Rectification and works contract taxation: limitation objection rejected and pre-levy service tax demand could not survive.

A rectification-based challenge was treated as maintainable despite the limitation objection because a statutory rectification remedy existed and the earlier order had become erroneous after a later binding decision. Applying the settled principle that an error apparent on the face of the record may be corrected when the legal basis changes, the time-bar objection was rejected. On merits, the Court applied the settled rule that an indivisible works contract cannot be vivisected for tax purposes, so service tax could not be levied on the works contract demand for the period before 01.06.2007. The impugned orders were set aside and the matter was remanded for fresh decision in accordance with law.

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Issues: (i) Whether the appeal could be treated as within limitation despite being filed beyond the prescribed period after the rectification proceedings before the Tribunal. (ii) Whether service tax was leviable on works contract service for the period prior to 01.06.2007.

Issue (i): Whether the appeal could be treated as within limitation despite being filed beyond the prescribed period after the rectification proceedings before the Tribunal.

Analysis: The appeal was accompanied by earlier rectification proceedings before the Tribunal. The Court accepted that the nomenclature of the application was not decisive where a statutory remedy for rectification existed, and relied on the settled principle that an error apparent on the face of the record can be corrected when the legal basis of the earlier order is later altered by a superior court. On that basis, the delay objection was not accepted.

Conclusion: The objection on limitation was rejected and the appeal was treated as within time.

Issue (ii): Whether service tax was leviable on works contract service for the period prior to 01.06.2007.

Analysis: The Court applied the settled position that an indivisible works contract cannot be vivisected into separate components for taxation in the manner attempted in the impugned order. In light of the binding law on works contract service, the demand raised for the period before 01.06.2007 could not survive.

Conclusion: Service tax was not leviable on the works contract demand for the pre-01.06.2007 period.

Final Conclusion: The impugned orders were set aside and the matter was sent back for fresh decision in accordance with law, with the assessee obtaining relief on both the procedural and substantive questions.

Ratio Decidendi: A rectification-based challenge can be entertained where the earlier order is rendered erroneous by a later binding decision, and an indivisible works contract cannot be subjected to service tax for the period before the levy became applicable.

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