The main legal point established in the judgment is that service tax is applicable only to the service component of composite contracts and does not encroach upon the exclusive powers of State Legislatures to impose tax on the sale of goods.

Badar Durrez Ahmed, J (Oral)

1. These writ petitions raise common issues and are, therefore, being disposed of together. Writ Petition (Civil) No.1342/2008 (YFC Projects Pvt. Ltd. vs. Union of India) was taken as the lead matter and all reference to this batch of matters will be in relation to the pleadings in YFC Projects Pvt. Ltd.

2. In these petitions, as would be evident from the prayer in M/s YFC Projects Pvt. Ltd., challenges have been raised to the constitutional validity of Section 65(105) (zzd), Section 65 (105) (zzq) and Section 65 (105) (zzzh) of the Finance Act, 1994. The prayers made in YFC Projects Pvt. Ltd. are as under:-

“A) Issue a writ of certiorari/mandamus or any other appropriate writ/order/direction against the respondent by quashing the impugned provisions viz. Section 65(105) (zzd) read with section 65(29) and section 65(39a), Section 65(105)(zzq) read with section 65 (25b), section 65(105)(zzzh) read with section 65(30a) and section 65(91a) of Chapter V of the Finance Act, 1994 as much as levying the service tax on the works contract and Ready-mix Concrete (RMC) as unconstitutional and also quashing of clarification given through Instruction No.C.No.IV/16/56/07/STC dated 7-11-2007 (at Annexure P-3) and under Reference Code No.097.03/04.01.08 of the Circular No.98/1/2008-ST, dated 04.01.2008 (at Annexure P-4) issued by the respondent as illegal and unconstitutional by declaring that ‘works contract’ of the petitioner were not subject to tax prior to the enactment of the Finance Act, 2007 as levied on ‘works contract services’ under Section 65(105)(zzzza) of Chapter V of the Finance Act, 1994;

B) issue a writ of certiorari/mandamus or any other appropriate writ/order/direction against the respondent declaring that the production and supply of ready-mix Concrete (RMC), which is covered under the Tariff Item No.3824 50 10 by specifying Nil rate of duty of excise under the Central Excise Tariff Act, 1985 read with Central Excise Act, 1944, is not a taxable service under the Finance Act, 1994, hence service tax collected on the same is illegal and unconstitutional;

C) issue a writ of certiorari/mandamus or any other appropriate writ/order/direction against the respondent declaring that the works contract started prior to 01.06.2007 are also eligible to pay the tax under the ‘works contract services’ under Section 65 (105) (zzzza) of the Finance Act, 1994 read with Rules made thereunder by Notification No.32/2007-ST, dated 22.05.2007;

D) issue such other writ/order/direction against the respondent for refund of the service tax illegally collected from the petitioner for the period from September 2004 till May 2007;

E) issue such other writ/order/direction and further orders as the Hon’ble Court may deem just and proper in the facts and circumstances of the case.”

3. The petitioner in YFC Projects Pvt. Ltd. is, inter alia, engaged in the business of commercial construction, construction of multi-storeyed residential complexes and also construction of structures and finishing works. YFC Projects Pvt. Ltd., is also engaged in the business of manufacture and supply of ready-mix concrete.

4. The relevant pleadings in YFC Projects Pvt. Ltd. tracing the genesis of the aforesaid three provisions were as under:-

“7. That the respondent amended the Finance Act, 1994, w.e.f. 01.07.2003 through the Finance Act, 2003 by introducing ‘Commissioning or Installation Services’ (later on renamed as ‘Erection, Commissioning or Installation Services’) under sub-clause (zzd) of clause (105) read with clause (29) and clause (39a) of Section 65 of Chapter V of the Finance Act, 1994 vide Notification No.7/2003, dated 20.06.2003. To enlarge the scope of this taxable service, aforesaid provisions were amended by the Finance (No.2) Act, 2004, w.e.f. 10.09.2004, to include the erection services within its ambit, again by the Finance Act, 2005, w.e.f. 16.06.2005, to include specific installation services and again by the Finance Act, 2006