Composite works contract and repeated extended limitation invocation both failed, defeating service tax demands, interest, and penalties.

An indivisible composite works contract could not be split and taxed under Construction of Complex Service; the demand was therefore unsustainable and set aside. A separate demand for Consulting Engineer Service received from outside India was time-barred because the department had already invoked the extended period on the same facts in an earlier notice, so the later notice could not again rely on extended limitation; this demand was also set aside. Interest and penalties, being purely consequential to the underlying tax demands, could not survive once those demands failed, and they too were deleted.

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Issues: (i) whether the demand under the head of Construction of Complex Service was sustainable where the underlying activity was a composite works contract involving transfer of property in goods; (ii) whether the demand relating to Consulting Engineer Service received from outside India was barred by limitation because the extended period had already been invoked earlier on the same facts; and (iii) whether interest and penalties could survive once the tax demands were held unsustainable.

Issue (i): whether the demand under the head of Construction of Complex Service was sustainable where the underlying activity was a composite works contract involving transfer of property in goods.

Analysis: The activity undertaken was admitted to be a composite works contract. Such indivisible contracts cannot be split up and taxed under other service categories merely because a separate taxable entry did not exist for the relevant period. A composite works contract is taxable only under the specific entry created for Works Contract Service, and not under Construction of Complex Service.

Conclusion: The demand under Construction of Complex Service was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether the demand relating to Consulting Engineer Service received from outside India was barred by limitation because the extended period had already been invoked earlier on the same facts.

Analysis: The record showed that a prior show cause notice had already been issued on the same issue invoking the extended period. Once the department was aware of the material facts, the extended period could not be invoked again on the same set of facts in a subsequent notice. The later demand was therefore hit by limitation.

Conclusion: The demand on Consulting Engineer Service was barred by limitation and was set aside in favour of the assessee.

Issue (iii): whether interest and penalties could survive once the tax demands were held unsustainable.

Analysis: Interest and penalties were purely consequential to the tax demands. Since the demands themselves could not stand, no independent basis remained for levy of interest or imposition of penalties.

Conclusion: The interest and penalty demands also failed in favour of the assessee.

Final Conclusion: The impugned order could not be sustained on either the merits of classification or on limitation, and the assessee obtained complete relief in the appeal.

Ratio Decidendi: An indivisible composite works contract cannot be vivisected and taxed under another service category, and where the department has already invoked the extended period on the same facts, a subsequent notice cannot again rely on the extended period for the same matter.

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