Composite construction contracts with material supply were held outside service tax under the relevant construction service heads.

Composite contracts involving supply of materials, consumables, labour and incidental charges were held not taxable under Construction of Residential Complex Service and Commercial or Industrial Construction Service for the relevant period, because transfer of property in goods took the works outside the service tax levy under those heads. On that basis, the service tax demand was set aside and consequential relief was granted.

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Issues: Whether the demand of service tax under Construction of Residential Complex Service and Commercial / Industrial Construction Service was sustainable where the contracts were composite in nature involving supply of materials as well as rendition of services.

Analysis: The contract documents showed that the works were for complete items including supply of materials, consumables, labour and incidental charges, and therefore were composite contracts. Applying the settled position that composite contracts involving transfer of property in goods are not leviable to service tax under the said categories for the relevant period, the demand could not be sustained.

Conclusion: The demand of service tax was set aside and the appeal was allowed with consequential reliefs.

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