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Service Tax in Work Contract

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Querist : Anonymous

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Querist : Anonymous (Querist)
04 June 2010 What is the effect of the decision by the Larger bench of CESTAT in the case of Deliam Industries? Will one have to pay the service tax from 2004 on work contracts? What about the time barred case i.e. for the FY 2004-05?
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Shyam Lal Naik

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Shyam Lal Naik (Expert)
09 June 2010 It is a very unfortunate decision, so far as service providers are concerned.

The tribunal has hels that a composite contract can be vivisected and the labour portion can be subjected to Service tax.

The tribunal based its decision on article 366 (29A). Vide the said sub clause (29A), certain transactions are treated as sale by a deeming fiction, although, the are not sale per se.

It is well settled law that a deeming fiction can be applied only for the purpose for which it is created. Vivisection of Composite contracts by way of a deeming fiction for the purpose of sales tax could not be extended to Service tax by the juduciary.

The decision, in my view, is not proper law and should be contested at higher judicial forum.
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