# M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD v. THE DEPUTY COMMISSIONER OF COMMERCIAL TAXES & ORS

- **Citation:** [2022] 17 S.C.R. 883
- **Court:** Supreme Court of India
- **Decided:** 2022-08-02
- **Case number:** Civil Appeal Nos. 8673- 8684 of 2013
- **Bench:** M. R. Shah, B. V. Nagarathna
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-total-environment-building-systems-pvt-ltd-v-the-deputy-commissioner-of-35762
- **Pages:** 47

## Headnote

Finance Act, 1994: s. 65(105) (zzzze)(as amended) - Works
contract - Composite Works Contract - Levy of service tax - Issue
as regards the levy of service tax on Composite Works Contracts
prior to the introduction of the Finance Act, 2007 by which the
Finance Act, 1994 came to amended to introduce s. 65(105) (zzzze)
pertaining to Works Contract - Held: For the period prior to
introduction of Finance Act, 2007, service tax was not leviable under
Finance Act, 1994 on indivisible works contracts - Binding decision
of the Court in the case of Larsen and Toubro Limited, is followed -
Larsen and Toubro Limited's case has stood the test of time and has
never been doubted earlier - Said decision has been followed
consistently by this Court as well as by various High Courts and
the tribunals - If the prayer to reconsider and/or review the judgment
in Larsen and Toubro Limited is accepted, it may unsettle the law,
which has been consistently followed since 2015 onwards - Thus,
on the principle of stare decisis, Larsen and Toubro Limited's case,
neither needs to be revisited, nor referred to a larger Bench of this
Court and that too after a period of almost seven years - Thus, the
orders passed by the respective High Courts/tribunals that for the
period pre-Finance Act, 2007, the assesses were liable to pay the
service tax on indivisible/composite works contracts is quashed and
set aside - Finance Act, 2007.
Doctrines of precedents and Stare decisis - Relevance and
significance of - Discussed.
Disposing of the appeals, the Court
HELD:
Per M. R. SHAH, J.
1.1 The relevance and significance of the principle of stare
decisis have to be kept in mind and that in law, certainty,
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[2022] 17 S.C.R.
consistency and continuity are highly desirable features.The
judgment of this Court in the case of Larsen and Toubro Limited
has stood the test of time and has never been doubted earlier.
The said decision has been followed consistently by this Court
as well as by various High Courts and the Tribunals. Therefore,
if the prayer made on behalf of the Revenue to reconsider and/or
review the judgment of this Court in the case of Larsen and Toubro
Limited is accepted, in that case, it would 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 Limited and it may unsettle the law,
which has been consistently followed since 2015 onwards. There
are all possibilities of contradictory orders. Therefore, on the
principle of stare decisis, the judgment of this Court in the case
of Larsen and Toubro Limited, neither needs 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 now canvassed before this Court. [Para
10.5.1, 12][899-B; 906-D-G]
*Commissioner, Central Excise and Customs, Kerala Vs.
Larsen and Toubro Limited, (2016) 1 SCC 170 : [2015]
8 SCR 1046 - relied on.
1.2 At this stage, it is required to be noted that one of the
appeals being Civil Appeal No. 6523 of 2014 filed by M/s. G.D.
Builders is against the decision of the Delhi High Court in the
case of G.D. Builders Vs. Union of India. It is to be noted that the
said decision of the Delhi High Court in the case of G.D. Builders
has been specifically overruled by this Court in the case of Larsen
and Toubro Limited. The decision of the Delhi High Court in the
case of G.D. Builders has been considered by this Court in the
case of Larsen and Toubro Limited and ultimately, this Court opined
that the decision of the Delhi High Court in the case of G.D.
Builders is in fact contrary to a long line of decisions. It is further
specifically observed and held that the decision of the Delhi High
Court in the case of G.D. Builders is wholly incorrect in its
conclusion that the Fi

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 [2022] 17 S.C.R. 883
883
M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD.
v.
THE DEPUTY COMMISSIONER OF COMMERCIAL
TAXES & ORS.
(Civil Appeal Nos. 8673- 8684 of 2013)
AUGUST 02, 2022
[M. R. SHAH AND B. V. NAGARATHNA, JJ.]
Finance Act, 1994: s. 65(105) (zzzze)(as amended) - Works
contract - Composite Works Contract - Levy of service tax - Issue
as regards the levy of service tax on Composite Works Contracts
prior to the introduction of the Finance Act, 2007 by which the
Finance Act, 1994 came to amended to introduce s. 65(105) (zzzze)
pertaining to Works Contract - Held: For the period prior to
introduction of Finance Act, 2007, service tax was not leviable under
Finance Act, 1994 on indivisible works contracts - Binding decision
of the Court in the case of Larsen and Toubro Limited, is followed -
Larsen and Toubro Limited's case has stood the test of time and has
never been doubted earlier - Said decision has been followed
consistently by this Court as well as by various High Courts and
the tribunals - If the prayer to reconsider and/or review the judgment
in Larsen and Toubro Limited is accepted, it may unsettle the law,
which has been consistently followed since 2015 onwards - Thus,
on the principle of stare decisis, Larsen and Toubro Limited's case,
neither needs to be revisited, nor referred to a larger Bench of this
Court and that too after a period of almost seven years - Thus, the
orders passed by the respective High Courts/tribunals that for the
period pre-Finance Act, 2007, the assesses were liable to pay the
service tax on indivisible/composite works contracts is quashed and
set aside - Finance Act, 2007.
