Composite Works Contract Not Taxable Before 1st June 2007: CESTAT Delhi

SEW Infrastructure Limited Vs Commissioner of Central Excise (CESTAT Delhi)

Summary: The Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, held that the services performed by M/s SEW Infrastructure Limited under a composite work order involving both services and goods were classifiable as works contract service and not as site formation service for the disputed pre-1 June 2007 period.

The dispute arose from two show cause notices covering July 2005 to August 2006 and March 2006 to September 2006. The Revenue had proposed service tax on the basis that the appellant’s activities involving earth work, excavation, back filling, site levelling, grading and disposal constituted site formation and clearance, excavation and earthmoving and demolition services under section 65(97a) read with section 65(105)(zzza) of the Finance Act, 1994.

The appellant relied upon its work order dated 8 July 2005 and contended that the contract was a composite works contract, which became specifically taxable only with effect from 1 June 2007. The Tribunal examined the work order and found that it included both the service element and the goods element. The contract specifically contemplated earth work using borrowed good earth, which had to be arranged by the contractor at its own cost.