CCE, Kerala v/s. Larsen & Toubro Ltd. – 2015 (39) STR 913 (SC)
Pathik Shah
CCE, Kerala v/s. Larsen & Toubro Ltd. – 2015 (39) STR 913 (SC)
Facts:
These were group of appeals both by assessees and by Revenue. Appeal by Revenue were against the judgments of the Tribunal holding Indivisible Works contract cannot be vivisected and subjected to service tax, in absence of specific machinery provision i.e. charging and valuation provision. These were the cases prior to introduction of express provision of ‘Works Contract Service’ brought under service tax w.e.f.1.6.2007. Assessees’ appeals were against the judgments holding otherwise i.e. works contracts can be vivisected and service tax leviable thereon.
Dept.’s Case:
The 46th Amendment to the Constitution of India has itself divided works contract by Article 366(29A)(b) and after taking out the ‘goods’ element from such contracts, what remains is the ‘labour and service’ element, which has been subjected to service tax by various entries in Finance Act, 1994. The Finance Act, 1994 itself contains both the charge of tax as well as machinery by which only the labour and service element in these indivisible contracts is taxable
Held:
No liability to pay service tax in respect of Composite Indivisible Works Contracts prior to 1.6.2007, as, there was no charging and valuation section specifically levying service tax and method for levying service tax only on works contracts.
The Hon’ble Court mainly referred to the second ‘Gannon Dunkerley’ Constitution Bench judgment which is reported in (1993) 1 SCC 364, and held / observed that the separation of value of goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting there from charges towards labour and services and such deductions are stated by the Constitution Bench to be eight in number.
The service tax charging section itself must lay down with specificity that the levy of service tax can only be on works contracts, and the measure of tax can only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of property in goods transferred in the execution of the works contract.
The Hon’ble Supreme Court overruled the judgment of Delhi High Court in case of G.D. Builders v. UOI [2013 (32) STR 673 (Del)] and also the judgment of Full Bench of Tribunal in case of Larsen and Toubro v. Commissioner [2015 (38) STR 266 (T-LB)].
With this, the minority judgment of the judicial members of Full Bench of Delhi Tribunal in Larsen & Toubro (supra), which comprehensively discussed all the authorities that were relevant to the issue and arrived at correct conclusion, stands upheld by this judgment of the Hon’ble Supreme Court.
Ratio of above judgment of Hon’ble Supreme Court followed /invoked:
(i) Uhde India Pvt. Ltd. – 2016-TIOL-121-CESTAT-MUM – Demand pertaining to lump-sum turn key projects contract for setting up a Nitric Acid Plant under ‘Consulting Engineer Service’, for the period
prior to 1.6.2007 set aside
(ii) Voltage Engineering Co – 2015-TIOL-2633-CESTAT-Mum – Demand pertaining to Execution of Electrical Contract involving supply, erection, testing and commissioning of Electrical sub-stations, for the period prior to 1.6.2007 set aside
(iii) CCE v. R.K.
Construction – 2015-TIOL-2560-CESTAT-Mum–Demand pertaining
to Commercial or Industrial Construction Service for the period prior to
1.6.2007 held to be not sustainable.
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