Doctrines of precedents and Stare decisis - Relevance and
significance of - Discussed.
Disposing of the appeals, the Court
HELD:
Per M. R. SHAH, J.
1.1 The relevance and significance of the principle of stare
decisis have to be kept in mind and that in law, certainty,
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[2022] 17 S.C.R.
consistency and continuity are highly desirable features.The
judgment of this Court in the case of Larsen and Toubro Limited
has stood the test of time and has never been doubted earlier.
The said decision has been followed consistently by this Court
as well as by various High Courts and the Tribunals. Therefore,
if the prayer made on behalf of the Revenue to reconsider and/or
review the judgment of this Court in the case of Larsen and Toubro
Limited is accepted, in that case, it would 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 Limited and it may unsettle the law,
which has been consistently followed since 2015 onwards. There
are all possibilities of contradictory orders. Therefore, on the
principle of stare decisis, the judgment of this Court in the case
of Larsen and Toubro Limited, neither needs 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 now canvassed before this Court. [Para
10.5.1, 12][899-B; 906-D-G]
*Commissioner, Central Excise and Customs, Kerala Vs.
Larsen and Toubro Limited, (2016) 1 SCC 170 : [2015]
8 SCR 1046 - relied on.
1.2 At this stage, it is required to be noted that one of the
appeals being Civil Appeal No. 6523 of 2014 filed by M/s. G.D.
Builders is against the decision of the Delhi High Court in the
case of G.D. Builders Vs. Union of India. It is to be noted that the
said decision of the Delhi High Court in the case of G.D. Builders
has been specifically overruled by this Court in the case of Larsen
and Toubro Limited. The decision of the Delhi High Court in the
case of G.D. Builders has been considered by this Court in the
case of Larsen and Toubro Limited and ultimately, this Court opined
that the decision of the Delhi High Court in the case of G.D.
Builders is in fact contrary to a long line of decisions. It is further
specifically observed and held that the decision of the Delhi High
Court in the case of G.D. Builders is wholly incorrect in its
conclusion that the Finance Act, 1994 contains both the charge
and machinery for levy and assessment of service tax on
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indivisible works contracts. It is reported that while deciding the
group of matters in the case of Larsen and Toubro Limited, the
papers of the appeal filed by M/s. G.D. Builders being Civil Appeal
No. 6523 of 2014 were also called and the counsel appearing on
behalf of the G.D. Builders was also heard. It appears that,
however, the Civil Appeal No. 6523 of 2014 filed by M/s. G.D.
Builders against the decision of the Delhi High Court has not
been specifically disposed of. Therefore, once the decision of
the Delhi High Court in the case of G.D. Builders, which is the
subject matter of Civil Appeal No. 6523 of 2014 has been held to
be wholly incorrect, Civil Appeal No. 6523 of 2014 filed by M/s.
G.D. Builders has to be allowed and the judgment and order passed
by the Delhi High Court has to be quashed and set aside. [Para
13][906-H; 907-A-E]
1.3 In view thereof and for the reasons stated, the 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 are hereby quashed
and set aside. Consequently, the respective assessment orders/
orders in originals levying the service tax on the respective
assesses on the indivisible/Composite Works Contracts for the
period prior to pre-2007 are hereby quashed and set aside. [Para
14][908-F-G]
Dr. Shah Faesal and Ors. Vs. Union of India and Anr.,
(2020) 4 SCC 1 : [2020] 3 SCR 1115; State of Madhya
Pradesh v. Mahalaxmi Fabric Mills Ltd., 1995 Supp
(1) SCC 642 : [1995] 1 SCR 756; Indra Sawhney Vs.
Union of India, 1992 Supp (3) SCC 217 : [1992] 2
Suppl. SCR 454; Keshav Mills Co. Ltd. Vs.
Commissioner of Income Tax, Bombay North,
Ahmedabad, AIR 1965 SC 1636 : [1965] SCR 908 -
followed.
Dr. Jaishri Laxmanrao Patil Vs. Chief Minister and Ors.,
(2021) 8 SCC 1; Union of India Vs. Raghubir Singh
(Dead) by LRs. etc., (1989) 2 SCC 754 : [1989] 3 SCR
316; State of Madras Vs. Gannon Dunkerley & Co.,
(Madras) Ltd., [1959] SCR 379, Larsen and Toubro
M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. v. THE
DEPUTY COMM'R OF COMMERCIAL TAXES
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Limited and Anr. Vs. State of Karnataka and Anr., (2014)
1 SCC 708: [2013 ]17 SCR 678; Nagarjuna
Construction Company Limited Vs. Union of India and
Anr., (2013) 1 SCC 721: [2012] 10 SCR 1064; Imagic
Creative (P) Ltd. Vs. Commissioner of Commercial Taxes
and Ors., (2008) 2 SCC 614: [2008] 1 SCR 457; T.N.
