A division bench of the Madras High Court, in CCE & ST v. M/s.Hindustan Construction Company Limited (HCCL) held that agreement for the work of engineering design as well as construction is a composite contract and therefore, service tax is not leviable on such contracts.
Assessee, , in the instant case, is engaged in Engineering Consultancy and had rendered service in that category to M/s.New Tirupur Area Development Corporation Limited (NTADCL). For the relevant assessment year, the assessee entered into an agreement with New Tirupur Area Development Corporation Ltd wherein it involved HCCL undertaking work of engineering design as well as construction of TWP. The department took a view that the Engineering Contract entered with M/s.NTADCL, comes within the purview of consulting Engineering service and hence service tax already paid by M/s.HCCL on the amount received from M/s. NTADCL is correct, and accordingly, rejected the claim for refund of Rs.2.84 crores.
On appeal, the CESTAT concluded the issue in favour of the assessee by holding that there is an indivisible contract and therefore, service tax cannot be imposed.
The bench comprising Justices S.Manikumar and R. Pongiappan relied on the Supreme Court decision in Commissioner of Central Excise & Customs, Kerala Vs. Larsen & Toubro Limited, wherein the Court settled the issue of whether Service Tax can be levied in respect of composite contract or indivisible contract.
Dismissing the Revenue’s appeal, the Court said that “Upon consideration of the clauses in the contract, the tribunal has arrived at a categorical finding of fact that there is an indivisible contract. No concrete material, contra, is placed, before us for reversal of such finding.”