Under GST, work contracts are treated as a supply of services. These typically involve both goods (like materials) and services (like labor). The government has defined clear tax rates and compliance norms to ensure uniformity. This summary provides the key highlights you need to know for 2025.
GST Rates for Work Contracts
Input Tax Credit (ITC)
Complete Referencer of GSTR-1, GSTR-1A, GSTR-3B, GSTR-9 & GSTR-9C Click Here
Composition Scheme
Valuation of Contract (with Land)
Place of Supply
2025 Compliance Updates
No Service Tax on WCS provided to Airport and Non Commercial Governmental Authority: CESTAT [Read Order]
Step by Step Guide of Preparing Company Balance Sheet and Profit & Loss Account Click Here
M/s Kailash Chawla vs Commissioner of Central Excise
CITATION: 2025 TAXSCAN (CESTAT) 197
The CESTAT, New Delhi held that service tax is not applicable on works contract services (WCS) provided to airports and non-commercial government bodies like the CPWD. The appellant, M/s Kailash Chawla, had not charged service tax on services rendered to the Airport Authority of India (AAI), citing exemption under Notification No. 42/2010. The tribunal classified the services under WCS and rejected the department’s claim that they constituted repair and maintenance services not covered under the exemption.
The bench, comprising Dr. Rachna Gupta and Hemambika R. Priya, ruled there was no willful misstatement or intent to evade tax. It emphasized that failure to declare does not amount to suppression unless accompanied by deliberate intent. Since the appellant fully cooperated and provided necessary documents, the extended limitation period under Section 11A was not applicable. The tribunal set aside the demand, affirming that such services to non-commercial government entities are not taxable.
Implementation of Govt Projects not exigible to Service Tax: Calcutta HC [Read Order]
Commissioner of Service Tax Kolkata vs M/s Electrosteel Castings Limited
CITATION: 2025 TAXSCAN (HC) 165
The Calcutta High Court held that services provided for implementing government infrastructure projects, such as water supply systems, are not liable to service tax under the Works Contract Services (WCS) category. M/s Electrosteel Castings Ltd had executed a water distribution project for the Kerala Water Authority, which the Court found to be a non-commercial, public utility service. It ruled that such services do not qualify as commercial or industrial construction and are thus exempt from service tax, affirming the earlier CESTAT order.
The Division Bench, comprising Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya, also ruled that the tax collected and paid under mistaken interpretation must be refunded, rejecting the department’s claim of unjust enrichment. Since the tax was not reimbursed by the government and there was no legal mandate to pay it, the Court held that Section 11B of the Central Excise Act, 1944, was not applicable. The ruling reinforced that funds paid under error cannot be retained by the tax department.
Mere use of lubricants, consumables in relation to Dam Construction work cannot be considered as WCS: CESTAT [Read Order]
Capital Housing Projects Pvt Ltd vs Principal Commissioner of Central Tax Guntur – GST
CITATION: 2025 TAXSCAN (CESTAT) 142
The Hyderabad bench of CESTAT held that activities like blasting, excavation, and use of lubricants and consumables in dam construction do not qualify as Works Contract Services (WCS). The appellant, a sub-contractor for dam-related works, argued for exemption under Notification No. 25/2012, claiming the services were ultimately for a government project. However, the tribunal noted the absence of any transfer of goods or deemed sale, and that VAT was not discharged, thus excluding the work from WCS classification.
The bench, comprising A.K. Jyotishi and Angad Prasad, found that the appellant merely provided site preparation services to a contractor and not directly to the Government of Andhra Pradesh. Since the contract did not involve transfer of property in goods, the exemption under S.No. 29(h) of the notification was held to be inapplicable. The tribunal dismissed the appeal, affirming that such indirect services lacking key elements of WCS cannot attract service tax exemption.
