The legal document emphasizes that the levy of service tax under the Finance Act, 1994, on indivisible works contracts is non-existent. It clarifies that the Act does not contain a specific charge or machinery provisions for taxing such composite contracts, which include both transfer of property in goods and supply of labor and services. The absence of explicit provisions for segregating and taxing the service component within a works contract renders the levy unconstitutional and legally invalid (!) (!) (!) (!) (!) .

Furthermore, the constitutional scheme assigns exclusive taxation powers to the Centre and the States, with no scope for concurrent taxation. Therefore, the complete segregation of the goods and service elements in works contracts is essential to uphold the constitutional validity of any tax. Since the legislation and rules do not specify such segregation or provide adequate machinery for assessment, any attempt to tax entire works contracts as a whole would transgress constitutional limits (!) (!) (!) .

The document also highlights that the relevant statutory definitions and rules post-2007 explicitly set out the criteria for taxing works contracts, including detailed provisions for bifurcation of the contract’s value into goods and service elements. Prior to this, the absence of such provisions meant that the tax could only be levied on service contracts that are not composite or indivisible (!) (!) .

Additionally, the scheme of taxation under the constitutional framework and the relevant statutes underscores the necessity of clear, definite, and ascertainable components of the tax, including the subject, person liable, rate, and measure. The lack of machinery provisions and explicit segregation mechanisms leads to the conclusion that the levy of service tax on indivisible works contracts is unconstitutional and invalid (!) (!) .

In sum, the document affirms that the levy of service tax on composite, indivisible works contracts under the provisions of the Finance Act, 1994, is not legally tenable due to the absence of specific charge, machinery, and constitutional compliance for such a levy. Consequently, any assessments or notifications attempting to impose such tax are invalid, and the relevant appeals are disposed of accordingly (!) (!) .