Composite repair and maintenance involving goods constitutes works contract, not taxable management, maintenance or repair service.

M/s DLF Home Services Pvt. Ltd. provided maintenance, repair, electrical, civil, housekeeping and related services to residents of multi-storied residential complexes.

Before 1 July 2012, it paid service tax under “Management, Maintenance or Repair Service”; from 1 April 2013, it classified the activities as “Works Contract Service” and claimed the applicable abatement.

The Department disputed this classification and issued show-cause notices for 2013–14, 2014–15 and 2015–16, alleging that the assessee had not proved transfer of property in goods or produced sufficient invoices evidencing VAT payment.

The Commissioners confirmed service-tax demands, interest and penalties for the classification-related liability. In the 2015–16 order, the Commissioner dropped a separate demand relating to electricity charges collected from flat owners. The assessee challenged the confirmed demands, while the Revenue challenged the dropping of the electricity-related demand.

Whether the assessee’s composite repair, maintenance, electrical and civil activities, involving the use and transfer of goods on which VAT was paid, were classifiable as “Works Contract Service” rather than “Management, Maintenance or Repair Service”?

Whether the assessee was entitled to the applicable valuation abatement in respect of the goods/materials used or transferred during execution of the contracts?

Whether electricity supplied by the assessee to individual flat owners, against payment, was exigible to service tax under the category of transmission or distribution of electricity or “Management, Maintenance or Repair Service”?

The Tribunal applied Section 65B(54) of the Finance Act, 1994, defining “works contract” as a contract involving transfer of property in goods leviable to tax as a sale of goods and relating, inter alia, to construction, installation, improvement, repair, maintenance, renovation or alteration of a movable or immovable structure.

It relied on Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu, 2014 (304) E.L.T. 161 (S.C.), and Larsen & Toubro Ltd. v. State of Karnataka, 2014 (303) E.L.T. 3 (S.C.), for the principle that a composite contract involving transfer of goods is a works contract and that the dominant-nature or overwhelming-component test is inapplicable.

It further followed Wipro GE Medical Systems Pvt. Ltd. v. CST, 2009 (14) S.T.R. 43 (Tri. Bang.), affirmed by the Supreme Court in 2012 (28) S.T.R. J44, holding that spare parts and materials sold or consumed in maintenance contracts, upon which sales tax/VAT is paid, cannot simultaneously be subjected to service tax and must be excluded from the taxable service value.

For electricity, the Tribunal applied the Supreme Court’s decisions in Commissioner of Sales Tax v. Madhya Pradesh Electricity Board, 1969 (1) SCC 200, and State of A.P. v. National Thermal Power Corpn. Ltd., 2002 (5) SCC 203, which recognize electricity as “goods”; consequently, a pure supply of electricity for consideration is a sale of goods and not a taxable service.

The Tribunal also relied on the decisions in CCE & ST (LTU), Delhi v. Xerox India Ltd., 2019 (20) G.S.T.L. 96 (Tri. Chan.), DLF Infocity Developers (Kolkata) Ltd., Final Order No. 77354/2025, and Unmesh Properties Pvt. Ltd., Final Order No. 75606/2026.

The Tribunal found that the assessee had produced purchase records, sample composite invoices, invoices raised on residents, and statutory VAT returns showing that goods and materials were used in the repair and maintenance activities and that VAT and service tax were charged in the relevant transactions.

Applying the statutory definition of works contract and the authorities in Kone Elevator, Larsen & Toubro and Wipro GE, it held that the presence of transfer or sale of goods in the composite contracts was sufficient to bring the activities within “Works Contract Service”; the Department could not deny the abatement merely because the assessee had not produced every individual invoice specifically showing VAT.

Since the principal service-tax demand failed, the consequential interest and penalties also could not survive.

On electricity, the Tribunal held that electricity is goods and that its supply against payment constitutes a sale of goods, outside the scope of service tax.

It distinguished Srijan Realty (P) Ltd. v. Commissioner of Service Tax, 2019 (24) G.S.T.L. 169 (Cal.), noting that the Revenue had not shown that this assessee collected service tax on electricity charges, and further relied on consistent Tribunal decisions and the Department’s acceptance of identical positions concerning other DLF group entities.

It dismissed the Revenue’s appeal, ST/61721/2018, and upheld the dropping of the demand on electricity income, holding that the supply of electricity was a sale of goods and not a taxable service.

Consequential relief was granted to the assessee in accordance with law.