Composite Contracts are not taxable under Erection Commissioning and Installation Service: CESTAT [Read Order]
M/s Topaz Service Corporation vs Commissioner of Central Goods Service Tax
CITATION: 2024 TAXSCAN (CESTAT) 667
The New Delhi Bench of CESTAT held that composite contracts involving both supply and installation of goods cannot be taxed under “Erection, Commissioning and Installation Services.” The appellant, engaged in cable and pipe laying work for government departments, argued that their contracts were composite in nature and subject to VAT. The tribunal found merit in their claim, noting that such contracts fall under Works Contract Services and are eligible for abatement under Circular No. 123/5/2010-TRU.
The bench, comprising Binu Tamta and Hembika R. Priya, ruled that only pure service contracts can be taxed under Erection, Commissioning and Installation Services. The tribunal remanded the case for recalculating the tax demand under the correct service category while allowing abatement. However, it upheld the extended period of limitation and penalty under Section 78, subject to the revised demand.
Pre-July 2012 Works Contract Services for Non-Commercial Use Liable to Service Tax: CESTAT [Read Order]
ETA Engineering Private Limited vs Commissioner of Central Excise
CITATION: 2024 TAXSCAN (CESTAT) 656
The Principal Bench of CESTAT, New Delhi, held that works contract services provided before July 1, 2012, are liable to service tax even if rendered for non-commercial use. The appellant, ETA Engineering Pvt Ltd, had carried out HVAC installation at AIIMS Rishikesh and claimed exemption from service tax for the pre-July 2012 period, arguing that their services qualified as works contract. However, the tribunal classified the services under Section 65(105)(zzzza) of the Finance Act, 1994, and ruled them taxable.
The bench, comprising Mr. Raju and Dr. Rachna Gupta, found that the exemption under Notification No. 25/2012-ST applied only from July 1, 2012, and did not cover the period in question. It also rejected the appellant’s contention regarding extended limitation, holding that there was no ambiguity in the taxability of such services. The appeal was dismissed, with the tribunal affirming that the nature of the recipient—commercial or not—does not alter the taxability of clearly defined works contract services under the law.
Bonafide Service Tax Payment on Composite Contract under CCS instead of WCS: CESTAT sets aside Demand of Extended Period [Read Order]
M/s R.R. Constructions vs The Commissioner of CGST & Central Excise
CITATION: 2024 TAXSCAN (CESTAT) 555
The Chennai Bench of CESTAT held that service tax paid under Construction of Complex Service (CCS) on composite contracts, instead of Works Contract Service (WCS), due to a bonafide belief, cannot attract demand for the extended period. The appellant had discharged service tax liability from April 2009 to June 2012 under CCS with abatement, but the department later reclassified it as WCS and raised a differential demand. The tribunal found that there was no suppression or willful misstatement, as the appellant had filed regular returns and paid tax accordingly.
The bench, comprising Ms. Sulekha Beevi C.S. and Mr. Vasa Seshagiri Rao, noted that the classification issue was interpretational and that the department had not proven any deliberate intent to evade tax. It set aside the demand for the extended period but held the appellant liable to pay tax for the normal period (April to June 2012) under WCS. However, the denial of abatement and composition scheme benefits for this period was found unsustainable, as the appellant had paid tax correctly under CCS based on prevailing interpretations.
Construction of Residential Complex is properly Classifiable under head WCS u/s 65(105): CESTAT [Read Order]
Aparna Constructions & Estates Pvt Ltd vs Commissioner of Central Tax
CITATION: 2024 TAXSCAN (CESTAT) 553
The Hyderabad Bench of CESTAT ruled that construction of residential complexes is correctly classifiable under Works Contract Service (WCS) as per Section 65(105)(zzzza) of the Finance Act, 1994. The appellant, M/s Aparna Constructions, engaged in development of flats and villas, was issued a show cause notice alleging misclassification under “Construction of Complex Service.” The tribunal noted that the contracts involved both material and service elements, making them composite in nature and rightly falling under WCS post 01.06.2007.