Kalyana Mandapam Assn. Vs. Union of India and Ors.,
(2004) 5 SCC 632 : [2004] 1 Suppl. SCR 169;
Saurashtra Cement & Chemical Industries Ltd. and
another Vs. Union of India and others, (2001) 1 SCC
91 : [2000] 4 Suppl. SCR 44; Chandra Prakash and
Ors. Vs. State of U.P. and Anr., (2002) 4 SCC 234 :
[2002] 2 SCR 913; Medley Pharmaceuticals Limited v.
Commissioner of Central Excise and Customs, Daman,
(2011) 2 SCC 6014; Waman Rao v. Union of India,
(1981) 2 SCC 362 : [1981] 2 SCR 1; G.D. Builders
[(2013) 32 STR 673 (Delhi]), K. Ajit Babu and Ors.
Vs. Union of India and Ors., (1997) 6 SCC 473 : [1997]
3 Suppl. SCR 56; Sundarjas Kanyalal Bhatija and Ors.
Vs. Collector Thane, Maharashtra and Ors., (1989) 3
SCC 396 : [1989] 3 SCR 405; Government of Andhra
Pradesh Vs. A.P. Jaswal (2001) 1 SCC 748 - referred
to.
Per B. V. Nagarathna, J. (Supplementing)
1.1It would be useful to discuss the evolution, meaning and
content of the expression works contract in the context of sales
tax law and as well as under the service tax regime. This is, having
regard to the definition of works contract being inserted w.e.f.
1st June, 2007 to the Finance Act, 1994 which seeks to impose
service tax on the service aspect of a works contract. The reason
for this exercise is because works contract by itself is not taxable.
A works contract as defined by the amendment has two
components, namely, a sale component and a service component.
It is only when both the components are satisfied and coexist
that a contract becomes a works contract as defined. Further, it
is only on the service component of the works contract that the
service tax is leviable w.e.f. 1st June, 2007. As far as the sale
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component in a works contract is concerned, the Sales Tax laws
of the respective States would apply. [Para 5][910-D-F]
1.2. Section 65(105)(zzzza) of the Finance Act, 1994 as
amended by the Finance Act, 2007 which defines work contract.
A reading of the said definition would indicate that two requisites
must be satisfied before service tax on works contract could be
levied. Works contract has two essential components: firstly, sale
of goods involved in the execution of such contracts which would
attract Sales Tax or Value Added Tax (VAT) as the case may be,
i.e., prior to the enforcement of the Goods and Services Tax
regime and secondly, a service component which is specified in
clause (ii)(a)-(e) of the definition of works contract which would
attract Service Tax under the provisions of the Finance Act, 1994
as amended in the year 2007. If both the above requisites are
present, then Service Tax on works contract is leviable on the
service component. This is clear from the use of the word "and"
between components (i) and (ii) of the definition of works contract
under Clause (zzzza) of Section 65 of the Finance Act, 1994 which
is as per the amendment in the year 2007. Thus, the definition
speaks of a composite works contract comprising of an element
of sale and an element of service. [Para 5][910-G-H; 911-E; 912C-E]
1.3. The definition of works contract was brought under
the service tax net as per Section 65(105)(zzzza) of the Finance
Act, 1994 by the insertion of the said definition. The said
introduction was made pursuant to the Finance Act, 2007, which
expressly made the service element in such works contract liable
to service tax w.e.f. 1st June, 2007. By the said amendment,
works contract which were indivisible and composite could be
split so that only the labour and service element of such contracts
would be taxed under the heading "Service Tax". [Para 8][928E]
1.4. It is in the above backdrop that the definition of Works
contract inserted for the first time by virtue of Section
65(105)(zzzza) under the Finance Act, 2007 assumes significance
and has to be applied w.e.f.1st June, 2007. Thus, on and from the
enforcement of the amendment in the Financial Year 2007, i.e.
1st June, 2007 the tax on the service component of works contract
M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. v. THE
DEPUTY COMM'R OF COMMERCIAL TAXES
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became leviable. Therefore, till then it was not so leviable as
there was no concept of works contract under the said Act. [Para
9][928-F-G]
1.5. Recognising this aspect of the matter in Larsen and
Toubro Ltd., this Court held that Service Tax on works contract
was not leviable, meaning thereby, that such tax on the service
component of works contract as defined above did not attract
Service Tax prior to the amendment. [Para 10][928-G-H]
Commissioner, Central Excise and Customs, Kerala Vs.
Larsen and Toubro Limited, (2016) 1 SCC 170 : [2015]
8 SCR 1046 - relied on.
1.6. Prior to the amendment being made to the Finance
Act, 1994 Service tax was being levied on purely service contract
and not on service element of works contract as there was no
definition of a works contract till then. Hence, the amendment
made to the Finance Act, 1994 by insertion of the definition of
works contract as under clause (zzzza) is not clarificatory in nature.
Having found that the Service Tax was not at all leviable on
service element of a works contract, Parliament felt the need for
the amendment and was so incorporated by the Finance Act, 2007.
