Works Contract Service requires actual qualifying execution; mere design, supply and supervision of commissioning is insufficient.

Design, manufacture, supply and supervision of erection and commissioning, without the appellant undertaking actual erection, commissioning, installation or other qualifying works contract activity, did not satisfy the statutory ingredients of a works contract. The contractual documents showed that obligations were limited to supply-side and supervisory functions, with civil work and erection excluded from the appellant's scope and payment linked to dispatch of equipment and documents. On that basis, the demand under Works Contract Service was held unsustainable and the impugned order was set aside with consequential relief.

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Issues: Whether the activities undertaken under the work orders amounted to execution of a works contract liable to service tax under Works Contract Service.

Analysis: The contractual documents showed that the appellant's obligations were confined to design, engineering, manufacture, supply, documentation and supervision of erection and commissioning of equipment. The work orders and letters of intent also indicated supply and delivery of machinery, exclusion of civil work and erection by the appellant, and payment terms linked to dispatch of documents and equipment rather than execution of erection or commissioning. Supervision of erection and commissioning was not treated as the same as actual erection, commissioning or installation. In the absence of the appellant undertaking the core activities contemplated under clause (a) or turnkey/EPC activity under clause (e) of the definition, the statutory ingredients of works contract were not satisfied.

Conclusion: The demand under Works Contract Service was not sustainable and the appeal succeeded.

Final Conclusion: The impugned order was set aside and the appellant obtained consequential relief.

Ratio Decidendi: Mere design, manufacture, supply and supervision of erection and commissioning, without undertaking actual erection, commissioning, installation or other qualifying works contract activity, does not attract service tax under Works Contract Service.

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