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TMI Blog2022 (8) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracts? As per M.R. SHAH, J. HELD THAT:- It is observed and held in the decision of [ 2020 (3) TMI 1324 - SUPREME COURT ] that even the rule of overruling the judgments should be applied with great caution, and only when the previous decision is manifestly wrong, as, for instance, if it proceeded upon a mistaken assumption of the continuance of a repealed or expired Statute, or is contrary to a decision of another court which the court is bound to follow; not, upon a mere suggestion, that some or all of the members of the court might later arrive at a different conclusion if the matter was res integra. It is further observed that otherwise there would be great danger of want of continuity in the interpretation of law. It is further observed and held that the decisions rendered by a coordinate Bench is binding on the subsequent Benches of equal or lesser strength and a coordinate Bench of the same strength cannot take a contrary view than what has been held by another coordinate Bench unless it is shown to be per incuriam. In Saurashtra Cement Chemical Industries Ltd. and another Vs. Union of India and others, [ 2000 (10) TMI 954 - SUPREME COURT ] this Court re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 54 - SUPREME COURT ] Kone Elevator India (P) Limited [ 2014 (5) TMI 265 - SUPREME COURT ], Larsen Toubro Ltd. and others vs. State of Karnataka [ 2013 (9) TMI 853 - SUPREME COURT ] all arising under the Sales Tax law, it was emphasised that there was no charging section to tax works contract in the Finance Act, 1994 i.e. until the amendment made with the insertion of subclause (zzzza) to clause 105 of Section 65 of the Finance Act, 1994. Further, in Larsen Toubro Ltd. [ 1992 (11) TMI 254 - SUPREME COURT ] the correctness of the judgment in G.D. Builders vs. Union of India [ 2013 (11) TMI 1004 - DELHI HIGH COURT ] was also considered. In the said case, it was held by the Delhi High Court that Section 65(105)(g), (zzd), (zzh), (zzq) and (zzzh) were good enough to tax indivisible composite works contract and that even when rules are yet to be framed for computation of taxes, taxes would be leviable. This proposition was based on the judgment in Mahim Patram (P) Ltd. vs. Union of India [ 2007 (2) TMI 73 - SUPREME COURT ]. It was observed that in G.D. Builders [ 2013 (11) TMI 1004 - DELHI HIGH COURT ] there was a misreading of Mahim Patram which was a case related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction Corporation Ltd. (NBCC) Versus Union of India Ors. , M/s. Larsen and Toubro Ltd. Versus Commissioner of Service Tax, Delhi , Commissioner of Service Tax Mumbai - II Versus M/s. IOT Infrastructure Energy Services Limited , M/s. L T Hydrocarbon Engineering Limited (previously known as Larsen Toubro Limited) Versus Commissioner of Service Tax, Mumbai M. R. SHAH And B. V. NAGARATHNA , JJ. For the Parties : Ms. Madhavi G.Divan, ASG Mr. Arijit Prasad,Sr. Adv. Mr. A.K. Panda, Sr.Adv. Mr. Vishesh Kalra, Adv. Ms. Aishani N., Adv. Mr. Mukesh Kumar Maroria, AOR Mr. B. Krishna Prasad, AOR Mr. Praveen Kumar, AOR Mr. Sanand Ramakrishnan, AOR Mr. Praveen Swarup, AOR Ms. Anubha Agrawal, AOR Mr. V. N. Raghupathy, AOR JUDGMENT M.R. SHAH, J. 1. As common question of law and facts arise in this group of appeals, they are being decided and disposed of by this common judgment and order. 2. The issue involved in the present group of appeals is, whether, service tax could be levied on Composite Works Contracts prior to the introduction of the Finance Act, 2007, by which the Finance Act, 1994 came to be amended to introduce Section 65(105)(zzzza) pertaining to Wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) and even the papers of Civil Appeal No. 6523 of 2014 were called for by the Bench concerned. However, it appears that by oversight and/or by inadvertence Civil Appeal No. 6523 of 2014 has not been decided and disposed of and therefore kept pending, which is now notified before this Court alongwith the other appeals. 3.3 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court of Delhi at New Delhi dated 09.01.2014 in Writ Petition (C) No. 6803 of 2013 by which the Division Bench of the High Court relying upon its earlier decision in the case of G.D. Builders (supra) has dismissed the said writ petition, the assessee original writ petitioner M/s. National Building Construction Corporation Ltd. (NBCC) has preferred the present Civil appeal No. 6526 of 2014. 3.4 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court of Delhi at New Delhi dated 13.11.2013 in Writ Petition No. 5046 of 2008 by which the Division Bench of the High Court has dismissed the said writ petition alongwith another writ petition in the case of G.D. Builders (supra), the assessee M/s. Unitech Ltd. has preferred th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Additional Solicitor General, appearing on behalf of the Revenue, has not disputed that the issue involved in the present appeals is as such squarely covered by the decision of this Court in the case of Larsen and Toubro Limited (supra). However, according to Ms. Madhavi Divan, the decision of this Court in the above case, holding that there was no service tax leviable on works contracts prior to the amendment by the Finance Act, 2007 needs to be re-considered. 