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g) M/s. Orissa Sponge Iron Ltd. 2007-TIOL-1091-CESTAT-BHUW

h) M/s. Turbotech Precision Engg. Pvt. Ltd. 2006 (3) S.T.R. 765 (Tri. - Bang) • Hon'ble Apex Court in the case of Imagic Creative Pvt. Ltd. 2008 (9) STR 337 (SC) specifically prohibited levy of sales tax on service element of a composite contract. For the same reasons, no service tax can be levied on the element of goods supplied/ sold during execution of works. • Works contract service came into existence w.e.f. 01.06.2007. The works undertaken by them are to be treated as works contract for the purposes of charging service tax w.e.f. 01.06.2007 only and no service tax can be charged for the period prior to 01.06.2007.

• Similar decision was given by Hon'ble Karnataka High Court in the case of CST Bangalore Vs. Turbotech Precision Engg. Pvt. Ltd. reported at 2010 (18) STR 545 (Kar) and by Mumbai Tribunal in the case of CCE Raigad Vs. Indian Oil Tanking Ltd. reported at 2010 (18) STR 577 (Tri- Mumbai).

• Revenue accepted service tax paid by them under works contract service w.e.f 01.06.2007 without raising any objection which gave them bonafide belief that their activity falls under works contract service. • Service tax has been demanded on free supply materials which is not sustainable as clarified by CBIC vide DOF No.334/13/2009-TRU dated 06.07.2009. It is mentioned that explanation appearing in sub rule (3) is being amended to provide that composition scheme would be available only to such works contracts where the gross value of works contracts includes the value of all goods used in or in relation to the execution of works contract whether received free of cost or for 5 ST/10009/2014-DB consideration under any other contract. This clarification will not apply to those works contract which were entered into prior to this date. • Hon'ble CESTAT Larger Bench in the case of Bhayana Builders Pvt. Ltd. reported at 2013 (32) STR 49 (Tri.-LB) have held that, "The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the Finance Act, 1994. It has been held that free supplies into construction even on extravagant inference would not constitute a non-monetary consideration remitted by the service recipient to the service provider for providing service particularly since no part of the goods and materials so supplied accrues to or is retained by the service provider." This decision has also been upheld by Hon'ble Apex Court as reported at 2018 (10) GSTL 118 (SC).

5.2 Similar finding was given by Hon'ble Karnataka High Court in the case of CST Bangalore Vs. Turbotech Precision Engg. Pvt. Ltd. reported at 2010(18) STR 545 (Kar), which held that complex contracts involving supply of goods and services (Works Contracts) were not subject to service tax before June 1, 2007 and that such contracts should not be split for taxation. 15 ST/10009/2014-DB 5.3 Therefore, we hold that indivisible composite contract awarded to the appellant in this case, is leviable to service tax under works contract service only w.e.f 01.06.2007. For the prior period, it will not be leviable to service tax as held by the lower authorities under civil or industrial construction service. Accordingly, we hold that the demand of service tax against the appellant is sustainable only for the period with effect from 01.06.2007. 5.4 Regarding payment of service tax under Composition Scheme, Rule 3(1) & 3(2) of the Works Contract (Composition Scheme For Payment of Service Tax) Rules, 2007 are reproduced below:-