Composite construction contracts are not taxable as construction service simpliciter; liability arises, if at all, under works contract levy.

A composite residential construction contract involving both supply of goods and services was not taxable as construction service simpliciter for the period July 2007 to April 2008. The applicable principle was that such mixed contracts fall within the specific works contract levy introduced from 1 June 2007, while pure service contracts alone remain within the construction service entries. On that basis, the service tax demand was held unsustainable, the order was set aside, and relief followed in favour of the assessee.

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Issues: Whether construction of a residential complex undertaken as a composite contract involving supply of goods and services during July 2007 to April 2008 was exigible to service tax under construction of complex service.

Analysis: The impugned demand related to a period after introduction of works contract service on 1 June 2007. The governing principle, as applied by the Tribunal, is that composite contracts involving both goods and services are not taxable as service simpliciter under the earlier construction service heads. Such contracts became liable only under the specific works contract entry introduced from 1 June 2007, whereas pure service contracts alone continued to fall within the construction service entries. The Tribunal found that the appellant's activity was not a service simpliciter contract.

Conclusion: The demand of service tax was not sustainable and the issue was answered in favour of the assessee.

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

Ratio Decidendi: A composite construction contract involving both supply of goods and provision of services is not taxable as construction service simpliciter; taxability, where applicable, arises only under the specific works contract levy introduced from 1 June 2007.

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