The bench, comprising Anil Choudhary and A.K. Jyothishi, relied on the Supreme Court’s decision in Larsen & Toubro Ltd. which clarified that such composite contracts were not taxable before 01.06.2007 and were to be taxed under WCS thereafter. It concluded that the construction activity in question was rightly classified under WCS, allowing the appellant’s claim and ruling against the revenue.
Liability under Works Contract Service would be taxable only from 1.7.2010: CESTAT Sets aside Demand of CCS [Read Order]
M/s. Real Value Promoters Pvt Ltd vs Commissioner of GST & Central Excise
CITATION: 2024 TAXSCAN (CESTAT) 519
The Chennai Bench of CESTAT ruled that service tax liability under Works Contract Service (WCS) arises only from 1.7.2010 and set aside the demand raised under Commercial Complex Service (CCS) for the period prior. The appellant, M/s Real Value Promoters Pvt Ltd, had entered into composite contracts involving both goods and services. The tribunal found such contracts properly classifiable under WCS and not CCS for the period from April to September 2009.
The bench, comprising P. Dinesha and M. Ajit Kumar, applied the Supreme Court ruling in Larsen & Toubro, holding that composite construction contracts became taxable only after 1.7.2010 under WCS. The tribunal also noted that the penalty under Renting of Immovable Property Service (RIPS) could not be sustained due to interpretational issues surrounding taxability, which had led to legislative amendments. The appeal was allowed, and the impugned orders, including penalties, were set aside.
Service Tax Demand under Work Contract Service is not Valid as assessee was not Registered for the same: CESTAT [Read Order]
Commissioner of Central Excise vs M/s Tiranga Construction Co
CITATION: 2024 TAXSCAN (CESTAT) 459
The Allahabad Bench of CESTAT held that a service tax demand under Works Contract Service (WCS) is not valid when the assessee is not registered for that specific service. M/s Tiranga Construction Co. was registered only under “Commercial and Industrial Construction” services until 05.12.2010 and availed abatement under Notification 1/2006. The tribunal found that the department’s reclassification of services rendered to the Lucknow Development Authority as WCS was incorrect, as the assessee had not opted for or registered under that category prior to the amendment.
The bench, comprising P.K. Choudhary and Sanjiv Srivastava, concluded that although the services were composite in nature, they were rightly classified under Commercial and Industrial Construction before registration under WCS was obtained. Since the registration for WCS was only amended on 05.10.2010, no service tax could be demanded under WCS for the earlier period. The tribunal dismissed the department’s claim and upheld the adjudicating authority’s decision in favor of the assessee.
Claim For Valuation under Rule 2A Of The Service Tax (Determination Of Values) Rules, 2006 is Allowable only on Work Contract Service: CESTAT [Read Order]
M/s Vishal Enterprises vs Commissioner of Central Excise
CITATION: 2024 TAXSCAN (CESTAT) 445
The Allahabad Bench of CESTAT held that valuation under Rule 2A of the Service Tax (Determination of Values) Rules, 2006 or the Composition Scheme under Works Contract Service can be claimed only if the services fall under the category of “Works Contract Service” (WCS). M/s Vishal Enterprises, acting as a subcontractor, failed to pay service tax or file returns for FY 2012–13. The tribunal confirmed that subcontractors are also liable for service tax, as clarified by CBEC Circular No. 96/7/2007-ST.
The bench, comprising P.K. Choudhary and Sanjiv Srivastava, classified the appellant’s services as WCS and extended the benefits of Rule 2A and the composition scheme accordingly. However, it upheld the demand for the normal limitation period due to non-payment and non-compliance. The ruling emphasized that such valuation benefits are strictly tied to proper classification under WCS.
No Service tax Demandable on Works Contract Service: CESTAT [Read Order]
M/s. Ashoka Bricks Industries (P) Limited vs Commissioner of Central Excise, Customs and Service Tax
CITATION: 2024 TAXSCAN (CESTAT) 371
The Kolkata Bench of CESTAT held that no service tax is demandable when the services provided fall under the category of “Works Contract Service” but have been incorrectly classified and charged under “Commercial or Industrial Construction Service.” M/s Ashoka Bricks Industries had executed a contract involving the supply and placement of materials for embankment strengthening at a thermal power station between February 2006 and March 2008, and the department raised a demand under the wrong category.