[Para 12][929-D-E]
1.7. The judgment in Larsen and Toubro Ltd. has been
correctly decided and does not call for a reconsideration insofar
as the period prior to 1st June, 2007 is concerned. [Para 13][929F-G]
Gannon Dunkerley (I) - State of Madras vs. Gannon
Dunkerley and Co.(Madras) Ltd. AIR 1958 SC 560 :
[1959 SCR 379], Gannon Dunkerley (II) -- Gannon
Dunkerley and Co. vs. State of Rajasthan 1993 (1)SCC
364 : [1992] 3 Suppl. SCR 103, Builders Association
of India vs. Union of India (1989) 2 SCC 645 : [1989]
2 SCR 320, State of AP v. Kone Elevators (2005) 3 SCC
389 : [2005] 2SCR 152, Kone Elevator India Pvt. Ltd.
vs. State of Tamil Nadu (2014) 7 SCC 1 : [2014] 5
SCR 912, Bharat Sanchar Nigam Ltd. vs. Union of India
[2006] 145 STC 91 (SC) : [2006] 2 SCR 823, Larsen
and Toubro Limited and Another vs. State of Karnataka
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and Another (2014) (1) SCC 708 : [2013] 17 SCC 678,
Commissioner of Sales Tax vs. Purshottam Premji (1970)
2 SCC 287, Tamil Nadu Kalyana Mandapam
Association vs. Union of India (2004) 5 SCC 632:
[2004] 1 Suppl. SCR 169, Imagic Creative Pvt. Ltd. vs.
The Commissioner of Commercial Taxes and Ors. (2008)
2 SCC 614 : [2008] 1 SCR 457, Nagarjuna
Construction Company Ltd. vs. Government of India
and Ors. (2013) 1 SCC 721: [2012] 10 SCR 1064,
Mahim Patram (P) Ltd. vs. Union of India (2007) 3 SCC
668: [2007] 3 SCR 73, Commissioner of Service Tax
and Others vs. Bhayana Builders Private Limited and
Others (2018) 3 SCC 782, G.D. Builders vs. Union of
India (2013) 32 STR 673] - referred to.
Case Law Reference
In the judgment of M. R. Shah, J.
[2015] 8 SCR 1046
relied on
Para 12, 13
[1959] SCR 379
referred to
Para 6.1
[2013 ]17 SCR 678
referred to
Para 6.1
[2012] 10 SCR 1064
referred to
Para 6.1
[2008] 1 SCR 457
referred to
Para 6.1
[2004] 1Suppl. SCR 169
referred to
Para 6.1
[2002] 2SCR 913
referred to
Para 10.6
[1981] 2 SCR 1
referred to
Para 11.4
[1965] SCR 908
followed
Para 10.5
[2020] 3 SCR 1115
followed
Para 10.6
[1989] 3 SCR 316
referred to
Para 11.2
[1992] 2 Suppl. SCR 454
followed
Para 12
[1997] 3 Suppl. SCR 56
referred to
Para 11.3
[1989] 3 SCR 405
referred to
Para 11.3
[2000] 4 Suppl. SCR 44
referred to
Para 11.5
[1995] 1 SCR 756
followed
Para 11.5
M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. v. THE
DEPUTY COMM'R OF COMMERCIAL TAXES
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In the judgment of B.V Nagarathna, J.
[2015] 8 SCR 1046
relied on
Para 13
[1959] SCR 379
referred to
Para 5 (A)
[1992] 3 Suppl. SCR 103
referred to
Para 5(C)
[1989 ] 2 SCR 320
referred to
Para 5 (E)
[2005] 2 SCR 152
referred to
Para 5 (G)
[2014] 5 SCR 912
referred to
Para 5 (G)
[2006] 2 SCR 823
referred to
Para 5 (H)
[2013]17 SCR 678
referred to
Para 5 (I)
[2004] 1 Suppl. SCR 169
referred to
Para 6 (a)
[2008] 1 SCR 457
referred to
Para 6 (b)
[2012] 10 SCR 1064
referred to
Para 6 (c)
[2007] 3 SCR 73
referred to
Para 7 (e)
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.86738684 of 2013.
From the Judgment and Order dated 07.10.2009 of the High Court
of Karnataka at Bangalore in Writ Appeal Nos.3481-3492 of 2009.
With
Civil Appeal Nos.6525, 6523,6526 of 2014, 2666 of 2022, 45474548 of 2014, 2667 of 2022, 6792 of 2010 and 2668 of 2022.
Ms. Madhavi Divan, ASG, A. K. Panda, Arijit Prasad, Arvind P.
Datar, Sr. Advs., Mukesh Kumar Maroria, Ms. Aruna Gupta, Ms. Diksha
Rai, Vatsal Joshi, Anirudhha Purushottam, Vishesh Kalra, B. Krishna
Prasad, Sanand Ramakrishnan, Rajeev Mishra, Sunil Narayanan, Ms.
