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2014 (1) TMI 1558 - HC - Service TaxConstitutional validity of Section 65(105) (zzd), Section 65 (105) (zzq) and Section 65 (105) (zzzh) of the Finance Act, 1994 - Levy of the service tax on the works contract and Ready-mix Concrete - Held that:- impugned three provisions pertain, to composite contracts involving erection, commissioning or installation services, commercial or industrial construction as well as construction of residential complexes. Such composite contracts may have service as well as supply components. It is an accepted position that, insofar as the sale/supply of materials is concerned, they fall under Entry 54 of List II of the Seventh Schedule to the Constitution of India and, therefore, fall within the exclusive domain of the State Legislature. This is, of course, to be read with Article 366 (29-A) of the Constitution. It is, therefore, clear that Parliament cannot legislate in respect of the sale of goods component involved in such a composite contract. Service tax, however, falls within the exclusive domain of Parliament. This is under the residual 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 would be amenable to service tax - Consequently, the impugned provisions are valid but, are to be applied in the different manner - Decided against assessee.
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