Composite works contract taxability before 1.6.2007 was rejected, as service tax could not apply to indivisible contracts.

Service tax was not leviable on a composite, indivisible works contract for the period prior to 1.6.2007 because the value of goods and construction services could not be separately bifurcated before the statutory amendment. Relying on Larsen & Toubro Ltd., the HC held that the Tribunal was in deleting the demand for that pre-amendment period, as the levy could not be applied retrospectively to such composite contracts. Finding no illegality or perversity in the Tribunal's view, the Court held that no substantial question of law arose and the demand up to 1.6.2007 was unsustainable.

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Issues: Whether service tax was leviable on the value of a composite works contract prior to 1.6.2007 and whether the Tribunal was justified in deleting the demand for that period.

Analysis: The respondent supplied materials along with construction services, and the value of goods and services in such composite contracts could not be separately bifurcated for the pre-1.6.2007 period. Relying on the Supreme Court decision in Larsen & Toubro Ltd., the Court held that service tax could not be levied on a composite indivisible works contract before the statutory amendment that took effect on 1.6.2007. The Court found no illegality or perversity in the Tribunal's view that the demand was unsustainable up to that date and that no substantial question of law arose.

Conclusion: The demand of service tax for the period prior to 1.6.2007 was not sustainable, and the appeal was dismissed.

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