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Case Law on Works Contract

Posted by on in Service Tax
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Service Tax - The appellant were awarded a contract from DMRC for design of rail based mass rapid transport system – confirmation of demand under Erection, Commissioning or Installation Services - appellant’s stand that the services are of the nature of work contracts – Composite Contract

HELD – Commissioning or Installation is one of the activity for the impugned contract which is composite in nature – perusal of the contract makes it clear that the scope of work is not confined merely to erection, commissioning or installation. It is also apparent that the nature of contract is such that erection, commissioning and installation part cannot be severed from rest of the contractual responsibility - This perusal makes it clear that the contract is composite in nature rather being the contract for service simpliciter 

Hence, the services in hand cannot be held taxable as service simpliciter of Erection, Commissioning or Installation - Despite acknowledging the composite nature of the contract in hand, the Commissioner is opined to have committed an error while confirming the demand under erection, commissioning and installation – further, since the services rendered is classified as works contract and the work contract in respect of railways is excluded from the tax liability as per the statutory definition itself, no question of levy of any service tax on such contract arises – the impugned order is set aside and appeal is allowed

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