Case Note & Summary
The appellant, Sheth & Sura Engineering Pvt Ltd., filed a Central Excise Appeal before the Bombay High Court against the rejection of its application for refund of service tax under Section 11B of the Central Excise Act, 1944. The dispute arose from a works contract where the appellant had paid service tax on the entire gross amount charged without deducting the value of goods transferred in the execution of the contract. The appellant relied on the Supreme Court's judgment in Commissioner of C. Ex & Cus., Kerala v. Larsen & Toubro Ltd. (2015 (39) S.T.R. 913 (S.C.)), which held that for indivisible works contracts, service tax can only be levied on the service element after deducting the value of property in goods transferred, taking into account eight heads of deduction. The court, after hearing the parties, allowed the appeal and set aside the rejection of the refund application. The court directed the respondents to process the refund application in accordance with law, following the principles laid down in Larsen & Toubro. The judgment emphasized that the charging section must specify that service tax is only on the service portion of works contracts, and the measure of tax must be derived from the gross amount less the value of goods transferred.
Headnote
A) Service Tax - Works Contract - Indivisible Works Contract - Section 11B of Central Excise Act, 1944 - Refund of Service Tax - The appellant sought refund of service tax paid on an indivisible works contract without deducting the value of goods transferred - The court held that following the Supreme Court's judgment in Larsen & Toubro, service tax can only be levied on the service element after deducting the value of property in goods transferred - The refund application under Section 11B was maintainable - The court allowed the appeal and directed the authorities to process the refund (Paras 1-3).
Issue of Consideration
Whether the appellant is entitled to refund of service tax paid on an indivisible works contract where the value of goods transferred was not deducted from the gross amount charged, in light of the Supreme Court's decision in Commissioner of C. Ex & Cus., Kerala v. Larsen & Toubro Ltd.
Final Decision
The appeal is allowed. The impugned order rejecting the refund application is set aside. The respondents are directed to process the refund application in accordance with law, following the principles laid down in Commissioner of C. Ex & Cus., Kerala v. Larsen & Toubro Ltd.
Law Points
- Service tax on works contracts can only be levied on the service element after deducting the value of goods transferred
- Indivisible works contracts must be split taking into account eight heads of deduction
- Refund of service tax under Section 11B of Central Excise Act
- 1944 is permissible if tax was paid on the entire contract value without proper deduction
