Divisible contract and exemption for goods component upheld where labour and goods were separately identified in repair work

The contract was treated as divisible because the consideration was consciously split into labour charges and the price of goods, and the goods component was found to pass in property during execution of the repair work. On that basis, the authority applied Notification No. 12/2003-ST to the separately identifiable goods element and dropped the show cause notice. The reviewing forum found no legal infirmity in that approach and upheld the finding that the goods component was exempt. The Revenue's appeal failed, and the cross objection did not survive.

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Issues: Whether the contract was divisible so that the labour charges and value of goods could be separately identified, and whether the goods component was liable to service tax in view of Notification No. 12/2003-ST dated 28th June, 2003.

Analysis: The adjudication order recorded a conscious finding that the consideration was broken up into labour charges and price of goods. On that basis, the contract was treated as divisible and it was found that property in the goods passed during execution of the repair work. The authority then examined the goods component with reference to the exemption notification and dropped the show cause notice. No legal infirmity in that approach was shown.

Conclusion: The finding that the contract was divisible and that the goods component was covered by the exemption was upheld. The Revenue's appeal failed and the cross objection also did not survive.

Final Conclusion: The order below was sustained in full, leaving no ground for interference with the relief granted to the assessee.

Ratio Decidendi: Where the adjudicating authority records a reasoned finding that a contract is divisible and that the goods element is separately identifiable and covered by an applicable exemption notification, interference is unwarranted in the absence of legal infirmity.

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