The bench, comprising Shri Ashok Jindal and Shri K. Anpazhakan, ruled that since the service involved both supply of goods and labor, it rightly fell under Works Contract Service, which became taxable from 01.06.2007. As the department did not issue the demand under the correct classification, the tribunal held that no service tax could be levied. The appeal was allowed, and the impugned order was set aside.
Works Contract is Leviable to Service Tax only After 01.06.2007: CESTAT [Read Order]
M/s. Praveen Electrical Works vs Commissioner of Central Excise and Service Tax
CITATION: 2024 TAXSCAN (CESTAT) 336
The Bangalore Bench of CESTAT held that service tax on works contracts is leviable only from 01.06.2007. M/s Praveen Electrical Works, engaged in electrical contracts for government departments, had received a show cause notice demanding service tax under “Erection, Commissioning or Installation Services” for a period before this date. The tribunal found that the contracts were composite in nature, involving both material and labor, and thus classifiable as works contracts.
The bench, comprising P.A. Augustian and Pullela Nageswara Rao, allowed the appeal, holding that the demand under “Erection, Commissioning or Installation Services” was unsustainable due to the composite nature of the contracts and the applicable date of taxability. Accordingly, the penalties were also set aside. However, the appeal concerning “Rent-a-Cab Operator Service” was dismissed due to lack of evidence linking it to the works contract activity, and the related penalties under Sections 77 and 78 were upheld.
Contract for Doing Particular Job will not Fall under Manpower Recruitment or Supply Agency Service: CESTAT [Read Order]
Fitweld Enterprise vs C.S.T.-Service Tax
CITATION: 2024 TAXSCAN (CESTAT) 278
The Ahmedabad Bench of CESTAT held that a contract for executing specific fabrication or engineering work does not fall under the category of “Manpower Recruitment or Supply Agency Service.” The appellant, Fitweld Enterprise, was engaged by M/s Anup Engineering Ltd. to perform fabrication and related engineering tasks. The tribunal noted that the service recipient was concerned only with job completion—not manpower deployment—and that charges were not based on the number or wages of supplied personnel.
The bench, comprising Ramesh Nair and C.L. Mahar, emphasized that previous tribunal rulings had clearly distinguished contracts for specific jobs from manpower supply services. Since the appellant provided end-to-end job execution and not manpower supply, the classification under manpower services was incorrect. The tribunal set aside the impugned order and remanded the matter for fresh adjudication.
CESTAT sets aside Service Tax Demand on Work Contract Service for the period before 1.06.2007 [Read Order]
M. Srinagesh Hegde vs Commissioner of Central Excise
CITATION: 2024 TAXSCAN (CESTAT) 261
The Bangalore Bench of CESTAT held that service tax is not leviable on Works Contract Services rendered prior to 01.06.2007. The appellant, M. Srinagesh Hegde, was engaged in civil construction involving both material and labor, and had been classified under “Commercial or Industrial Construction Service” by the department for the period from 01.04.2002 to 31.03.2007. The tribunal found the services to be in the nature of works contracts and not taxable prior to 01.06.2007 in light of the Larsen & Toubro Supreme Court ruling.
The bench, comprising Dr. D.M. Misra and Pullela Nageswara Rao, concluded that composite contracts involving supply of goods and services cannot be vivisected for taxation before the specified date. Since the appellant was executing such contracts and was registered under VAT and service tax after 01.06.2007, the demand of ₹15,00,040 under the wrong classification was unsustainable. The tribunal set aside the service tax demand and allowed the appeal.
