In Service Tax Appeal No. 386 Of 2011 -CESTAT- CESTAT (Chandigarh) classifies SAB Industries' contracts with State Industrial Development Corporation Uttarakhand Limited as 'Works Contracts'
Members S.S. Garg (Judicial) & P. Anjani Kumar (Technical) [12-07-2023]

Read Order: SAB Industries Limited v. The Commissioner of Central Excise and Service Tax, Chandigarh-I

Chahat Varma

New Delhi, July 28, 2023: The Chandigarh bench of the Customs, Excise, and Service Tax Appellate Tribunal has provided relief to SAB Industries Limited (appellants), by classifying their contracts with M/s SIDCUL (State Industrial Development Corporation Uttarakhand Limited) as ‘works contracts’.

Briefly stated, the appellants were engaged in construction works under a contract with M/s SIDCUL between January 2005 and March 2008. Upon conducting an audit of the appellants' records, the Revenue concluded that the appellants were providing taxable services under the category of ‘commercial or industrial construction service’, classifiable under Section 65 (105) (zzq) of the Finance Act, 1994.

The two-member bench of S.S. Garg (Judicial) and P. Anjani Kumar (Technical) after careful consideration, found that the contracts were not vivisectible between labour and material, leading to their classification as composite contracts. As a result, the bench ruled that the contracts should be categorized as works contracts classifiable under Section 65 (105) (zzzza) of the Finance Act, 1994.

The bench held that the contracts entered into by the appellants with M/s SIDCUL between January 2005 and March 2008 were chargeable to service tax from 01.06.2007 onwards. As a result, the demand for the period from January 2005 to 01.06.2007 was set aside. Additionally, the bench held that the demand raised and confirmed by the Revenue under the category of commercial or industrial construction service for the period after 01.06.2007 also cannot be sustained, as the demand was not raised under works contract service.