2013 (12) TMI 1063 - AT - Service Tax

Demand of service tax - laying the coated pipes - Erection, Commissioning and Installation - Held that - The leviability of service tax would depend primarily upon whether the building or civil structure is used, or to be used for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax. The definition of service specifically excludes construction of roads, airports, railway transport terminals, bridge, tunnel, long distance pipelines and dams. In this regard it is clarified that any pipeline other than those running within an industrial and commercial establishment such as a factory, refinery and similar industrial establishments are long distance pipelines. Thus, construction of pipeline running within such an industrial and commercial establishment is within the scope of the levy - activity of the respondent is not chargeable to service tax - Decided against Revenue.

Summary

Issues:
1. Interpretation of the definition of "Erection, Commissioning and Installation Services" under the Finance Act, 1994.
2. Applicability of circulars issued by the Central Board of Excise and Customs (C.B.E. & C.) in determining tax liability.
3. Whether the activity of laying coated pipes for a government project is subject to service tax.
4. Consideration of case laws and previous judgments by the CESTAT.

Analysis:

1. The main issue in this case revolved around the interpretation of the definition of "Erection, Commissioning and Installation Services" under the Finance Act, 1994. The Commissioner of Customs & Central Excise had initially imposed a demand for Service Tax on a company for laying coated pipes on behalf of a customer. The Commissioner (Appeals) set aside this order, leading to an appeal by the Revenue.

2. The respondents argued that they were not covered under the taxable head of Erection, Commissioning, and Installation Services as defined under the Finance Act, 1994. They relied on circulars issued by the C.B.E. & C. and cited relevant case laws to support their contention. However, the Revenue maintained that the activity fell within the definition of the taxable service and disputed the reliance placed on the circulars.

3. The Revenue contended that the activity of laying coated pipes for a government project was covered under the category of "Erection, Commissioning and Installation" and therefore subject to service tax. They argued that the income generated from laying pipes and preparing them for use constituted a taxable service under the Act.

4. The Tribunal considered various case laws and judgments, including those related to similar activities and government projects. They highlighted a case involving Larsen & Toubro Ltd. where the purpose of construction was deemed crucial in determining tax liability. The Tribunal also referenced a Board's Circular to clarify the taxability of certain constructions for commercial purposes.

5. After careful consideration of the facts, case laws, and relevant circulars, the Tribunal concluded that the activity of laying coated pipes for a government project was not chargeable to service tax. They upheld the order of the Commissioner (Appeals) and rejected the appeal filed by the Revenue. The Tribunal also disposed of the stay petition accordingly.

This detailed analysis reflects the complex legal arguments, interpretations of statutes, and application of precedents that were central to the judgment delivered by the Appellate Tribunal CESTAT AHMEDABAD.