G. D. Builders vs. UOI 2013 (32) STR 673 (Del.) - Construction Service

G. D. Builders vs. UOI 2013 (32) STR 673 (Del.)

The High Court in this case held as under:

• The scope and ambit of Commercial or Industrial and Residential construction service cannot be read down on imposition of service tax on works contract, which covers contractor only supplying labour or undertaking construction service, whether with or without supply of material. The levy under construction services is valid, the only condition being that it should be on service element and not on materials or goods used, as power to levy Sales Tax or VAT is with State Government.
• After 46th amendment to Constitution of India composite contracts can be bifurcated to compute the value of goods sold/supplied in contracts for construction of building with labour and material. Service portion of composite contracts can be subjected to Service Tax. Aspect doctrine can be applied for bifurcating/vivisecting the composite contract.
• Notification providing for 67% abatement towards value of material used for computing service tax payable is to ensure that service element is taxable. It is alternative to otherwise subjective determination in each case, which may be cumbersome and require detailed examination for ascertainment of service element. It provides convenient, alternative, optional and hassle free method for exclusion of non-service element and payment of service tax provided requirements mentioned in the notification are satisfied.
• Service tax can be levied on service element. Computation of this component is matter of detail and not relating to validity of imposition of service tax. It is procedural and matter of calculation and merely because no rules are framed for computation, it does not follow that no tax is leviable.