Composite contracts and service tax liability turn on contract-wise facts, statutory timing, and available abatements or exemptions.

Composite contracts involving supply of materials were analysed against the applicable service tax regime, with liability turning on contract-wise factual examination and the relevant statutory period. For erection, commissioning and installation work, service tax was stated to apply only from 01.06.2007; for maintenance and repair, movable property remained taxable, while abatements and exemptions for roads and non-commercial buildings had to be tested on each contract's terms. A vague show cause notice was not treated as fatal where the assessee later produced the contracts and the classification was examined on that basis. The demand for the extended period and the related limitation issue were left for reconsideration on remand.

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Issues: (i) Whether the show cause notice and adjudication were vitiated for want of specificity and denial of natural justice; (ii) whether composite contracts involving supply of materials were liable to service tax under the stated service categories and whether abatements or exemptions were available; (iii) whether the demand raised for the extended period was sustainable.

Issue (i): Whether the show cause notice and adjudication were vitiated for want of specificity and denial of natural justice.

Analysis: The contracts were not made available to the revenue at the notice stage despite repeated requests, and the assessee later produced the contract documents before the adjudicating authority. The service classification and quantification were then examined on the basis of those documents. In those circumstances, the objection that the notice was vague was not accepted as a ground to invalidate the proceedings or to hold that there was denial of opportunity.

Conclusion: The challenge on the ground of vagueness of notice and violation of natural justice was rejected.

Issue (ii): Whether composite contracts involving supply of materials were liable to service tax under the stated service categories and whether abatements or exemptions were available.

Analysis: The dispute involved numerous contracts covering both erection, commissioning and installation activities as well as management, maintenance and repair work. For composite contracts involving supply of materials, the governing legal principle applied was that service tax could be levied only from 01.06.2007. For maintenance and repair contracts, movable property remained taxable, while the applicability of abatements and the retrospective exemption relating to roads and non-commercial buildings required contract-wise examination. The scope of each contract, particularly those claimed to relate to roads, had not been conclusively determined and required reconsideration.

Conclusion: The service tax liability on composite contracts and the availability of abatements or exemptions required fresh examination on a contract-wise basis.

Issue (iii): Whether the demand raised for the extended period was sustainable.

Analysis: A part of the demand related to a period beyond five years. Since the matter was being remanded for fresh consideration on merits, the limitation question also required reconsideration by the original authority.

Conclusion: The limitation issue was left open for decision on remand.

Final Conclusion: The impugned order was set aside and the matter was sent back for fresh adjudication on the disputed classifications, abatements, exemptions and limitation.

Ratio Decidendi: Where composite contracts involve supply of materials, service tax liability depends on the applicable statutory regime and contract-wise factual determination, and a vague notice is not fatal when the assessee later participates and produces the relevant contract records.

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