Service tax on construction, maintenance and consulting engineer services: pre-01.06.2007 liabilities held not leviable, order set aside.

Whether service tax applied to construction of residential and commercial complexes, maintenance/repair and consulting engineer services before 01.06.2007 turned on the statutory insertion defining 'works contract' and the date the service element became taxable. The analysis affirms that the statutory definition and amendment made the service component taxable only with effect from 01.06.2007, and earlier authorities treating such activities as not leviable to service tax before that date were followed. Consequently, demands and penalties for the pre-01.06.2007 period were held unsustainable and the impugned order was set aside with consequential relief.

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Issues: Whether service tax was leviable on construction of residential complex, construction of commercial complex, maintenance/repair services and consulting engineers services as works contract services for the period prior to 01.06.2007.

Analysis: The question turns on the introduction and applicability of the statutory definition of 'works contract' and the date from which the service component of works contracts became taxable. Reliance is placed on the principle that the definition of works contract for service tax purposes was inserted as Section 65(105)(zzzza) and that the amendment making the service element of works contracts taxable operates with effect from 01.06.2007. Earlier authorities applying this principle distinguished service tax liability before and after the statutory amendment and treated maintenance/repair and related activities falling within works contract as not taxable under service tax prior to the amendment. Consistent decisions interpreting these propositions were applied to the facts concerning the nature of the appellant's work orders and the characterisation of activities as works contract.

Conclusion: The service tax demand and penalties confirmed for the period prior to 01.06.2007 are not sustainable; the impugned order is set aside and the appeal is allowed with consequential relief, if any, as per law.

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