Nisha Bagchi, Ms. Sheena Taqui, Dhvanit Chopra, Ms. Akansha Saini,
Shiv Vinayak Gupta, Mrs. Bina Gupta, J.K. Mittal, Ms. Vandana Mittal,
Ms. Aashna Suri, Praveen Kumar, Ms. Sunaina Kumar, V. N. Raghupathy,
Praveen Swarup, Ms. Anubha Agrawal, V. Lakshmikumaran, Aditya
Bhattacharya, Ms. Mounica Kasturi, Ms. Purvi Asati, Ms. Apeksha
Mehta, Ms. Charanya Lakshmikumaran, Bhanu Kapoor, S. Ravi Shankar,
Amol Chitale, Nirnimesh Dube, Rahul Chitnis, Sachin Patil, Aaditya A.
Pande, Geo Joseph, Ms. Shwetal Shepal, Ardhendumauli Kumar Prasad,
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Ms. Shreya Srivastava, Ashish Madaan, E. C. Agrawala, Shivaji M.
Jadhav, Mrs. Pragya Baghel, Ms. Ranjeeta Rohatgi, Advs. for the
appearing parties.
The Judgments of the Court were delivered by
M. R. SHAH, J.
1. As common question of law and facts arise in this group of
appeals, they are being decided and disposed of by this common judgment
and order.
2. The issue involved in the present group of appeals is, "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
came to be amended to introduce Section 65(105)(zzzza) pertaining to
Works Contracts?"
3. Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 07.10.2009 passed by the High Court of Karnataka at
Bengaluru in Writ Appeal Nos. 3481-3492 of 2009 by which the Division
Bench of the High Court has dismissed the said writ appeals and has
confirmed the judgment and order passed by the learned Single Judge
dismissing the writ petitions in which the appellant challenged the
assessment orders levying service tax, on the ground of alternative
remedy available by way of statutory appeal, assessee - M/s. Total
Environment Building Systems Pvt. Ltd. has preferred the present appeals
- Civil Appeal Nos. 8673-8684 of 2013.
3.1 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the High Court of Delhi at New Delhi in Writ Petition
No. 1342 of 2008 by which, relying upon the decision of the Delhi High
Court in the case of G.D. Builders Vs. Union of India, (2013) 32
STR 673 (Delhi), which is the subject matter before this Court by way
of Civil Appeal No. 6523 of 2014, the Division Bench has dismissed the
said writ petition and has held that it is only the service element, which is
to be taxed, the original writ petitioner - assessee - YFC Projects Pvt.
Ltd. has preferred the present Civil Appeal No. 6525 of 2014.
3.2 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the Division Bench of the High Court dated
13.11.2013 in Writ Petition (C) No. 4107 of 2008 by which the Division
Bench of the High Court has dismissed the said writ petition, the assessee
M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. v. THE
DEPUTY COMM'R OF COMMERCIAL TAXES
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- G.D. Builders has preferred the present Civil Appeal No. 6523 of
2014.
At this stage, it is required to be noted that in the case of
Commissioner, Central Excise and Customs, Kerala Vs. Larsen
and Toubro Limited, (2016) 1 SCC 170, this Court has specifically
overruled the judgment of the Delhi High Court in the case of G.D.
Builders (supra) and has observed and held that the observations made
by the Delhi High Court in paragraph 31 is wholly inaccurate in its
conclusion that the Finance Act, 1994 contains both the charge and
machinery for levy and assessment of service tax on indivisible works
contracts.
At this stage, it is reported that as such Civil Appeal No. 6523 of
2014, now under consideration was also heard alongwith the group of
appeals while deciding the case of Larsen and Toubro Limited (supra)
and even the papers of Civil Appeal No. 6523 of 2014 were called for by
the Bench concerned. However, it appears that by oversightand/or by
inadvertence Civil Appeal No. 6523 of 2014 has not been decided and
disposed of and therefore kept pending, which is now notified before
this Court alongwith the other appeals.
3.3 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the High Court of Delhi at New Delhi dated
09.01.2014 in Writ Petition (C) No. 6803 of 2013 by which the Division
Bench of the High Court relying upon its earlier decision in the case of
G.D. Builders (supra) has dismissed the said writ petition, the assessee
- original writ petitioner - M/s. National Building Construction Corporation
Ltd. (NBCC) has preferred the present Civil appeal No. 6526 of 2014.
3.4 Feeling aggrieved and dissatisfied with the impugned judgment
and order passed by the High Court of Delhi at New Delhi dated
13.11.2013 in Writ Petition No. 5046 of 2008 by which the Division Bench
of the High Court has dismissed the said writ petition alongwith another
writ petition in the case of G.D. Builders (supra), the assessee - M/s.
Unitech Ltd. has preferred the present Civil Appeal No. 2666 of 2022
arising out of SLP (C) No. 36206 of 2014.
3.5 Feeling aggrieved and dissatisfied with the impugned common
judgment and order passed by the Guwahati High Court dated 04.06.2012
passed in Writ Petition Nos. 5676 and 5678 of 2012, the original
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writ petitioner - assessee - NBCC has preferred the present Civil Appeal
Nos. 4547-4548 of 2014.
