No Service Tax on composite work contracts excepted before 2007: Supreme Court
The bench comprised of Justices M R Shah and B V Nagarathna.
By : Legal Era
Update: 2022-08-02 17:00 GMT
No Service Tax on composite work contracts excepted before 2007: Supreme Court
The bench comprised of Justices M R Shah and B V Nagarathna.
Setting aside the judgements given by High Courts and Tax Tribunals, the Supreme Court declared that no service tax could be levied on composite work contracts which were executed before 2007. The bench said that assesses are not liable to pay the service tax for the contracts performed prior to the introduction of the Finance Act, 2007.
Pursuant to a series of appeals, the question before the Court was whether service tax would be levied on composite works contracts prior to the introduction of the Finance Act, 2007, by which the Finance Act, 1994 came to be amended to introduce Section 65(105) (zzzza) pertaining to works contracts. The Finance Act 2007 had imposed tax on work contracts by amending the 1994 law. A composite works contract is essentially a contract of service which also involves supply of goods in the execution of the of the contract.
In the case Commissioner, Central Excise and Customs, Kerala Vs Larsen and Toubro, the Apex Court held that no such tax could be levied. However in this case, the Apex Court was asked by the Government to re-look into the issue.
The latest decision came on appeals filed by Total Environment Building Systems and others against various High Court and tribunal orders passed around 2008-2009. In its judgement, the apex court said that "Assessment orders in originals levying the service tax on the respective assesses on the indivisible/composite works contracts for the period prior to pre-2007 are hereby quashed and set aside.
It was noted that the "Court does not agree with government's contention that even before the 2007 amendment there was provision of Service Tax on composite works contract."