6.1 In support to her prayer to re-consider the decision of this Court in the case of Larsen and Toubro Limited (supra), Ms. Madhavi Divan, learned Additional Solicitor General has made a number of submissions and has taken us to the legislative history pertaining to the service tax. She has also taken us to the definition of the Works Contract and what can be said to be Works Contracts. She has also taken us through a number of other decisions of this Court including the decisions in the case of State of Madras Vs. Gannon Dunkerley Co., (Madras) Ltd., (1959) SCR 379; Larsen and Toubro Limited and Anr. Vs. State of Karnataka and Anr., (2014) 1 SCC 708; Nagarjuna Construction Company Limited Vs. Union of India and Anr., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1 It is vehemently submitted by Shri Datar, learned Senior Advocate appearing on behalf of some of the assesses that in the case of Larsen and Toubro Limited (supra), it is specifically observed that a taxable service under the Finance Act, 1994 covers service contracts simpliciter and not the Composite Works Contracts (reliance is placed upon the observations made in paragraphs 23 and 29 of the said decision). It is contended that while referring to exemption notifications in paragraph 42, it has been specifically observed and held that since the levy of service tax has been found to be non-existent, no question of any exemption would arise. It is further urged by Shri Datar, learned Senior Advocate appearing on behalf of some of the assesses that the decision of this Court in the case of Larsen and Toubro Limited (supra) has been subsequently followed by this Court in the case of Commissioner of Service Tax and Ors. Vs. Bhayana Builders Private Limited and Ors., (2018) 3 SCC 782. That after following and considering the decision of this Court in the case of Larsen and Toubro Limited (supra), this Court dismissed the appeals preferred by the Revenue. 7.2 It is further submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot and on whether the decision of this Court in the case of Larsen and Toubro Limited (supra) is required to be re-considered, as now submitted and/or prayed on behalf of the Revenue. 8. Heard, Ms. Madhavi Divan, learned ASG appearing on behalf of the Revenue and Shri Arvind Datar, learned Senior Advocate and other learned senior and other counsel appearing on behalf of the respective assessees. 9. The short question which is posed for consideration of this Court is, whether for the period prior to introduction of the Finance Act, 2007, the service tax would be leviable on the Composite Works Contracts? 10. At the outset, it is required to be noted that whether post-2007, the service tax was leviable on Composite Works Contracts is now no longer res integra in view of the direct decision of this Court in the case of Larsen and Toubro Limited, (supra). 10.1 Ms. Divan, learned ASG is not disputing that in the case of Larsen and Toubro Limited (supra), this Court has specifically observed and held that the service tax was not leviable on the indivisible/Composite Works Contracts, post Finance Act, 2007. However, according to the learned ASG, the said decision requires re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oday. (viii) Merely because in the subsequent cases, the amount of tax involved may be higher, cannot be a ground to pray for reconsideration of the earlier binding decision, which has been consistently followed by various High Courts and the Tribunals in the entire country. 10.3 Keeping in mind the aforesaid factual aspects, the prayer made on behalf of Revenue to re-consider the decision of this Court in the case of Larsen and Toubro Limited (supra) and to refer the matter to the Larger Bench is required to be considered. 10.4 While considering the prayer made on behalf of the Revenue to review and/or revisit the earlier decision of this Court in the case of Larsen and Toubro Limited (supra), few decisions on the principle of stare decisis are required to be referred to and considered. 10.5 In the case of Dr. Jaishri Laxmanrao Patil Vs. Chief Minister and Ors., (2021) 8 SCC 1, after considering the earlier decision of the Seven Judge Constitution Bench in the case of Keshav Mills Co. Ltd. Vs. Commissioner of Income Tax, Bombay North, Ahmedabad, AIR 1965 SC 1636, it is observed and held that before reviewing and revising its earlier decision the Court must satisfy it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this Court of its power to review its earlier decisions on the ground that the view pressed before it later appears to the Court to be more reasonable, may incidentally tend to make law uncertain and introduce confusion which must be consistently avoided. That is not to say that if on a subsequent occasion, the Court is satisfied that its earlier decision was clearly erroneous, it should hesitate to correct the error; but before a previous decision is pronounced to be plainly erroneous, the Court must be satisfied with a fair amount of unanimity amongst its members that a revision of the said view is fully justified. It is not possible or desirable, and in any case it would be inexpedient to lay down any principles which should govern the approach of the Court in dealing with the question of reviewing and revising its earlier decisions. It would always depend upon several relevant considerations - What is the nature of the infirmity or error on which a plea for a review and revision of the earlier view is based? On the earlier occasion, did some patent aspects of the