Works contract taxation and extended limitation failed where material supply entitled abatement and prior notice barred later extended period.

Execution of finishing works with supply of material was treated as works contract, taxable only from 01.06.2007; demands for the earlier period could not survive, and for the post-01.06.2007 period tax could not be levied on the gross value as if the activity were a different service because the assessee was entitled to the applicable abatement. The later demand was also barred by limitation because extended limitation was invoked for a subsequent notice on the same issue after an earlier notice had already been issued, making the invocation unjustified. The proceedings were therefore unsustainable on merits and on limitation, with consequential relief.

---

---

Issues: (i) Whether the appellant's activity was classifiable as works contract and, if so, whether service tax could be demanded for the period prior to 01.06.2007 and on the gross value for the subsequent period; (ii) whether the demand for the later period was barred by limitation by invocation of the extended period.

Issue (i): Whether the appellant's activity was classifiable as works contract and, if so, whether service tax could be demanded for the period prior to 01.06.2007 and on the gross value for the subsequent period.

Analysis: The activity involved execution of finishing works along with supply of material, which brought it within the ambit of works contract. Such service became taxable only from 01.06.2007. Therefore, demands relating to the period prior to that date could not survive. For the period after 01.06.2007, once the activity was held to be works contract and material was supplied, the assessee was entitled to the abatement available on the taxable value and tax could not be demanded on the gross value as if the activity were a different taxable service.

Conclusion: The demand on merits was unsustainable, both for the pre-01.06.2007 period and for the post-01.06.2007 period on the gross value basis.

Issue (ii): Whether the demand for the later period was barred by limitation by invocation of the extended period.

Analysis: The later demand covered a period for which notice was issued by invoking the extended limitation period. Since an earlier notice on the same issue had already been issued for an earlier period, invocation of the extended period for the subsequent notice was not justified on the settled limitation principle applied by the Court.

Conclusion: The demand for the later period was barred by limitation.

Final Conclusion: The impugned proceedings could not be sustained on merits or on limitation, and the appeals succeeded with consequential relief.

Ratio Decidendi: An activity involving execution of works with supply of material is taxable as works contract only from 01.06.2007, and a subsequent demand on the same issue cannot be sustained by invoking the extended period where an earlier notice on the same issue had already been issued.

---