Composite works contract classification bars taxation under another service head where both goods supply and construction work are involved.

A construction arrangement involving both supply of goods and execution of work was held to be a composite contract classifiable as Works Contract Service, taxable only from 01.06.2007. Because the transaction had that character, it could not be reclassified and taxed under Construction of Residential Complex Service merely on the basis adopted by the department. The demand was therefore unsustainable under that service head, and relief followed for the assessee. The impugned order was set aside and the appeal was allowed.

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Issues: Whether a construction activity involving both supply of goods and execution of work is a composite contract classifiable as Works Contract Service, and whether service tax demand could be sustained under Construction of Residential Complex Service.

Analysis: The disputed activity involved both supply/sale of goods and execution of construction work. Such a contract is composite in nature and, in law, falls under the category of Works Contract Service, which became taxable from 01.06.2007. Once the activity is of that character, it cannot be reclassified and taxed under a different service head merely because the department proceeded on that basis. The reasoning is supported by the settled position that a composite contract involving both goods and service is to be assessed as works contract and not under another defined service category.

Conclusion: The demand could not be sustained under Construction of Residential Complex Service, and the appellant was entitled to relief.

Final Conclusion: The impugned order was set aside and the appeal was allowed in favour of the appellant on the ground that the transaction was a composite works contract.

Ratio Decidendi: A composite contract involving both supply of goods and provision of service must be classified as Works Contract Service and cannot be taxed under another service head.

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