Composite works contracts: separately disclosed goods value in tyre retreading invoices was not subject to service tax, with refund relief.

Tyre retreading contracts involving both goods and services were treated as composite works contracts. Where invoices separately disclosed the value of goods and the service charges, the goods component was not liable to service tax merely because the contract involved service performance. The Tribunal held that the separately identified goods value had to be kept distinct from the taxable service element, so tax could not be levied on that component. Amounts paid under protest on the goods value were therefore refundable, with consequential relief available in accordance with law.

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Issues: Whether service tax was leviable on the value of goods used in tyre retreading contracts when the invoices separately showed the material component and service charges, and whether tax paid under protest on such goods value was refundable.

Analysis: The appeal turned on the character of tyre retreading contracts where goods and service were involved together to achieve the contractual object. The Tribunal applied the principle that such composite contracts fall within the category of works contract, and that where the invoices distinctly bifurcate the value of goods from the service element, the goods component cannot be subjected to service tax merely because the contract involves rendering of service. The demand was therefore inconsistent with the legal position governing composite contracts and the separate tax treatment of the goods element.

Conclusion: Service tax was not payable on the value of goods used in tyre retreading contracts as separately shown in the invoices. The assessee was entitled to refund of the tax paid under protest on that goods value, with consequential relief in accordance with law.

Final Conclusion: The appeals were allowed by setting aside service tax liability on the separately identified goods component in tyre retreading contracts and by granting refund-related relief for amounts paid under protest.

Ratio Decidendi: Where a composite contract involving goods and services distinctly discloses the value of goods in the invoices, the goods component is not liable to service tax as such component is to be treated separately from the taxable service element.

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