Sahni Electric Works Vs Commissioner of Service Tax (CESTAT Delhi)
Undisputedly Electric motor winding job required both winding of the motors and also using the materials required for such service. Thus, it was a composite works contract which involved both rendering service and supplying material. The Revenue also does not dispute that it is a composite contract. However, there is a break up in the contract and 20% of the total amount received is attributed by the Delhi Jal Board towards services and 80% towards material. The appellant has paid service tax on 20% and VAT on the 80% of the amount. Under these circumstances, we find that the demand of service tax on the 80% of the value of the contract attributed towards the goods cannot be sustained. We also find that the issue is squarely covered in favour of the appellant by the decision of this Tribunal in Raj Engineering and National Pump Services. At any rate, if the contract is for a composite works contract, it should be treated as a separate species of contract and it is chargeable to service tax only under the head of “works contract service” as per the judgment of Supreme Court in Larsen & Toubro7. The definition of “works contract service” under Section 65 (105) (zzza) does not include works contract towards winding of motor. For that reason also the demand cannot be sustained.