question remain unnoticed, or was the attention of the Court not drawn to any relevant and material statutory pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y v. Union of India, 1992 Supp (3) SCC 217] speaking through B.P. Jeevan Reddy, J. has held that the relevance and significance of the principle of stare decisis have to be kept in mind. It was reiterated that in law certainty, consistency and continuity are highly desirable features. Following are the exact words in para 683 : (SCC p. 657) 683. Though, we are sitting in a larger Bench, we have kept in mind the relevance and significance of the principle of stare decisis. We are conscious of the fact that in law certainty, consistency and continuity are highly desirable features. Where a decision has stood the test of time and has never been doubted, we have respected it unless, of course, there are compelling and strong reasons to depart from it. Where, however, such uniformity is not found, we have tried to answer the question on principle keeping in mind the scheme and goal of our Constitution and the material placed before us. 10.6 In the case of Dr. Shah Faesal and Ors. Vs. Union of India and Anr., (2020) 4 SCC 1, the Constitution Bench of this Court had occasion to consider the principle of stare decisis and the law of precedents/re- consideration/review of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will be made to a larger Bench. In this context, a five-Judge Bench of this Court in Chandra Prakash v. State of U.P. [(2002) 4 SCC 234], after considering series of earlier rulings reiterated that : (SCC p. 245, para 22) 22. The doctrine of binding precedent is of utmost importance in the administration of our judicial system. It promotes certainty and consistency in judicial decisions. Judicial consistency promotes confidence in the system, therefore, there is this need for consistency in the enunciation of legal principles in the decisions of this Court. (emphasis supplied) 10.7 It is observed and held in the aforesaid decision that even the rule of overruling the judgments should be applied with great caution, and only when the previous decision is manifestly wrong, as, for instance, if it proceeded upon a mistaken assumption of the continuance of a repealed or expired Statute, or is contrary to a decision of another court which the court is bound to follow; not, upon a mere suggestion, that some or all of the members of the court might later arrive at a different conclusion if the matter was res integra. It is further observed that otherwise there would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table. Law must be made more effective as a guide to behaviour, otherwise, the lawyers or, for that matter, laymen would be in a predicament and would not know how to advise or conduct themselves. The general public should not be in a dilemma to obey or not to obey such law. 11.4 In Medley Pharmaceuticals Limited v. Commissioner of Central Excise and Customs, Daman, (2011) 2 SCC 6014, the question before this Court was whether, physicians' samples are excisable goods considering that they are prohibited from being sold under the Drugs and Cosmetics Act, 1940. Observing that since this Court has consistently held that the medical supplies supplied to the doctors are liable to excise duty, the issue involved in this case was no longer res integra. Relying on the Constitutional Bench decision in Waman Rao v. Union of India, (1981) 2 SCC 362, it was held: 43. It is settled law that this Court should follow an earlier decision that has withstood the changes in time, irrespective of the rationale of the view taken. It was held by a Constitution Bench in Waman Rao v. Union of India [(1981) 2 SCC 362]: (SCC p. 393, para 40) 40. It is also true to say that for the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is to be observed in its observance rather than in its breach to serve the people and subserve the ends of justice. 12. What was said by the Constitution Bench in Indra Sawhney Vs. Union of India, 1992 Supp (3) SCC 217 and Keshav Mills Co. Ltd. Vs. Commissioner of Income Tax, Bombay North, Ahmedabad, AIR 1965 SC 1636, on the principle of stare decisis clearly bind us. The judgment of this Court in the case of Larsen and Toubro Limited (supra) has stood the test of time and has never been doubted earlier. As observed hereinabove, the said decision has been followed consistently by this Court as well as by various High Courts and the Tribunals. Therefore, if the prayer made on behalf of the Revenue to reconsider and/or review the judgment of this Court in the case of Larsen and Toubro Limited (supra) is accepted, in that case, it will affect so many other assesses in whose favour the decisions have already been taken relying upon and/or following the decision of this Court in the case of Larsen and Toubro Limited (supra) and It may unsettle the law, which has been consistently followed since 2015 onwards. There are all possibilities of contradictory orders. Therefore, on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.1 Now, so far as Civil Appeal No. 6525 of 2014, Civil Appeal No. 6526 of 2014 and Civil Appeal No. 2666 of 2022 are concerned, the High Court has dismissed the said writ petitions preferred by the respective assesses relying upon its earlier decision in the case of G.D. Builders (supra). Once the decision of the Delhi High Court in the case of G.D. Builders (supra) is held to be wholly incorrect by this Court in the case of Larsen and Toubro Limited (supra), Civil Appeal No. 6525 of 2014, Civil Appeal No. 6526 of 2014 and Civil Appeal No. 2666 of 2022 are also to be allowed. 