Composite works contracts were not taxable before 01.06.2007, so the service tax demand, interest and penalty failed.

Composite works contracts involving both supply of material and construction activity were not taxable as Commercial Construction Services for the period before 01.06.2007, because settled law treated such contracts as outside service tax until works contract service was introduced. On that basis, the demand could not be sustained for the pre-01.06.2007 period, and the related interest and penalty also fell with the demand. The impugned order was set aside in favour of the assessee.

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Issues: Whether a composite contract involving supply of material and construction activity could be taxed under Commercial Construction Services for the period prior to 01.06.2007, and whether the demand, interest and penalty could be sustained.

Analysis: The disputed period was prior to 01.06.2007. The record showed that the services were rendered under works contracts involving both construction activity and supply of material, making them composite contracts. The settled law held that such composite contracts were not taxable under service tax before the introduction of works contract service.

Conclusion: The demand could not be sustained for the pre-01.06.2007 period, and the impugned order was set aside in favour of the assessee.

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