Intermittent works executed by Co-operative Societies not fall under Manpower Recruitment or Supply: CESTAT upholds Orders set aside Service Tax Demand [Read Order]
Commissioner of Central Excise & Service Tax vs Jagarnathpur DPL Co-Operative Limited
CITATION: 2024 TAXSCAN (CESTAT) 109
The Kolkata Bench of CESTAT ruled that job-based contracts executed by co-operative societies do not fall under the scope of “Manpower Recruitment or Supply Agency Service.” The respondents—three co-operative societies—had performed specific tasks at HEC’s plants based on work orders that focused on output, not on supplying a fixed number of personnel. The department’s demand under Section 65(68) and 65(105)(k) of the Finance Act, 1994 was found to be misclassified.
The bench, comprising R. Muralidhar and K. Anpazhakan, upheld the Commissioner (Appeals)’ decision, noting that the contracts were principal-to-principal and not labour supply arrangements. Payment was based on work quantity, and the societies had full discretion in manpower deployment. Since the contracts were for completing specific jobs and not for providing manpower per se, the tribunal found no grounds to classify the service as manpower supply and dismissed the department’s appeal.
Agreement to Provide Manpower for Maintenance is Contract of Service, not Sale under MVAT Act: Bombay HC [Read Order]
Atos India Private Limited vs The State of Maharashtra
CITATION: 2023 TAXSCAN (HC) 2036
The Bombay High Court held that an agreement to provide manpower for software maintenance is a contract for service and not a sale under the Maharashtra Value Added Tax Act, 2002. The appellant had provided a team of employees to QAD India Pvt. Ltd. for ERP software maintenance and was paid a fixed fee regardless of actual bug fixes performed. The Commissioner of Sales Tax had earlier held that this arrangement amounted to a sale, attracting VAT under Section 2(24) of the MVAT Act.
The Division Bench, comprising Justices Dr. Neela Gokhale and K.R. Shriram, ruled that the contract was a service-only agreement with no transfer of saleable goods. Since no tangible software or goods were delivered, and the work was done on QAD’s US-based servers, the theory of works contract or aspect theory did not apply. The court concluded that the arrangement was purely a contract for service, not subject to VAT, and set aside the Commissioner’s contrary ruling.
No Service Tax Leviable on Activity of Laying of Pipelines provided to Government under ‘Works Contract Service’: CESTAT [Read Order]
Indian Hume Pipe Co. Limited vs The Commissioner of GST & Central Excise
CITATION: 2023 TAXSCAN (CESTAT) 1522
The Chennai Bench of CESTAT ruled that no service tax is leviable on the activity of laying pipelines provided to the government under Works Contract Service. Indian Hume Pipe Co. Ltd. had undertaken a composite contract with the Tamil Nadu Water and Drainage Board (TWAD) involving the supply and installation of PSC pipes for a drinking water project. The department had demanded service tax for the period from 04.06.2009 to 12.01.2010, claiming the activity fell under the taxable category of Works Contract Service.
The bench, comprising Sulekha Beevi and Vasa Seshagiri Rao, relied on the Lanco Infratech Ltd. ruling and held that pipeline laying for government water supply projects is exempt from service tax. Since the contract was for a non-commercial public utility project, the tribunal found the demand unsustainable and allowed the appeal by setting aside the service tax liability.
CESTAT Quashes Service Tax Demand under ‘Works Contracts Service’ for Supply of PSC Pipes on Ground of Service Tax Exemption Eligibility [Read Order]
Indian Hume Pipe Co. Limited vs The Commissioner of GST & Central Excise
CITATION: 2023 TAXSCAN (CESTAT) 1522
The Chennai Bench of CESTAT quashed a service tax demand under Works Contract Service against Indian Hume Pipe Co. Ltd. for the supply and laying of PSC pipes under a turnkey water supply project for the Tamil Nadu Water and Drainage Board (TWAD). The assessee contended that the service was not commercial in nature and related to a government drinking water supply scheme, thus qualifying for exemption from service tax.
The bench, comprising Sulekha Beevi and Vasa Seshagiri Rao, relied on precedent set in Shriram EPC Ltd. and held that pipeline-laying activities for government water projects are not taxable under Works Contract Service. As the project served a non-commercial public utility purpose, the tribunal found the demand unsustainable and allowed the appeal, setting aside the service tax liability.