13.2 So far as Civil Appeal Nos. 8673-8684 of 2013 preferred by the assessee M/s. Total Environment Building Systems Pvt. Ltd. are concerned, the same are against the judgment and order passed by the High Court of Karnataka in Writ Appeal Nos. 3481-3492 of 2009 by which the Division Bench of the High Court has dismissed the said writ appeals and has confirmed the judgment and order passed by the learned Single Judge dismissing the writ petitions in which the appellant - assessee challenged the assessment orders levying Service Tax, on the ground of alternative remedy available by way of statutory appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, Her Ladyship has agreed with the conclusions arrived at by me in the present judgment and order, however, has thought it fit to give additional reasons for the conclusions and has dealt with the submissions made by Ms. Madhavi Divan on merits. However, for the reasons stated above as this Court has not agreed with the prayer made by Ms. Divan, learned ASG to reconsider the decision in the case of Larsen and Toubro Limited (supra) on the principle of stare decisis and on the principle of consistency, I deem it proper not to deliberate further on merits, as observed above, the issue involved is squarely covered by the decision of this Court in the case of Larsen and Toubro Limited (supra), which has been subsequently followed by this Court as well as by various High Courts and Tribunals. J. [M.R. SHAH] J. [B.V. NAGARATHNA] I have had the advantage of perusing the judgment proposed by His Lordship M.R. Shah J. While I agree with the conclusions arrived at by him, I wish to supplement the reasons for the conclusions. (2) As already stated, the issue in these appeals relates to the levy of service tax on composite works contract prior to the amendment made to the Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he works contract that the service tax is leviable w.e.f. 1st June, 2007. As far as the sale component in a works contract is concerned, the Sales Tax laws of the respective States would apply. It is also necessary to state that after the enforcement of the Central Goods and Services Tax Act (CGST), 2017 regime the matter is covered under that Act. Therefore, it is necessary to gather the meaning of works contract from judicial precedent in order to answer the rival submissions in the instant case. Section 65(105)(zzzza) of the Finance Act, 1994 as amended by the Finance Act, 2007 which defines work contract, has been extracted as under, for ease of reference: Works contract means a contract wherein,transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and (ii) such contract is for the purposes of carrying out,- (a) erection, commissioning or installation of plant, machinery, equipment or structures, whether prefabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or airconditioning including ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (ii)(a)( e) of the definition of works contract which would attract Service Tax under the provisions of the Finance Act, 1994 as amended in the year 2007. If both the above requisites are present, then Service Tax on works contract is leviable on the service component. This is clear from the use of the word and between components (i) and (ii) of the definition of works contract under Clause (zzzza) of Section 65 of the Finance Act, 1994 which is as per the amendment in the year 2007. Thus, the definition speaks of a composite works contract comprising of an element of sale and an element of service. Having regard to the specific definition of works contract introduced in the Finance Act, 1994, w.e.f. 1st June, 2007 and bearing in mind that both clauses (i) as well as (ii) of the definition have to be satisfied before the levy of service tax on the service component of a works contract, it is necessary to understand the scope and ambit of the expression transfer of property in goods in clause (i) of the definition of works contract from various judgments of this Court. Further, sales tax/VAT could also be levied on such transfer of goods involved in the execution of such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; C. In Gannon Dunkerley (II) Gannon Dunkerley and Co. vs. State of Rajasthan [1993 (1) SCC 364], the Constitution Bench of this Court explained the effect of the legal fiction introduced by subclause (b) of Clause (29A) of Article 366 of the Constitution. The following principles were enunciated, to outline the operation of subclause (b) of Clause (29A) of Article 366: a) That by virtue of the legal fiction in Clause 29A, even in a single indivisible works contract, there is a deemed sale of goods and such sale has all the incidents of sale of goods. b) That the value of goods involved in the execution of a works contract may be determined by taking into account the value of the entire works contract and deducting therefrom, the charges towards labour and services. c) That the following charges towards labour and services were to be excluded in determining the value of goods sold in executing a works contract: i) Labour charges for execution of the works; ii) Amount paid to a subcontractor for labour and services; iii) Charges fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the taxing power of the States in