“Commercial or industrial construction service”

The term “commercial or industrial construction service” is defined under Sec 65(25b) of the Finance Act 1994 as under:

“Commercial or industrial construction service” means –

(a)    Construction of a new building or civil structure or a part thereof; or

(b)   Construction of pipeline or conduit; or

(c)    Completion and finishing services such as glazing, plastering, Painting, floor and wall tiling, Wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pool, acoustic applications or fittings and other similar services, in relation to , building or civil structure; or

(d)   Repair, alteration, renovation or restoration of, or similar services in relation, to building or civil structure, pipeline or conduit,

Now an assessee has registered under this service and is doing painting contract, it is a pure labour contract, the building owner supplies the wall covering material and paint, and the assessee,s work is only to pain the building.

The department wants to assessee to get himself under “Works contracts” services - sec 65(105)(zzzza) , and wants him to pay composite tax @ 4% on the gross value

“Works contracts” services - sec 65(105)(zzzza)

Explanation to sec 65(105)(zzzza) for the purpose of this sub-clause, “Works contracts” means a contract wherein ,--

(1)   Transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(2)   Such contract is for the purpose of carrying out, -

(a)    erection, commissioning or installation of plant, machinery, equipment or structures, whether prefabricated or otherwise, installation of electronic devices, plumbing,, drain laying or other installations for transport if fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or

(b)   construction of new building or a civil structure or a part thereof, or of a pipeline or conduits, primarily for the purposes of commerce or industry; or

(c)    Construction of a new residential complex or a part thereof; or

(d)   Completion and finishing services repair alteration, renovation or restoration of, or similar services, in relation to (b) and (c);or

(e)    Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;

In the instant case there is no transfer of any goods as contemplated in sec 65(105)(zzzza) The work in confined to only wall filling and painting as contemplated under “Commercial or industrial construction service” hence the assessee have got the registration as “Commercial or industrial construction service” and have filed the return after collecting service tax as prescribed under the relevant provisions.

 assume that the wall covering material and paint involved will run to several crores, and the labour charges is a mear Rs 2/- per Sq Ft. The assessee is not claiming any abettment as there is no transfer of property. but collecting 10.3 % tax and paying it to the dept.

I would like to know if the department is correct is what it is telling