Works Contract Service undertaking a Work Activity involving Supply of Material Does not Fall under ‘Supply of Manpower Service’: CESTAT [Read Order]
M/s UP Bridge Corporation vs Commissioner of Central Excise, Meerut
CITATION: 2023 TAXSCAN (CESTAT) 1510
The Allahabad Bench of CESTAT held that a works contract involving the supply of material and execution of construction-related activities does not fall under the scope of ‘Supply of Manpower Service’. UP Bridge Corporation, registered under reverse charge for certain services, was issued a demand of ₹72.73 lakhs for allegedly providing manpower supply services. However, the tribunal found that the nature of work, including shuttering, concrete pouring, and steel reinforcement, involved supply of materials and was not merely labour supply.
The bench, comprising P.K. Choudhary and Sanjiv Srivastava, ruled that the contracts were for work execution with material involvement, not for deploying manpower alone. Since the invoices reflected a work-based contract rather than manpower supply, the demand raised under the manpower supply category was held to be unsustainable, and the appeal was allowed by deleting the service tax demand.
CESTAT Quashes Service Tax Demand under Work Contract Service on Ground of Non-inclusion of Body Corporate into Business Entity [Read Order]
The Managing Director vs Commissioner of Central Tax
CITATION: 2023 TAXSCAN (CESTAT) 1461
The Hyderabad Bench of CESTAT quashed a service tax demand under Works Contract Service against Andhra Pradesh Medical Services and Infrastructure Development Corporation (APMSIDC), holding that a body corporate not classified as a business entity is not liable for service tax in such cases. The appellant, a registered society under the Andhra Pradesh Public Societies Act, was involved in government health infrastructure projects and claimed exemption under Notification No. 25/2012-ST.
The bench, led by A.K. Jyotishi, found that although APMSIDC is a body corporate under Section 18 of the AP Societies Registration Act, it does not meet the criteria of a “business entity registered as a body corporate” for the purposes of service tax liability. As the services were rendered to a governmental authority and not a business entity, the tribunal allowed the appeal and set aside the service tax demand and penalty of ₹5,73,422.
Works Contract Services of Railway Including Sub-contracts are Exempted from Service Tax under Exemption Notification: CESTAT [Read Order]
Shri Mahendra Kumar Anchalia vs Commissioner of CGST & CX, Kolkata
CITATION: 2023 TAXSCAN (CESTAT) 1251
The Kolkata Bench of CESTAT ruled that works contract services provided for railway infrastructure, including sub-contracts, are exempt from service tax under Notification No. 25/2012. The appellant, Mahendra Kumar Anchalia, who carried out railway infrastructure projects such as erection and commissioning of signaling systems, was issued a demand for service tax and penalties for services provided under works contract and maintenance contracts.
The bench, comprising Ashok Jindal and Anpazhakan, held that the exemption for services to “Railways” is not restricted to those meant only for public carriage of passengers or goods. Referring to Konkan Railway Corporation Ltd., the tribunal emphasized that the exemption notification covers all railway infrastructure projects, including those executed through sub-contracts. Accordingly, the tribunal quashed the service tax demand and allowed the appeal.
Failure to Submit Documents due to Covid-19, Quantification of Service Tax under Work Contract Service without Extending Benefit of Abatement: CESTAT Allows to Submit Documents [Read Order]
M/s. Sivaparameshwari Engineering Construction & Co vs The Commissioner of GST & Central Excise
CITATION: 2023 TAXSCAN (CESTAT) 1097
The Chennai Bench of CESTAT allowed M/s. Sivaparameshwari Engineering Construction & Co. to submit documents that were not furnished earlier due to the Covid-19 pandemic. The assessee, engaged in works contract services for government bodies, was issued a demand of ₹5.19 crores for non-payment of service tax under Works Contract Services. The tribunal noted that the valuation of such services should be done under Rule 2A of the Service Tax Valuation Rules, but the benefit of abatement was not extended.
