Works contract classification prevails for composite supply of materials and services, defeating the demand and extended limitation.

Composite contracts involving both services and materials were held to fall within works contract service, not commercial and industrial construction service, because the Finance Act, 1994 did not treat such composite works as service contracts simpliciter. On that classification, the demand raised under the wrong service category was unsustainable. The Tribunal also found that the invocation of the extended period of limitation could not be sustained on the facts, making the limitation-based demand equally untenable. The impugned order was set aside and consequential relief followed.

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Issues: (i) Whether the activity undertaken by the appellant was classifiable as commercial and industrial construction service or as works contract service. (ii) Whether the demand was sustainable when raised by invoking the extended period of limitation.

Issue (i): Whether the activity undertaken by the appellant was classifiable as commercial and industrial construction service or as works contract service.

Analysis: The services were provided along with materials and were, therefore, composite in nature. On the settled principle that the Finance Act, 1994 did not contemplate taxation of composite works contracts as service contracts simpliciter, such activity falls under works contract service and not under the category adopted in the demand.

Conclusion: The activity was classifiable as works contract service, and the demand on that classification was not sustainable.

Issue (ii): Whether the demand was sustainable when raised by invoking the extended period of limitation.

Analysis: The demand was founded on extended limitation, but in the facts found by the Tribunal, the invocation of the extended period could not be sustained.

Conclusion: The invocation of the extended period of limitation was unsustainable.

Final Conclusion: The impugned order was set aside and the appeal was allowed with consequential relief.

Ratio Decidendi: Composite contracts involving supply of materials cannot be taxed as service contracts simpliciter, and where the classification itself fails, the associated demand and extended limitation based thereon are unsustainable.

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