Tribunal allows appeal on composite contracts, deems pre-2007 demands unsustainable.

The Tribunal allowed the appeal, finding that the services provided by the appellants were composite contracts involving both services and transfer of property in goods. The demands for the period before 01.06.2007 were deemed unsustainable, leading to the penalties imposed under Section 78 of the Finance Act, 1994, being not sustainable as well. The impugned order was set aside, and the appellants were granted consequential relief.

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Issues:
Classification of services for assessment under Kerala VAT and demand of tax under Section 78 of the Finance Act, 1994 for the period before 01.06.2007.

Analysis:
The appellants, engaged in civil construction works, were issued a Show Cause Notice (SCN) regarding the classification of their services as "Commercial and Industrial Construction Services" and "site formation and clearance, excavation, earth moving and demolition service" for specific periods. The Commissioner confirmed the demand of tax and imposed a penalty under Section 78, which was paid by the appellants. The appellants contended that the services provided were composite contracts involving both services and transfer of property in goods. They relied on a certificate issued by the Kerala VAT Authority and argued that the taxability of such contracts under the Finance Act, 1994, could only be under works contract service introduced from 01.06.2007. Therefore, they claimed that the demands for the period before 01.06.2007 were not sustainable based on the decision of the Hon'ble Supreme Court in the case of CCE Vs. Larsen & Toubro Ltd.

The Ld. counsel for the appellants presented evidence, including a certification from the VAT Authority, to support their claim that the services provided were composite contracts. The Commissioner had also allowed an abatement of 67% on the taxable value, recognizing the composite nature of the contracts where the gross amount charged included the value of all goods and materials supplied. The Tribunal found that the works undertaken by the appellants were indeed composite contracts, and the decision in the case of Larsen & Toubro Ltd. was applicable. Consequently, the demands for the period before 01.06.2007 were deemed unsustainable, leading to the penalties being not sustainable as well.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief. The operative portion of the order was pronounced in Open Court on 14/12/2018.

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