The bench, comprising Sulekha Beevi C.S. and Vasa Seshagiri Rao, held that the assessee must be given a fair opportunity to present their case, including documents obtained later from various government departments. The tribunal found merit in the appellant’s claim that the pandemic hindered timely submission of evidence and remanded the matter for de novo adjudication, setting aside the previous order.
Payment for Manufacturing Activities Undertaken on Job Work basis is not Manpower Recruitment or Supply Agency Service: CESTAT [Read Order]
Dosti Fabricators vs Commissioner of Central Excise & ST, Rajkot
CITATION: 2023 TAXSCAN (CESTAT) 1028
The Ahmedabad Bench of CESTAT held that payments made for manufacturing activities undertaken on a job work basis cannot be treated as consideration for manpower supply services. The department had classified Dosti Fabricators’ fabrication of tugs and barges as manpower recruitment service. However, the appellant argued that the contract was for a fabrication job and not for labour supply, and excise duty was also applicable on the manufactured goods from 01.03.2011.
The bench, comprising Ramesh Nair and C.K. Mahar, noted that the payments were made for completed manufacturing tasks and not based on manpower deployed. Citing past rulings, it reiterated that where charges are job-based and not wage-based, the service cannot be classified under Manpower Recruitment or Supply Agency Service. The tribunal accepted the appellant’s position and set aside the service tax demand.
CESTAT Quashes Service Tax Demand under Works Contract Service, Extended Period of Limitation is not Invokable [Read Order]
Bajrang Lal Gupta vs CCE
CITATION: 2023 TAXSCAN (CESTAT) 601
The Chandigarh Bench of CESTAT quashed a service tax demand under Works Contract Service against Bajrang Lal Gupta, ruling that the extended period of limitation could not be invoked. The appellant had undertaken construction of residential houses for the Housing Board of Haryana, and the department issued a show cause notice for ₹11 lakhs, claiming taxability under “Construction of Complex Services” while allowing 67% abatement under Notification No. 1/2006-ST.
The bench, comprising SS Garg and P. Anjani Kumar, held that the contract involved both labour and material, thus qualifying as a works contract. Since works contract service became taxable only from 01.06.2007, the demand for the entire disputed period was unsustainable. Referring to Srishti Construction, the tribunal concluded that services properly classifiable under a specific head cannot be taxed under another, and that the extended limitation period was not applicable. The appeal was allowed with consequential relief.
Work Contracts Chargeable only from 01.06.2007: CESTAT Quashes Service Tax Demand [Read Order]
M/s Kumar Builders vs Commissioner of Service Tax
CITATION: 2023 TAXSCAN (CESTAT) 535
The Chandigarh Bench of CESTAT quashed a service tax demand raised on M/s Kumar Builders, ruling that works contract services are taxable only from 01.06.2007. The department objected to the appellant’s reclassification of services from “Commercial or Industrial Construction Services” to “Works Contract Services,” claiming it was not permissible under CBEC Circular No. 98/2007-ST. However, the appellant argued that their contracts involved both material and service, and were correctly classified under Works Contract Service after the specified date.
The bench, comprising SS Garg and P. Anjani Kumar, upheld the appellant’s position citing Supreme Court rulings in Larsen & Toubro Ltd. and Total Environment Building Systems Pvt. Ltd., which confirmed that service tax on works contracts is only applicable from 01.06.2007. Since the appellant opted into the composition scheme under the correct classification, the tribunal allowed the appeal and quashed the service tax demand.
Service Tax is Applicable to the Construction of Office Buildings, Erection of Cell Phone Towers and other Civil Structures under ‘Works Contract’: CESTAT [Read Order]
K. Villaudam vs The Commissioner of Central Excise
CITATION: 2023 TAXSCAN (CESTAT) 503
The Chennai Bench of CESTAT ruled that construction activities involving office buildings, cell phone towers, and other civil structures fall under “Works Contract Service” post 01.06.2007. The appellant, K. Villaudam, had not taken service tax registration or filed returns from April 2005 to March 2009. The tribunal held that demands raised under “construction service” and “commercial or industrial construction service” for the pre-01.06.2007 period were unsustainable, as the activities were composite in nature.
