No service tax levy on Composite Works Contracts prior to Finance Act 2007 – SC  

No service tax levy on Composite Works Contracts prior to the introduction of the Finance Act 2007 – Supreme Court

ABCAUS Case Law Citation
ABCAUS 3606 (2022) (08) ICAI

Important Case Laws involved
G. D. Builders Vs. Union of India, (2013) 32 STR 673 (Delhi)
Commissioner, Central Excise and Customs, Kerala Vs. Larsen and Toubro Limited, (2016) 1 SCC 170

As common question of law was involved in a group of appeal filed before the Hon’ble Supreme Court by various aggrieved parties.

The issue involved was, “whether, service tax could be levied on Composite Works Contracts prior to the introduction of the Finance Act, 2007, by which the Finance Act, 1994 was amended to introduce Section 65(105)(zzzza) pertaining to Works Contracts?

Their Lordships noted that in the case of Larsen and Toubro, Hon’ble Supreme Court had specifically observed and held that the service tax was not leviable on the indivisible/Composite Works Contracts, post Finance Act, 2007.

However, the Revenue/Department was of the view that   the said decision requires re-consideration and therefore, the prayer is made to refer the matter to the Larger Bench.

The Hon’ble Supreme Court observed that as laid down, by it, before reviewing and revising its earlier decision the Court must satisfy itself whether it is necessary to do so in the interest of public good or for any other compelling reason and the Court must endeavour to maintain certainty and continuity in the interpretation of the law in the country.

The Hon’ble Supreme Court stated that the judgment of the Court in the case of Larsen and Toubro has stood the test of time and has never been doubted earlier. the said decision has been followed consistently by Apex Court as well as by various High Courts and the Tribunals.  Therefore, if the prayer made on behalf of the Revenue to re-consider and/or review the judgment of this Court in the case of Larsen and Toubro is accepted, in that case, it will affect so many other assesses in whose favour the decisions have already been taken relying upon and/or following the decision of this Court in the case of Larsen and Toubro and It may unsettle the law, which has been consistently followed since 2015 onwards. Also, there are all possibilities of contradictory orders.

The Apex Court stated that on the principle of stare decisis, the judgment of the Court in the case of Larsen and Toubro, neither needed to be revisited, nor referred to a Larger Bench of this Court as prayed, i.e., after a period of almost seven years and when no efforts were made to file any review application requesting to review the judgment on the grounds, which are canvassed now.

Accordingly, appeals were allowed and impugned judgments and orders passed by the respective High Courts/Tribunals taking the view that for the period pre-Finance Act, 2007, the respective assesses are/were liable to pay the service tax on indivisible/composite works contracts were quashed and set aside.

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