Composite contract and effective control determine service tax liability; extended limitation needs proof of wilful suppression.

A composite construction contract involving supply of materials was treated as falling within the works contract principle, so tax under Commercial or Industrial Construction Service could not be sustained. Supply of Tangible Goods Service also failed because there was no evidence that possession and effective control of the machinery remained with the assessee; mere provision of operators was insufficient. The extended period of limitation could not be invoked without specific allegations and proof of wilful suppression or mala fide intent. On both merits and limitation, the demand was set aside and complete relief followed.

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Issues: (i) whether the demand under Commercial or Industrial Construction Service could be sustained when the construction activity was a composite contract involving supply of material and fell within the works contract regime; (ii) whether the demand under Supply of Tangible Goods Service could be sustained in the absence of evidence showing that possession and effective control of the machinery remained with the assessee; (iii) whether the extended period of limitation could be invoked without specific averments and evidence of wilful suppression or mala fide intent.

Issue (i): whether the demand under Commercial or Industrial Construction Service could be sustained when the construction activity was a composite contract involving supply of material and fell within the works contract regime.

Analysis: The dispute turned on the character of the construction activity. Where the contract was composite and involved supply of material, the demand could not be sustained under the standalone construction service category if the activity was covered by the works contract principle already accepted in prior binding precedent of the same Bench.

Conclusion: The demand under Commercial or Industrial Construction Service was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether the demand under Supply of Tangible Goods Service could be sustained in the absence of evidence showing that possession and effective control of the machinery remained with the assessee.

Analysis: Taxability under this category depended on the nature of transfer of the goods and the existence of possession and effective control. In the absence of proof that the machinery remained under the assessee's possession and control, mere reference to provision of operators was insufficient to sustain the levy.

Conclusion: The demand under Supply of Tangible Goods Service was not sustainable and was set aside in favour of the assessee.

Issue (iii): whether the extended period of limitation could be invoked without specific averments and evidence of wilful suppression or mala fide intent.

Analysis: Invocation of the extended period required material showing deliberate evasion, supported by specific allegations in the notice. Mere non-payment of tax, non-filing of returns, or reliance on financial records, without evidence of mala fide conduct, was insufficient to attract the extended limitation period.

Conclusion: The extended period of limitation could not be invoked against the assessee.

Final Conclusion: The entire demand failed on merits as well as on limitation, and the assessee obtained complete relief.

Ratio Decidendi: A composite construction contract cannot be taxed under a pure construction service category, supply of machinery is not taxable as tangible goods supply unless possession and effective control are shown to remain with the supplier, and the extended period of limitation requires specific allegations and proof of wilful suppression or similar mala fide conduct.

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