3.6 Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 19.03.2015 passed by the Customs, Excise and Service
Tax Appellate Tribunal (CESTAT) in Service Tax Stay No. 59278 of
2013 in S.T. Appeal No. 58658 of 2013, the assessee - M/s. Larsen and
Toubro Limited has preferred the present Civil Appeal No. 2667 of 2022
arising out of SLP (C) No. 21828 of 2015.
3.7 Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 10.03.2010 passed by the CESTAT, West Zonal Bench
in Appeal No. ST/275 of 2006, the Revenue has preferred the present
Civil Appeal No. 6792 of 2010.
3.8 Feeling aggrieved and dissatisfied with the impugned judgment
and order dated 12.06.2015 passed by CESTAT, Mumbai in ST/Stay/
3022/12-Mum in S.T. Appeal No. 873 of 2012, the assessee - M/s.
L&T, Hydrocarbon Engineering Ltd. (previously known as Larsen &
Toubro Ltd.) has preferred the present Civil Appeal No. 2668 of 2022
arising out of SLP (C) No. 32501 of 2015.
4. As observed hereinabove, the issue involved in the present
appeals is, "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 came to be amended to introduce Section
65(105)(zzzza) pertaining to Works Contracts?"
5. At the outset, it is required to be noted that the very issue had
been considered by this Court in the case of Commissioner, Central
Excise and Customs, Kerala Vs. Larsen and Toubro Limited,
(2016) 1 SCC 170. In the aforesaid decision, after considering the
entire scheme of levy of service tax pre-2007 and post-2007, this Court
has specifically observed and held that on indivisible works contracts,
for the period prior to introduction of Finance Act, 2007, service tax was
not leviable under Finance Act, 1994. It is specifically observed and held
that works contracts on which the service tax was levied under the
Finance Act, 1994 is distinct from contracts of service.
6. Ms. Madhavi Divan, learned Additional Solicitor General,
appearing on behalf of the Revenue, has not disputed that the issue
involved in the present appeals is as such squarely covered by the decision
of this Court in the case of Larsen and Toubro Limited (supra).
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However, according to Ms. Madhavi Divan, the decision of this Court in
the above case, holding that there was no service tax leviable on works
contracts prior to the amendment by the Finance Act, 2007 needs to be
re-considered.
6.1 In support to her prayer to re-consider the decision of this
Court in the case of Larsen and Toubro Limited (supra), Ms. Madhavi
Divan, learned Additional Solicitor General has made a number of
submissions and has taken us to the legislative history pertaining to the
service tax. She has also taken us to the definition of the Works Contract
and what can be said to be Works Contracts. She has also taken us
through a number of other decisions of this Court including the decisions
in the case of State of Madras Vs. Gannon Dunkerley & Co.,
(Madras) Ltd., (1959) SCR 379; Larsen and Toubro Limited and
Anr. Vs. State of Karnataka and Anr., (2014) 1 SCC 708; Nagarjuna
Construction Company Limited Vs. Union of India and Anr.,
(2013) 1 SCC 721; Imagic Creative (P) Ltd. Vs. Commissioner
of Commercial Taxes and Ors., (2008) 2 SCC 614; and T.N.
Kalyana Mandapam Assn. Vs. Union of India and Ors., (2004) 5
SCC 632.
6.2 It is vehemently submitted by Ms. Madhavi Divan, learned
Additional Solicitor General that, even prior to Finance Act, 2007, there
was an elaborate mechanism for segregating the value of the goods
component and the service component in a Works Contract. Therefore,
it is the case on behalf of the Revenue that it cannot be said that there
was no machinery provision to charge as such the service component in
a Composite Works Contracts in order to make it excisable service tax.
Therefore, it is the case on behalf of the Revenue that the observations
and the findings recorded by this Court in the case of Larsen and Toubro
Limited (supra) that there was no service tax leviable on Works
Contracts prior to the amendment by the Finance Act, 2007 is
fundamentally erroneous and contrary to, and in the teeth of the well
settled principles laid down by previous judgments, including the judgments
passed by Larger Benches of this Court referred to hereinabove.
However, for the reasons stated hereinbelow, we do not propose to
elaborately consider the submissions made by Ms. Madhavi Divan, learned
Additional Solicitor General on merits and made in support of her request
to re-consider the decision of this Court in the case of Larsen and
Toubro Limited (supra).
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7. On the other hand, Shri Arvind P. Datar, learned Senior Advocate,
appearing on behalf of some of the assessees and other learned senior
counsel appearing on behalf of the respective assessees have vehemently
submitted that as such, the issue involved in the present appeals is squarely
covered by the decision of this Court in the case of Larsen and Toubro
Limited (supra). It is submitted that in most of the appeals, which are
arising out of the judgments and orders passed by the High Court of
Delhi, the High court has followed its decision in the case of G.D.
Builders (supra). That the said decision of the Delhi High Court in the
case of G.D. Builders (supra) has been held to be wholly incorrect by
this Court in the case of Larsen and Toubro Limited (supra). He has
taken us to the relevant observations made by this Court in the case of
Larsen and Toubro Limited (supra) in paragraphs 28, 29, 30, 31, 32,
33, 38 and 39.