relation to works contract particularly in paragraphs 3840 of the judgment. F. In light of the said discussion, this Court concluded that the transfer of any goods in Subclauses (a) to (f) of Clause (29A) of Article 366 of the Constitution is by way of a deeming provision i.e., a deemed sale. This Court however, cautioned that the levy of sales tax after the 46th Amendment to the Constitution of India has to still comply with the restrictions imposed under Articles 286 and 269 of the Constitution. G. Later a threejudge bench of this Court in State of AP v. Kone Elevators [(2005) 3 SCC 389] had taken the view that a contract for manufacture, supply and installation of lifts is a sale and the entire value of the consideration can therefore be taxed under the sales tax law. However, the matter was subsequently referred to a larger Bench to review the issue afresh. This Court, on rehearing the matter referred to it, in Kone Elevator India Pvt. Ltd. vs. State of Tamil Nadu [(2014) 7 SCC 1], observed that the installation obligation in a contract for manufacture, supply and installation of lift is not merely incidental, but was a profound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e scope of the expression tax on sale or purchase of goods and overcome Gannon Dunkerley (1) [State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., AIR 1958 SC 560 : 1959 SCR 379] . Seen thus, even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some additional obligations are imposed, such contract does not cease to be works contract. The additional obligations in the contract would not alter the nature of contract so long as the contract provides for a contract for works and satisfies the primary description of works contract. Once the characteristics or elements of works contract are satisfied in a contract then irrespective of additional obligations, such contract would be covered by the term works contract . Nothing in Article 366(29A)( b) limits the term works contract to contract for labour and service only. The learned Advocate General for Maharashtra was right in his submission that the term works contract cannot be confined to a contract to provide labour and services but is a contract for undertaking or bringing into existence some works . We are also in agreement with the submission of Mr K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract in a composite contract like contract for construction of building and sale of a flat therein. In light of the above discussion, the legal proposition was summarised in paragraph 97 of the judgment. Evolution of the practice in relation to the levy of service tax on works contract: (6) Service tax was introduced in India vide the Finance Act, 1994. Service tax is legislated by Parliament under the residuary entry i.e. Entry 97 of List I of the Seventh Schedule of the Constitution of India read with Article 248 of the Constitution. The service tax provisions have the following basic scheme: (i) Section 65 of the Act provides for taxable services; (ii) Section 66 of the Act provides for the charge of service tax by the person designated as the person responsible for collecting the service tax for the Government; (iii) Section 67 of the Act provides for the value of taxable service which is to be subjected to 5% service tax; and (iv) Section 68 of the Act provides for the collection and payment mechanism for service tax. It is necessary to trace the evolution of charging service tax on works contract as discerned by this Court in the aforesaid ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that a composite contract, would have to be construed such that the legal fiction in Article 366 (29A) allowing tax on the sale element of a works contract would have to be applied only to the extent for which it was enacted, i.e., to the extent of the value of the sale component of the contract and should not be applied in relation to the service element of the transaction. That taxes, in the nature of a service tax could be applied in relation only to the service element. c) In Nagarjuna Construction Company Ltd. vs. Government of India and Ors. [(2013) 1 SCC 721], this Court discussed the effect of introduction of an express charging provision to impose tax on works contract, w.e.f. 01st June, 2007, on works contract which were entered into prior to 01st June, 2007. In the said case, the appellant therein was said to be in the business of carrying out composite construction contracts. The appellantassessee had paid salestax/ VAT on those contracts under the Andhra Pradesh General Sales Tax Act, 1957, Andhra Pradesh Value Added Tax Act, 2005 and other State enactments. Prior to 01st June, 2007, the assessee had paid servicetax under the category of erection, commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.e.f. 1st June, 2007. The amendment was made to the said section of the Finance Act, 1994 by which works contract which were indivisible and composite could be split so that only the labour and service element of such contracts would be taxed as service tax. (7) Having noted the above developments, it is necessary to discuss the judgment in Larsen and Toubro Ltd. (supra) in detail as learned ASG, Ms. Divan has vehemently submitted that the said judgment requires reconsideration. It may be noted that this judgment concerned the position of law prior to the amendment made to the Finance Act, 1994, w.e.f. 1st June, 2007, incorporating the definition of works contract