Composite construction contracts not taxable as Construction of Residential Complex Services, while maintenance and repair receipts remain liable to service tax.

Composite construction contracts involving both supply of goods and provision of services were held not liable to service tax under Construction of Residential Complex Services in the manner adopted by the department, and the related demand was set aside. Amounts collected for Management, Maintenance and Repair services were treated as consideration for a taxable service, so the corresponding service tax demand was sustained. The impugned order was therefore modified to delete the construction-related demand while maintaining the levy, interest and penalties on the maintenance and repair receipts.

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Issues: (i) Whether service tax demand under Construction of Residential Complex Services was sustainable in respect of composite contracts involving supply of goods and services and denial of abatement under Notification No. 1/2006-S.T. dated 01.03.2006. (ii) Whether service tax was payable on amounts collected towards Management, Maintenance and Repair services.

Issue (i): Whether service tax demand under Construction of Residential Complex Services was sustainable in respect of composite contracts involving supply of goods and services and denial of abatement under Notification No. 1/2006-S.T. dated 01.03.2006.

Analysis: The contracts were found to be composite in nature, involving both supply of goods and rendition of services. The issue was covered by the earlier decision applying the principle that such composite contracts are not to be subjected to the impugned levy in the manner adopted by the department.

Conclusion: The demand under Construction of Residential Complex Services was unsustainable and was set aside.

Issue (ii): Whether service tax was payable on amounts collected towards Management, Maintenance and Repair services.

Analysis: Amounts were collected from customers for providing maintenance and repair services, bringing the receipts within the taxable category.

Conclusion: The demand under Management, Maintenance and Repair services was upheld.

Final Conclusion: The impugned order was modified by setting aside the demand relating to Construction of Residential Complex Services while sustaining the demand, interest and penalties relating to Management, Maintenance and Repair services, with the connected appeals disposed accordingly.

Ratio Decidendi: Composite contracts involving both supply of goods and services cannot be fastened with service tax in the impugned manner where the levy is otherwise inapplicable on the facts found.

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