7.1 It is vehemently submitted by Shri Datar, learned Senior
Advocate appearing on behalf of some of the assesses that in the case
of Larsen and Toubro Limited (supra), it is specifically observed
that a taxable service under the Finance Act, 1994 covers service
contracts simpliciter and not the Composite Works Contracts (reliance
is placed upon the observations made in paragraphs 23 and 29 of the
said decision). It is contended that while referring to exemption
notifications in paragraph 42, it has been specifically observed and held
that since the levy of service tax has been found to be non-existent, no
question of any exemption would arise. It is further urged by Shri Datar,
learned Senior Advocate appearing on behalf of some of the assesses
that the decision of this Court in the case of Larsen and Toubro Limited
(supra) has been subsequently followed by this Court in the case of
Commissioner of Service Tax and Ors. Vs. Bhayana Builders
Private Limited and Ors., (2018) 3 SCC 782. That after following
and considering the decision of this Court in the case of Larsen and
Toubro Limited (supra), this Court dismissed the appeals preferred
by the Revenue.
7.2 It is further submitted by Shri Datar, learned Senior Advocate
appearing on behalf of some of the assesses that after 2015, the decision
of this Court in the case of Larsen and Toubro Limited (supra) has
been consistently followed by all the High Courts in the country and the
various Tribunals. It is submitted that therefore, if after a period of six to
seven years, the decision of this Court in the case of Larsen and Toubro
M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. v. THE
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Limited (supra) is to be re-considered at the instance of the Revenue,
it may upset the decisions already taken by the Tribunals and the various
High Courts. It is submitted that therefore on the principle of stare decisis,
this Court may not take a contrary view than the view taken by this
Court in the case of Larsen and Toubro Limited (supra) and/or may
not re-consider the same now at this length of time at the instance of the
Revenue, more particularly, when the Revenue did not file any review
application earlier to review the decision given by this Court in the case
of Larsen and Toubro Limited (supra).
7.3 It is further submitted by Shri Datar, learned Senior Advocate
appearing on behalf of some of the assesses that some of the appeals in
the present case arise out of the interim orders passed by the Tribunals.
That thereafter, final orders have been passed by the Tribunals by relying
upon the decision of this Court in the case of Larsen and Toubro
Limited (supra) and the Revenue has not challenged the final decision.
Therefore, as such, the Revenue has accepted the decisions in almost
all cases, which have already attained the finality.
7.4 Shri Datar, learned Senior Advocate appearing on behalf of
some of the assesses has also made elaborate submissions on non-levy
of service tax on the Composite Works Contracts prior to the Finance
Act, 2007. He has also taken us through the speech made by the then
Hon'ble Finance Minister while moving the amendment in the Parliament
while introducing the Finance Act, 2007. It is submitted that for the first
time, the service tax is levied on the Composite Works Contracts pursuant
to the Finance Act amendment made vide Finance Act, 2007. However,
for the reasons to be recorded hereinbelow, we do not propose to
elaborately deal with and/or consider the elaborate submissions made
on behalf of the respective parties on whether the service tax was leviable
on Composite Works Contracts prior to Finance Act, 2007 or not and on
whether the decision of this Court in the case of Larsen and Toubro
Limited (supra) is required to be re-considered, as now submitted and/
or prayed on behalf of the Revenue.
8. Heard, Ms. Madhavi Divan, learned ASG appearing on behalf
of the Revenue and Shri Arvind Datar, learned Senior Advocate and
other learned senior and other counsel appearing on behalf of the
respective assessees.
9. The short question which is posed for consideration of this
Court is, "whether for the period prior to introduction of the Finance Act,
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2007, the service tax would be leviable on the Composite Works
Contracts?"
10. At the outset, it is required to be noted that whether post2007, the service tax was leviable on Composite Works Contracts is
now no longer res integra in view of the direct decision of this Court in
the case of Larsen and Toubro Limited, (supra).
10.1 Ms. Divan, learned ASG is not disputing that in the case of
Larsen and Toubro Limited (supra), this Court has specifically
observed and held that the service tax was not leviable on the indivisible/
Composite Works Contracts, post Finance Act, 2007. However, according
to the learned ASG, the said decision requires re-consideration and
therefore, the prayer is made to refer the matter to the Larger Bench.
