A client has provided Work Contract Service by way of construction of Road and construction of buildings for Government or Government Authority. They have made expenses towards Repair & Mentainance, Labour Wages, Carriage of Magteriala and Other Expenses. The department has issued an SCN and raised the demand under Reverse Charge on such above expenses made and reflected in Profit/Loss account. The client in his defense reply submitted that as the Work Contract Service is a composite Service so to execute such services the expenditure made towards the above items are essential and could not be treated as separate expenditure. Hence, no demand under Reverse Charge is applicable as all the expenses has been made to execute the work contract by way of either Road Construction or Construction of Building for Government Authority.
The Department rebuted the clients defence and confirm the demand passing the Adjudication Order.
Please guide whether the client should prefer an appeal or the department has taken right action.
Before 1.7.17, splitting of works contract was possible. It could be treated as divisible contract. Study deep and study wide the following judgements :-
(i) Supreme Court judgement in the case of Larsen and Toubro Vs. State of Karnataka reported 2013 (9) TMI 853 - SUPREME COURT (3-member bench)
(ii) CCE Vs. BSBK Pvt. Ltd 2010 (5) TMI 46 - CESTAT, NEW DELHI - LB
(iii) National Organics Chemical Industries Ltd. VS. State of Maharashtra 2012 (8) TMI 407 - BOMBAY HIGH COURT
Yes Sir the client qualify the definition of Works Contract Service. Further the service was supplied with material for construction of Building and Road.