Works contract taxability for residential construction turned on classification and period, with penalties failing where demand was unsustainable.

Construction of residential complexes under composite contracts was treated as not taxable for periods prior to 1.7.2010, while post-1.7.2010 taxability depended on the nature of the contract. The demand under Works Contract Service was unsustainable on the facts because the appellant had already discharged tax under the declared service category for the relevant periods, so the impugned demands could not be maintained on the same classification basis. As the tax demand itself failed, the allegation of suppression and the consequential penalties also could not survive. Only any admitted liability independently payable for the relevant period and receipt category was preserved.

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Issues: Whether service tax demand under Works Contract Service was sustainable for the disputed periods, and whether penalties could survive when the appellant had remitted tax under the declared service category.

Analysis: The dispute concerned construction of residential complexes under composite contracts. The governing position applied was that, for periods prior to 1.7.2010, no service tax was leviable on such construction, whether treated as service simpliciter or as a works contract, and post-1.7.2010 taxability depended on the nature of the contract. On the facts, the appellant had already discharged tax under the declared category for the relevant periods, and the demand under the impugned orders could not be sustained on the same basis. In the absence of a sustainable tax demand on interpretation of classification, the allegation of suppression and the consequential penalties also could not survive.

Conclusion: The demand and penalties were set aside, with only any admitted tax liability for the specific period and receipt category left to be dealt with in accordance with law.

Final Conclusion: The appeals succeeded to the extent of quashing the impugned tax demands and penalties, while preserving only any admitted liability that remained independently payable under the applicable classification.

Ratio Decidendi: Construction of residential complexes under composite contracts was not taxable for periods prior to 1.7.2010, and where the demand rests on an unsustainable classification dispute, consequential penalties for suppression cannot be imposed.

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