Composite works contracts cannot be split for service tax under earlier categories, and extended limitation fails without suppression.

Composite and indivisible turnkey construction contracts involving both materials and labour were not taxable under Commercial or Industrial Construction Service or Construction of Complex Service for the period before 01.06.2007. After Works Contract Service was introduced, such contracts could not be split and classified under the earlier service heads, and were to be assessed, if at all, only under the specific works contract entry. On limitation and penalty, the extended period was unavailable because the department knew the facts and there was no suppression or wilful misstatement with intent to evade tax; accordingly, penalty was also unsustainable. The impugned orders were set aside and consequential relief followed.

---

---

Issues: (i) whether the appellant's turnkey composite contracts for construction were liable to service tax under Commercial or Industrial Construction Service and Construction of Complex Service for the period prior to 01.06.2007 and after the introduction of Works Contract Service; (ii) whether the extended period of limitation and penalty were invocable in the absence of suppression or wilful misstatement.

Issue (i): whether the appellant's turnkey composite contracts for construction were liable to service tax under Commercial or Industrial Construction Service and Construction of Complex Service for the period prior to 01.06.2007 and after the introduction of Works Contract Service.

Analysis: The contracts were found to be composite and indivisible, involving supply of material as well as labour and services. For the period prior to 01.06.2007, such composite works contracts were not taxable under Commercial or Industrial Construction Service or Construction of Complex Service. For the period after 01.06.2007, once Works Contract Service was introduced, a composite works contract could not be classified under the pre-existing service categories and had to be assessed, if at all, under the specific works contract entry.

Conclusion: The demand under Commercial or Industrial Construction Service and Construction of Complex Service was not sustainable for the relevant periods.

Issue (ii): whether the extended period of limitation and penalty were invocable in the absence of suppression or wilful misstatement.

Analysis: The records showed that the department was aware of the appellant's activities and that the relevant facts had been disclosed. In the absence of suppression of facts or wilful misstatement with intent to evade tax, the precondition for invoking the extended period and penal consequence was not satisfied.

Conclusion: The extended period of limitation and penalty were held to be unsustainable.

Final Conclusion: The impugned orders were set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: A composite and indivisible works contract cannot be vivisected and taxed under Commercial or Industrial Construction Service or Construction of Complex Service, and the extended period and penalty cannot be invoked without suppression or wilful misstatement with intent to evade tax.

---