The bench, comprising Vasa Seshagiri Rao and P. Dinesha, emphasized that such services were taxable only from 01.06.2007 under Section 65(105)(zzzza) of the Finance Act, 1994. Accepting the appellant’s admission, the tribunal determined that the service tax liability of ₹7,94,122 pertained solely to the post-01.06.2007 period under the correct classification of works contract service, setting aside the earlier misclassified demands.
CESTAT Quashes Service Tax Demand on ‘Manpower Recruitment and Supply Services’ Provided on Piece-Rate Basis [Read Order]
MAHENDRAPAL & CO vs C.C.E. & S.T
CITATION: 2023 TAXSCAN (CESTAT) 472
The Ahmedabad Bench of CESTAT quashed the service tax demand raised against Mahendrapal & Co. under ‘Manpower Recruitment and Supply Services’, holding that services provided on a piece-rate/job work basis may not fall under this category. The appellant contended that the work—such as loading, inspection, and security—was performed by workers under their own control and not by deputing manpower to the service recipient, M/s Mars Forge Pvt Ltd.
The bench, comprising Raju (Technical) and Somesh Arora (Judicial), noted that payments were made based on work output rather than the number of persons supplied. However, as the contracts and bills were in Gujarati and lacked clarity, the tribunal remanded the matter to the adjudicating authority for fresh consideration, allowing the appeal by remand.
Designing and Execution of Stalls on Customer’s Request Amounts to Work Contract Service: CESTAT Sets Aside Demand under ‘Interior Decorator’ [Read Order]
Praveg Communications India Limited vs Commissioner of Central Excise & ST
CITATION: 2023 TAXSCAN (CESTAT) 503
The Ahmedabad Bench of CESTAT ruled that designing and executing exhibition stalls on customer requests qualifies as “Works Contract Service” and not “Interior Decorator” service. The appellant, Praveg Communications India Ltd., provided end-to-end stall construction services involving both material and labour and had paid service tax at a concessional rate under the Works Contract Rules, 2007. The department, however, raised a demand of ₹1.06 crore, claiming the services were misclassified and taxable at a higher rate under “Interior Decorator” service.
The bench, comprising Ramesh Nair and C.L. Mahar, held that since the contract involved transfer of property in goods along with service components, it fulfilled the definition of a works contract. The tribunal found that the nature of work—temporary structure setup for exhibitions—did not fit within the scope of “Interior Decorator” service. Accordingly, it set aside the demand, confirming that the classification under Works Contract Service and payment at the concessional rate was valid and legal.
Nature of Contract Involves Supply or Deemed Supply of Goods and Rendering Service, it will be Works Contract Service Regardless of whether VAT or Service Tax is Payable: CESTAT [Read Order]
M/s Bhaskar Contractors vs The Additional Commissioner Central Excise & Service Tax
CITATION: 2023 TAXSCAN (CESTAT) 429
The New Delhi Bench of CESTAT held that if a contract involves the supply or deemed supply of goods along with services, it qualifies as a works contract, regardless of whether VAT was paid on the goods. The appellant, M/s Bhaskar Contractors, challenged the rejection of their claim that the services provided were works contract services. The department had raised a demand under Management, Maintenance, or Repair Service (MRS), citing non-payment of VAT and relying on a CBEC circular.
The bench, comprising Justice Dilip Gupta and PV Subba Rao, clarified that works contracts include all cases where there is a transfer (actual or deemed) of goods, irrespective of VAT payment. The tribunal directed the adjudicating authority to reassess the classification based on available documents such as work orders and invoices, and to use best judgment where such records are missing. The appeal was allowed with a direction for reconsideration, reinforcing that classification under works contract does not hinge solely on VAT applicability.
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