said provision as imposing service tax only on the service component of the composite contracts which fall under the impugned provisions. The Division Bench in G.D. Builders (supra) held that it is the service portion of the composite contract which alone could be made the subject matter of service tax and that the aspect doctrine would be applicable for bifurcating/vivisecting the composite contract into its service component and sale of goods component. While the sale of goods would be taxable under the authority of the State Legislature, the service component would be taxable by virtue of Parliamentary legislation which includes the Finance Act, 1994. It was further observed in G.D. Builders (supra) that the computation of the service component was only a matter of detail and not a matter relating to the validity of imposition of service tax. It was also observed that the notifications which were impugned before it were in the alternative and optional and it was for the assessees to take advantage or benefit of the said notifications , if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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