Document Fragment View

Matching Fragments





                                       ………………………………….J.
                                          [M.R. SHAH]



NEW DELHI;                             ………………………………….J.
AUGUST 02, 2022.                         [B.V. NAGARATHNA]

I have had the advantage of perusing the judgment proposed by His Lordship M.R. Shah J. While I agree with the conclusions arrived at by him, I wish to supplement the reasons for the conclusions. (2) As already stated, the issue in these appeals relates to the levy of service tax on composite works contract prior to the amendment made to the Finance Act, 1994 in the year 2007 by which Section 65(105) (zzzza) was introduced which gives the definition to the expression “works contract.” (3) While it is not essential to narrate the details of each of the cases under consideration as it has been made in the judgment proposed by M.R. Shah J., it is however necessary to answer the principal submission made by Ms. Madhavi Diwan, learned Additional Solicitor General appearing for the revenue with a detailed reasoning. She contended that the judgment of this Court in Commissioner, Central Excise and Customs, Kerala vs. Larsen and Toubro Ltd. [(2016) 1 SCC 170] (hereinafter referred as “Larsen & Toubro Ltd.”) requires reconsideration as in the said case it was held that service tax on composite works contract was not leviable prior to the amendment made to the Finance Act, 1994, in the year 2007, whereas according to her, in fact, it was leviable even prior thereto and the amendment made to the Finance Act, 1994, in the year 2007 by insertion of Section 65(105)(zzzza) is only clarificatory in nature. Hence, the judgment in Larsen and Toubro Ltd. (supra) holding otherwise calls for reconsideration.

a) In the aforesaid case, this Court traced the historical setting within which the controversy leading up to the 46 th amendment in the context of levy of sales tax on works contract progressed. Taking up the question as to whether service tax could be levied on the service element of a works contract, it was observed that service tax was introduced by the Finance Act, 1994 and various services were set out in Section 65 thereof as being amenable to tax. The legislative competence of such tax is traceable to Article 248 read with Schedule VII List I Entry 97 to the Constitution of India. The controversy in the said case was with regard to the period prior to the 2007 Amendment made to the Finance Act, 1994 in the year 2007 which introduced the definition and concept of works contract as being a separate subject­matter of taxation. By the said amendment works contract, which were indivisible and composite were split so that only the labour and service element of such contracts would be taxed under the heading service tax.
(8) As already noted, the definition of works contract was brought under the service tax net as per Section 65(105)(zzzza) of the Finance Act, 1994 by the insertion of the said definition. The said introduction was made pursuant to the Finance Act, 2007, which expressly made the service element in such works contract liable to service tax w.e.f.

1st June, 2007. By the said amendment, works contract which were indivisible and composite could be split so that only the labour and service element of such contracts would be taxed under the heading "Service Tax".

12) Therefore, reliance placed by the assesses in the present case on the aforesaid judgments is just and proper. On the other hand, the contention of Ms. Diwan, learned ASG to the effect that even prior to the aforesaid amendment being made to the Finance Act, 1994 service tax on works contract was leviable is not correct. It was being levied on purely service contract and not on service element of works contract as there was no definition of a works contract till then. Hence, the amendment made to the Finance Act, 1994 by insertion of the definition of works contract as under clause (zzzza) is not clarificatory in nature. Having found that the Service Tax was not at all leviable on service element of a works contract, Parliament felt the need for the amendment and was so incorporated by the Finance Act, 2007.