10.2 While appreciating the prayer/submission made on behalf of
the Revenue to re-consider the binding decision of this Court in the case
of Larsen and Toubro Limited (supra) and to refer the matter to the
Larger Bench, few facts are required to be taken into consideration,
which are as under:-
(i)
The decision of this Court in the case of Larsen and
Toubro Limited (supra) has been delivered/passed in the
year 2015, in which, it is specifically observed and held that
on indivisible works contracts for the period pre-Finance
Act, 2007, the service tax was not leviable;
(ii)
After considering the entire scheme and the levy of service
tax pre-Finance Act, 2007 and after giving cogent reasons,
a conscious decision has been taken by this Court holding
that the service tax was not leviable pre-Finance Act, 2007
on indivisible/Composite Works Contracts;
(iii)
While holding that for the period pre-Finance Act, 2007, on
indivisible/Composite Works Contracts, the service tax is
not leviable, number of decisions have been dealt with and
considered by this Court in the aforesaid decision;
(iv)
That subsequently, the decision of this court in the case of
Larsen and Toubro Limited (supra) has been followed
and considered by this Court in the case of Bhayana
Builders Private Limited and Ors., (supra);
M/S. TOTAL ENVIRONMENT BUILDING SYSTEMS PVT. LTD. v. THE
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(v)
That after the decision of this Court in the case of Larsen
and Toubro Limited (supra) rendered in the year 2015,
the said decision has been consistently followed by various
High Courts and the Tribunals;
(vi)
The decisions of the various High Courts and the Tribunals,
which were passed after following the decision of this Court
in the case of Larsen and Toubro Limited (supra) have
attained finality and in many cases, the Revenue has not
challenged the said decisions;
(vii)
No efforts were made by the Revenue to file any review
application to review and/or recall the judgment and order
passed by this Court in the case of Larsen and Toubro
Limited (supra). If the Revenue was so serious in their
view that decision of this Court in the case of Larsen and
Toubro Limited (supra) requires re-consideration,
Revenue ought to have filed the review application at that
stage and/or even thereafter. No such review application
has been filed even as on today.
(viii) Merely because in the subsequent cases, the amount of tax
involved may be higher, cannot be a ground to pray for reconsideration of the earlier binding decision, which has been
consistently followed by various High Courts and the
Tribunals in the entire country.
10.3 Keeping in mind the aforesaid factual aspects, the prayer
made on behalf of Revenue to re-consider the decision of this Court in
the case of Larsen and Toubro Limited (supra) and to refer the
matter to the Larger Bench is required to be considered.
10.4 While considering the prayer made on behalf of the Revenue
to review and/or revisit the earlier decision of this Court in the case of
Larsen and Toubro Limited (supra), few decisions on the principle
of stare decisis are required to be referred to and considered.
10.5 In the case of Dr. Jaishri Laxmanrao Patil Vs. Chief
Minister and Ors., (2021) 8 SCC 1, after considering the earlier
decision of the Seven Judge Constitution Bench in the case of Keshav
Mills Co. Ltd. Vs. Commissioner of Income Tax, Bombay North,
Ahmedabad, AIR 1965 SC 1636, it is observed and held that before
reviewing and revising its earlier decision the Court must satisfy itself
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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.
10.5.1 After discussing the law on the principle of stare decisis, it
is observed and held that the relevance and significance of the principle
of stare decisis have to be kept in mind and that in law, certainty,
consistency and continuity are highly desirable features. While holding
so, in paragraphs 453 to 456, it is observed and held as under:-
"453. The seven-Judge Constitution Bench judgment in Keshav
Mills [Keshav Mills Co. Ltd. v. CIT, AIR 1965 SC 1636 : (1965)
2 SCR 908] has unanimously held that before reviewing and
revising its earlier decision the Court must itself satisfy 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 a
certainty and continuity in the interpretation of the law in the
country.
454. In Jarnail Singh v. Lachhmi Narain Gupta [(2018) 10
SCC 396], the prayer to refer the Constitution Bench judgment
in M. Nagaraj [M. Nagaraj v. Union of India, (2006) 8 SCC
212] was rejected by the Constitution Bench relying on the law as
laid down in Keshav Mills case [Keshav Mills Co. Ltd. v. CIT,
AIR 1965 SC 1636 : (1965) 2 SCR 908]. In para 9 the following
has been laid down : (Jarnail Singh case [Jarnail
Singh v. Lachhmi Narain Gupta, (2018) 10 SCC 396], SCC pp.
410-11)
"9. Since we are asked to revisit a unanimous Constitution
Bench judgment, it is important to bear in mind the admonition
of the Constitution Bench judgment in Keshav Mills [Keshav
Mills Co. Ltd. v. CIT, AIR 1965 SC 1636 : (1965) 2 SCR 908].
This Court said : (SCR pp. 921-22 : AIR p. 1644, para 23)
'23. ... in reviewing and revising its earlier decision, this
Court should ask itself whether in the interests of the public
good or for any other valid and compulsive reasons, it is
necessary that the earlier decision should be revised. When
this Court decides questions of law, its decisions are, under
Article 141, binding on all courts within the territory of India,
and so, it must be the constant endeavour and concern of
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this Court to introduce and maintain an element of certainty
and continuity in the interpretation of law in the country.
Frequent exercise by this Court of its power to review its
earlier decisions on the ground that the view pressed before
it later appears to the Court to be more reasonable, may
incidentally tend to make law uncertain and introduce
confusion which must be consistently avoided. That is not
to say that if on a subsequent occasion, the Court is satisfied
that its earlier decision was clearly erroneous, it should
hesitate to correct the error; but before a previous decision
is pronounced to be plainly erroneous, the Court must be
satisfied with a fair amount of unanimity amongst its
members that a revision of the said view is fully justified. It
is not possible or desirable, and in any case it would be
inexpedient to lay down any principles which should govern
the approach of the Court in dealing with the question of
reviewing and revising its earlier decisions.