as under: a) In the aforesaid case, this Court traced the historical setting within which the controversy leading up to the 46th amendment in the context of levy of sales tax on works contract progressed. Taking up the question as to whether service tax could be levied on the service element of a works contract, it was observed that service tax was introduced by the Finance Act, 1994 and various services were set out in Section 65 thereof as being amenable to tax. The legislative competence of such tax is traceable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 364] (Gannon Dunkerley II) (supra) . That in the said judgment the modalities of taxing composite indivisible works contract was gone into which has been referred to above. It was observed that the value of the goods involved in the execution of the works contract will have to be determined by taking into account the value of entire works contract and deducting therefrom the charges towards labour and services which would cover (a) labour charges for execution of the works; (b) amount paid to a subcontractor for labour and services; (c) charges for planning, designing and architect s fees; (d) charges for obtaining on hire or otherwise machinery and tools used for the execution of the works contract; (e) cost of consumables such as water, electricity, fuel, etc. used in the execution of the works contract the property in which is not transferred in the course of execution of a works contract; and (f) cost of establishment of the contractor to the extent it is relatable to supply of labour and services; (g) other similar expenses relatable to supply of labour and services; (h) profit earned by the contractor to the extent it is relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d installation agency in relation to erection, commissioning or installation; * * * (zzh) to any person, by a technical testing and analysis agency, in relation to technical testing and analysis; * * * (zzq) to any person, by a commercial concern, in relation to construction service; * * * (zzzh) to any person, by any other person, in relation to construction of a complex; Explanation : For the purposes of this subclause, construction of a complex which is intended for sale, wholly or partly, by a builder or any person authorized by the builder before, during or after construction (except in cases for which no sum is received from or on behalf of the prospective buyer by the builder or a person authorized by the builder before the grant of completion certificate by the authority competent to issue such certificate under any law for the time being in force) shall be deemed to be service provided by the builder to the buyer; d) Speaking about the mutually exclusive taxation and powers of the Centre and the State, the dichotomy between the sales tax leviable by the State and service tax leviable by the Centre was emphasised by this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax on service element of indivisible works contract various exclusions are also made, such as, works contract in respect of roads, airport, airways transport, bridges, tunnels and dams, possibly in the national interest. The implication of the exclusion means that such contracts were never intended to be the subjectmatter of the service tax. e) Further, in Larsen Toubro Ltd. (supra) the correctness of the judgment in G.D. Builders vs. Union of India [(2013) 32 STR 673] was also considered. In the said case, it was held by the Delhi High Court that Section 65(105)(g), (zzd), (zzh), (zzq) and (zzzh) were good enough to tax indivisible composite works contract and that even when rules are yet to be framed for computation of taxes, taxes would be leviable. This proposition was based on the judgment in Mahim Patram (P) Ltd. vs. Union of India [(2007) 3 SCC 668]. It was observed that in G.D. Builders (supra) there was a misreading of Mahim Patram (supra) which was a case related to tax under the Central Sales Tax Act; that in Mahim Patram (supra), it was observed that under Section 9(2) of the Central Sales Tax Act power is conferred on officers of various States to utilise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service element in the said contract. We find therefore that this judgment is wholly incorrect in its conclusion that the Finance Act, 1994 contains both the charge and machinery for levy and assessment of service tax on indivisible works contracts. It was categorically observed that since the Finance Act, 1994 lays down no charge or machinery to levy and assess service tax on indivisible composite works contract, therefore, service tax was not existent at all under the Act and hence any exemption qua service tax levied did not arise at all. (8) As already noted, the definition of works contract was brought under the service tax net as per Section 65(105)(zzzza) of the Finance Act, 1994 by the insertion of the said definition. The said introduction was made pursuant to the Finance Act, 2007, which expressly made the service element in such works contract liable to service tax w.e.f. 1st June, 2007. By the said amendment, works contract which were indivisible and composite could be split so that only the labour and service element of such contracts would be taxed under the heading Service Tax . 9) It is in the above backdrop that the definition of Works contract inse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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