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No Service tax can be levied on indivisible Works Contracts prior to June 1 2007

Service Tax - By: - Bimal jain - Dated:- 25-8-2015 - Dear Professional Colleagues, We are sharing with you an important judgement of the Hon ble Supreme Court in the case of Commissioner of Central Excise and Customs, Kerala and Others Vs. Larsen and Toubro Ltd. and Others [2015 (8) TMI 749 - SUPREME COURT] on the following issue: Issue: Whether Service tax can be levied on indivisible Works Contracts prior to its introduction on June 1, 2007? Facts & Background: In the case of Larsen and To .....

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tion of Complex Service ( COCS ), or Erection, Commissioning or Installation Service ( ECIS ), are subject to levy of Service tax even prior to insertion of taxable service Works Contract Service under Section 65(105) (zzzza) of the Finance Act, 1994 ( the Finance Act ) i.e. prior to June 1, 2007. In the above stated case, the two Hon ble Judicial Members relying upon decisions in the case of CST Vs. Turbotech Precision Engineering Pvt Ltd.[2010 (4) TMI 344 - KARNATAKA HIGH COURT] and Strategic .....

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of India and Another [2013 (11) TMI 1004 - DELHI HIGH COURT] ( GD Builders Case ) that a Works Contract can be vivisected and discernible taxable service elements could be subjected to Service tax prior to June 1, 2007 is erroneous on per incuriam and sub silentio grounds. However, on the other hand three Hon ble Technical Members relying upon the decision in GD Builders Case, C.C.E. Vs. B.S.B.K. Pvt. Ltd. [2010 (5) TMI 46 - CESTAT, NEW DELHI - LB] and YFC Projects (P.) Ltd. Vs. Union of India [ .....

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uncontroverted as of now and therefore, the same is binding on all sub-ordinate Courts including this Tribunal. Accordingly, the matter travelled up to the Hon ble Supreme Court wherein group of appeals were filed both by the Revenue and the Assessees. Held: The Hon ble Apex Court after elaborate discussion of the various provisions and judicial pronouncements held as under: I). A plain reading of the judgment in the case of Gannon Dunkerley and Company and Others Vs. State of Rajasthan and Oth .....

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he Works contract to the transfer of property in goods in such contract; II).Works Contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such; III).A close look at the Finance Act would show that the taxable services referred to in the charging Section 65(105) thereof would refer only to service contracts simpliciter and not to composite Works contracts. This is clear from .....

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le introducing the concept of Service tax on indivisible Works Contracts various exclusions are also made such as Works contracts in respect of roads, airports, airways transport, bridges, tunnels, and dams. These infrastructure projects have been excluded and continue to be excluded presumably because they are conceived in the national interest. If the contention of the Revenue is accepted, each of these excluded Works contracts could be taxed under the sub-heads of Section 65(105) of the Finan .....

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judgment of this Court in the case of Mahim Patram Private Ltd. Vs. Union of India [2007 (2) TMI 73 - SUPREME COURT OF INDIA], to arrive at the conclusion that it was an authority for the proposition that a tax is leviable even if no rules are framed for assessment of such tax, which is wholly incorrect. Thus, the Hon ble Apex Court in no ambiguous terms ruled that Works contracts cannot be taxed before June 1, 2007. Accordingly, the appeals filed by the Assessees were allowed and appeals filed .....

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