Composite works contract taxability and limitation fail where only service element is taxable and no wilful suppression is proved.

Composite contracts involving construction, renovation, maintenance and repair with supply of materials are taxable only on the service element, not on the value of goods transferred in execution of the contract. The classification of such activity as management, maintenance or repair service was therefore incorrect, and the record supported exclusion of the goods component and abatement for composite contracts. Services relating to airport premises fell outside the taxable category, and services rendered to a non-commercial governmental body such as CPWD did not satisfy the commerce or industry requirement. Nil ST-3 returns did not, by themselves, establish suppression or wilful misstatement; absent positive evidence of intent to evade tax, the extended period of limitation could not be invoked.

---

---

Issues: (i) Whether the services rendered by the appellant were composite works contract services or taxable management, maintenance or repair services, and whether the value of goods was liable to service tax. (ii) Whether the extended period of limitation was invocable on the basis of alleged suppression of facts in the ST-3 returns.

Issue (i): Whether the services rendered by the appellant were composite works contract services or taxable management, maintenance or repair services, and whether the value of goods was liable to service tax.

Analysis: The contracts involved construction, renovation, maintenance and repair along with supply of materials, and therefore were not service contracts simpliciter. Under the service tax scheme, tax was leviable only on the service element and not on the value of goods transferred in execution of a composite contract. The appellant was entitled to exclusion of the goods component and the record also supported availability of abatement for composite contracts. The services rendered to airport premises were outside the taxable category as works contract services in relation to airports were excluded, and the services rendered to CPWD were for a non-commercial governmental body and did not satisfy the commerce or industry requirement. The classification adopted by the department as management, maintenance or repair service was therefore incorrect.

Conclusion: The issue is decided in favour of the assessee.

Issue (ii): Whether the extended period of limitation was invocable on the basis of alleged suppression of facts in the ST-3 returns.

Analysis: Once the services were correctly classifiable as composite works contract services, and in part as non-taxable services rendered to airport premises and a non-commercial governmental authority, the filing of nil returns did not constitute deliberate suppression or wilful misstatement. No positive material was shown to establish intent to evade tax, and mere non-disclosure without a culpable act was insufficient to trigger the extended period.

Conclusion: The extended period of limitation was not invocable and the demand for the time-barred period was unsustainable.

Final Conclusion: The demand was unsustainable both on merits and, for one appeal, also on limitation, so the impugned order was set aside and both appeals succeeded.

Ratio Decidendi: A composite contract involving supply of goods and services is taxable only to the extent of the service element, and the extended period cannot be invoked unless deliberate suppression or wilful misstatement with intent to evade tax is proved.

---