TaxTMI 
TaxTMI 
2026 (9) TMI 1214
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....nstruction of residential complex service' under Section 65(105)(zzzh) of the Act. Accordingly, the demand was proposed and confirmed after allowing abatement under Notification No. 18/2005 dated 07.04.2005 and 1/2006-ST dated 01.03.2006 as the appellant's contracts included the use of material in rendering the service. 2. Later, with effect from 01.06.2007, "Works Contract Service" itself has been made a taxable service by inserting clause 65(105)(zzzza) in the Act . The question as to whether the "Works Contract Services" provided before 01.06.2007 could be charged under other heads or otherwise has been decided by the Hon'ble Supreme Court in the case of Commissioner of Central Excise & Customs, Kerala Vs Larsen & Toubro Ltd., [2015 (39) STR 913 (SC)]. It has been held that Works Contract Services are a separate species of contract and they could be charged to service tax only under the head of Works Contract Service, such service could not be taxed under another head and other heads cover only services simpliciter. Revenue's submission that abatement was allowed under various notifications was also rejected by the Supreme Court. Relevant portion of this judgment is reproduce....
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....on which is not ascertainable, be the amount as may be determined in the prescribed manner." 16. At this stage, it is important to note the scheme of taxation under our Constitution. In the lists contained in the 7th Schedule to the Constitution, taxation entries are to be found only in lists I and II. This is for the reason that in our Constitutional scheme, taxation powers of the Centre and the States are mutually exclusive. There is no concurrent power of taxation. This being the case, the moment the levy contained in a taxing statute transgresses into a prohibited exclusive field, it is liable to be struck down. In the present case, the dichotomy is between sales tax leviable by the States and service tax leviable by the Centre. When it comes to composite indivisible works contracts, such contracts can be taxed by Parliament as well as State legislatures. Parliament can only tax the service element contained in these contracts, and the States can only tax the transfer of property in goods element contained in these contracts. Thus, it becomes very important to segregate the two elements completely for if some element of transfer of property in goods remains when a serv....
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....nized works contracts as a separate species of contract as follows:- "To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the Court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at p. 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell, from the agreement to do work and render service and to impose a tax thereon cannot be questioned, and will stand untouched by the present judgment." (at page 427) 24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This....
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....s how much shall be the percentage of the total amount charged for the works contract, attributable to the service element in such contracts. It is this scheme and this scheme alone which complies with constitutional requirements in that it bifurcates a composite indivisible works contract and takes care to see that no element attributable to the property in goods transferred pursuant to such contract, enters into computation of service tax. 27. In fact, the speech made by the Hon'ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts specifically stated:- "State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract. However, I also propose an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract." 28. Pursuant to the aforesaid speech, not only was the statute amended and rules framed, but a Works Contract (Composition Scheme for Payment of....