Composite construction contract with material supply evidence supports service tax abatement on construction work.

A construction agreement priced on a per sq. ft. basis was treated as a composite contract because the terms referred to material quality and the record showed purchase and use of steel, cement and other materials in execution of the work. VAT returns, invoices and certificates from professionals linked those supplies to the contracted construction, so the service tax abatement was available. The claim for 67% abatement was therefore upheld and denial of the benefit was unsustainable.

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Issues: Whether the construction contract was a composite contract involving supply of material, and whether the appellants were entitled to the abatement of 67% claimed under the applicable service tax notifications.

Analysis: The contract was found to be for construction on a per sq. ft. rate and not a simple labour-only arrangement. The terms of the contract referred to material quality, and the VAT returns, invoices, Chartered Accountant certificate, and Chartered Engineer certificate established purchase and use of steel, cement, and other material in execution of the work. These materials and supporting documents also connected the supplies with the contract work awarded by the customer. On that basis, the contract was treated as a composite contract, making the claimed abatement applicable.

Conclusion: The appellants were entitled to the 67% abatement and the impugned order was unsustainable.

Ratio Decidendi: A construction agreement supported by evidence of material supply and execution is to be treated as a composite contract, and the associated service tax abatement cannot be denied merely because the contract does not expressly isolate the material component.

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