Contract involving supply of material and labour is a ‘Works Contract Service’

[CA Bimal Jain]

The CESTAT, Chandigarh in the case of BAJRANG LAL GUPTA VERSUS CCE- GURGAON - 2023 (6) TMI 246 - CESTAT CHANDIGARH held that contract involving both supply of material and labour is a ‘Works Contract Service’ which was not taxable prior to June 1, 2007.

Facts:

Bajrang Lal Gupta (“the Appellant”) is a proprietorship concern engaged in the business of construction of residential house on contractual basis. An inquiry was conducted by the Department calling certain details from the Appellant and alleging that the Appellant has not discharged service tax liability on construction services rendered by it to the Housing Board Haryana based on which a Show Cause Notice dated July 3, 2008 (“the SCN”) was issued proposing service tax demand of INR 11,24,458 after extending abatement benefit of 67%. The Appellant filed a detailed reply to the SCN to the Additional Commissioner which vide Order dated October 29, 2009 (“the Impugned Order”) confirmed the entire demand against the Appellant and further levied penalties under section 76, 77 and 78  of the Finance Act, 1994.

Aggrieved by the order of the Additional Commissioner the Appellant filed an appeal before Ld. Commissioner (Appeals) which vide order dated December 27, 2010 rejected the appeal. Aggrieved thereby the Appellant filed an appeal before the CESTAT.

Issue:

Whether a contract involving supply of material and labour is a ‘Works Contract Service’ and whether the extended period of limitation is invokable?

Held:

The CESTAT Chandigarh in BAJRANG LAL GUPTA VERSUS CCE- GURGAON - 2023 (6) TMI 246 - CESTAT CHANDIGARH held as under:

• Relied on the judgement of the Hon’ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS - 2015 (8) TMI 749 - SUPREME COURT wherein it was held that the composite contracts are classifiable under the taxable category of ‘Works Contract Service’ and the same is taxable only from June 01, 2007.
• Relied on the judgement of the CESTAT, Chandigarh in the case of M/S. SRISHTI CONSTRUCTIONS VERSUS COMMISSIONER OF CENTRAL EXCISE AND ST, LUDHIANA - 2017 (12) TMI 172 - CESTAT CHANDIGARH wherein the Tribunal had set aside the service tax demand under Works Contracts Service and also declared that the extended period of limitation is not invokable. 
• Set aside the Impugned Order.

Relevant Provisions:

Section 65(105)(zzh) of the Finance Act, 1994:

"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(105)(zzh) of the Finance Act, 1994:

"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

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