Composite works contract not taxable as site formation service for the pre-01.06.2007 period.

A composite contract for supply and installation of reinforced cement concrete pipes and embankment work was treated as a works contract because it involved both material supply and execution of construction activity. The consideration could not be split and taxed as site formation services for the period before 01.06.2007, when works contracts were not exigible to service tax in that form. As VAT had also been discharged under the composition scheme, the arrangement was recognised as a works contract rather than a service simpliciter, and the Revenue's challenge failed.

---

---

Issues: Whether the consideration received under the contract for supply and installation of reinforced cement concrete pipes and embankment work was taxable as site formation services, or whether it was a works contract not liable to service tax for the relevant period.

Analysis: The contract was examined as a whole and was found to involve supply of materials as well as execution of embankment and related construction work. The arrangement was treated by the parties as a works contract, and VAT had also been accounted for under the applicable composition scheme. Since the contract contained both supply and service elements, the amount received could not be isolated and brought to tax under the head of site formation services for the period prior to 01.06.2007.

Conclusion: The activity was held to be a works contract and not taxable as site formation services for the relevant period.

Final Conclusion: The Revenue's challenge failed because the contract was held to be a composite works contract outside service tax liability for the period in dispute, and the appeals were rejected.

Ratio Decidendi: A composite contract involving supply of materials and execution of work cannot be taxed as a service simpliciter for the period when such works contracts were not exigible to service tax.

---