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15. A reading of this judgment, on which counsel for the assessees heavily relied, would go to show that the separation of the value of goods contained in the execution of a works contract will have to be determined by working from the value of the entire works contract and deducting therefrom charges towards labour and services. Such deductions are stated by the Constitution Bench to be eight in number. What is important in particular is the deductions which are to be made under sub- paras (f), (g) and (h). Under each of these paras, a bifurcation has to be made by the charging Section itself so that the cost of establishment of the contractor is bifurcated into what is relatable to supply of labour and services. Similarly, all other expenses have also to be bifurcated insofar as they are relatable to supply of labour and services, and the same goes for the profit that is earned by the contractor. These deductions are ordinarily to be made from the contractor's accounts. However, if it is found that contractors have not maintained proper accounts, or their accounts are found to be not worthy of credence, it is left to the legislature to prescribe a formula on the basis of a fixed percentage of the value of the entire works contract as relatable to the labour and service element of it. This judgment, therefore, clearly and unmistakably holds that unless the splitting of an indivisible works contract is done taking into account the eight heads of deduction, the charge to tax that would be made would otherwise contain, apart from other things, the entire cost of establishment, other expenses, and profit earned by the contractor and would transgress into forbidden territory namely into such portion of such cost, expenses and profit as would be attributable in the works 20 ST/86241/2016 contract to the transfer of property in goods in such contract. This being the case, we feel that the learned counsel for the assessees are on firm ground when they state that the service tax charging section itself must lay down with specificity that the levy of service tax can only be on works contracts, and the measure of tax can only be on that portion of works contracts which contain a service element which is to be derived from the gross amount charged for the works contract less the value of property in goods transferred in the execution of the works contract. This not having been done by the Finance Act, 1994, it is clear that any charge to tax under the five heads in Section 65(105) noticed above would only be of service contracts simpliciter and not composite indivisible works contracts.

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42. It remains to consider the argument of Shri Radhakrishnan that post 1994 all indivisible works contracts would be contrary to public policy, being hit by Section 23 of the Indian Contract Act, and hit by Mcdowell's case.

43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services.

44. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax "levied" by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals are disposed of."

4.5 In view of the observations as made by the Commissioner in para 11.2 of the impugned order it is quite evident that demand of service tax has been made in respect of indivisible contracts for turnkey projects, involving supply of services and the material for provision of the said services. Since Hon'ble Supreme Court has concluded that these services could not have been taxed prior to the introduction of "work contract services"

29 ST/86241/2016 12.11. Works Contract is an indivisible contract. The conflict whether transfer of goods in a works contract is exigible to the Sales Tax was resolved by the Supreme Court in the case of State of Madras versus Gannon Dunkerley & Co. The Hon'ble Supreme Court held in the said judgement that it was not within the competence of the State to impose Sales Tax on the supply of materials used in the execution of Works Contract treating it as a sale. It is pertinent to mention that such agreements are neither a contract to sell the material used in construction, nor does property pass therein as movables. The materials are passed to the owner only as an accretion to the property, A contract for the sale of materials cannot be implied from such an agreement. Thus, where the contract is indivisible, it cannot be split up. The artificial division of the indivisible contract and consequent splitting of value without having any relation or nexus with the real transaction, for the purpose of payment of Service Tax, is completely contrary to the nature and explicit terms of the contract. In view of this position, it has to be held that for determining the taxable value for the purpose of payment of Service Tax, gross value of the contract/agreement, including the material/goods consumed for providing the output service would be the basis for computing the Service Tax payable on the services provided under such contracts/agreements. Service Tax is chargeable on the services rendered. In the case of indivisible works contract where the value of service cannot be identified or determined then Service Tax is chargeable on the whole value including the value of material/goods. However, since Service Tax is not payable on the value of goods, schemes like abatement or composition scheme are in place, which exclude the value of goods on assumptive basis. As per Section 67 of the Finance Act, 1994 the value of taxable service shall be the gross amount charged by the service provider for provision of the service. Rule 3(1) of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 stipulates that the gross amount charged for works contract shall include the value of all goods used in or in relation to execution of the works contract, whether supplied under any other contract for consideration or otherwise and 30 ST/86241/2016 value of all the services that are required to be provided for the execution of works contract.