Summary
In a batch of appeals, the question was whether service tax could be levied on composite, indivisible works contracts before the Finance Act, 2007 inserted Section 65(105)(zzzza) into the Finance Act, 1994. In Larsen and Toubro (2015) this Court had held that no such tax was leviable, overruling the Delhi High Court's G.D. Builders. The Revenue conceded the point was covered but sought a reference to a larger Bench. On the principle of stare decisis, the Court refused. Larsen and Toubro had been followed by this Court and consistently by High Courts and Tribunals, the Revenue had never sought review. In a concurring opinion, Nagarathna J. held on the merits that the 2007 amendment was not clarificatory. The assessees' appeals were allowed and the pre-2007 assessments quashed, and the Revenue's appeal was dismissed.
Issues
- Whether service tax was leviable on composite, indivisible works contracts for the period before the Finance Act, 2007 introduced Section 65(105)(zzzza) into the Finance Act, 1994.
- Whether Commissioner, Central Excise and Customs v. Larsen and Toubro Ltd. (2016) 1 SCC 170 should be reconsidered or referred to a larger Bench.
Provisions considered
- Sections 65(105), 66 and 67; Section 65(105)(zzzza) inserted by the Finance Act, 2007, Finance Act, 1994Before 2007 the taxable services covered only service contracts simpliciter, with no charge or machinery to separate the service element of indivisible works contracts. Following Larsen and Toubro, service tax was not leviable on such contracts before the 2007 amendment. (¶¶ 2, 5, 10, 13.2, 13.3)
Held
- Larsen and Toubro held that, before the Finance Act, 2007, the Finance Act, 1994 contained no charge or machinery to levy service tax on composite, indivisible works contracts. The Revenue did not dispute that the appeals were covered by that decision. (¶¶ 5, 6, 10)
- Under the doctrine of stare decisis, as explained in Keshav Mills, Jaishri Laxmanrao Patil and Shah Faesal, a settled decision is reconsidered only for compelling reasons such as manifest error or unworkability. Certainty, consistency and continuity are especially important in tax matters. (¶¶ 10.4, 10.5, 10.6, 10.7, 11, 11.1, 11.5)
- Larsen and Toubro had stood since 2015, was followed by this Court in Bhayana Builders and consistently by High Courts and Tribunals, and many such decisions had become final. The Revenue never sought review, and a higher amount of tax in later cases is no ground for reconsideration. Reopening it would unsettle the law, so no reference to a larger Bench was warranted. (¶¶ 10.2, 12)
- As G.D. Builders had been overruled in Larsen and Toubro, the appeals from Delhi High Court judgments following it were allowed. The other assessees' appeals were allowed and the pre-2007 assessments set aside, and the Revenue's appeal against a CESTAT order in the assessee's favour was dismissed. (¶¶ 13, 13.1, 13.2, 13.3, 13.4, 14)
- Concurring, Nagarathna J. traced the concept of works contract from the Gannon Dunkerley cases through the 46th Amendment, and the levy of service tax on it. She held that the 2007 definition of works contract was not clarificatory but introduced the levy on the service element for the first time from 1 June 2007, so Larsen and Toubro was correctly decided.
Result
The assessees' appeals are allowed and the judgments and assessment orders levying service tax on indivisible works contracts for the pre-2007 period are quashed; the Revenue's appeal is dismissed. No costs.