Composite layout-development contracts involving goods transfers are treated as works contracts, with material-value exclusion supported by documentary evidence.

Composite layout-development contracts involving transfer of property in goods and infrastructure works are described as falling within the works-contract regime where VAT is discharged on the goods component. The notes state that such composite arrangements should not be artificially classified as site-formation services. They further state that extended limitation requires evidence of deliberate misstatement or suppression with intent to evade tax, rather than mere non-disclosure or non-payment. Documentary evidence, including Chartered Accountant certification and VAT records, is identified as supporting exclusion of sold goods and materials from taxable value, leaving only the service component chargeable. A dissenting view treated the activity as site-formation service.

---

---

Issues: (i) Whether the composite layout-development activities involving supply of goods and infrastructure works were classifiable as Site Formation and Clearance, Excavation, Earth Moving and Demolition Service or as Works Contract Service; (ii) Whether the extended period of limitation could be invoked; (iii) Whether the value of goods and materials used in the activity was excludible from the taxable value.

Issue (i): Whether the composite layout-development activities involving supply of goods and infrastructure works were classifiable as Site Formation and Clearance, Excavation, Earth Moving and Demolition Service or as Works Contract Service.

Analysis: The agreements required conversion of land use and provision of roads, drains, sewerage lines, borewells, reservoirs, water connections and other infrastructure. Property in goods used for these works was transferred and VAT was discharged under the composition scheme. The statutory definition and the Board clarification treated contracts subjected to VAT as works contracts for service-tax purposes. A composite contract involving goods and services could not be artificially classified under Site Formation Service where its essential character was execution of works involving construction and infrastructure development.

Conclusion: The activities are classifiable as Works Contract Service, in favour of the assessee.

Issue (ii): Whether the extended period of limitation could be invoked.

Analysis: Mere failure to disclose taxable activity or non-payment of tax does not establish wilful suppression. Invocation of the extended period required evidence of deliberate misstatement or suppression with intent to evade tax, which was absent.

Conclusion: The extended period of limitation was not invocable, in favour of the assessee.

Issue (iii): Whether the value of goods and materials used in the activity was excludible from the taxable value.

Analysis: Documentary material, including the Chartered Accountant's certification and VAT discharge, established use of goods and materials in executing the infrastructure works. The exemption for goods and materials sold by the service provider applied on production of documentary proof, and service tax was chargeable only on the service component.

Conclusion: The material-cost exclusion was allowable, in favour of the assessee.

Dissenting Opinion: The Member (Technical) considered the activity specifically classifiable as Site Formation Service, though the demand was confined to the normal period and the Revenue appeals on valuation were dismissed.

Final Conclusion: The composite layout-development contracts, involving taxable transfer of goods and infrastructure works, fall within the works-contract regime; the contrary classification and the resulting demands could not stand.

Ratio Decidendi: A composite contract involving transfer of property in goods on which VAT is paid and execution of infrastructure works must be classified as Works Contract Service and cannot be artificially vivisected for classification as Site Formation Service.

---