2014 (3) TMI 734 - AT - Service Tax

Demand of service tax - Erection, Commissioning and Installation Service - Held that - The Chief Engineer, Water Resources Department of the Government of Maharashtra is not a commissioning and installation agency as they do not undertake these activities for anybody else except themselves. Further, the erection and commissioning or installation should be in relation to plant, machinery, equipment or structures. As clarified by CEBC vide circular No. 790/09/2004 # dated 17/09/2004 erection of structures referred to therein means civil works to installation/commissioning of a plant and machinery. Agricultural dam or sluice gates thereto cannot be considered as a plant and machinery or equipment or structures thereof. They are in the nature of infrastructural construction catering to the needs of agriculture. They are excluded from the purview of service tax levy both under the category of commercial and industrial construction service and Works Contract services specifically. - activity undertaken by the appellant falls outside the purview of service tax, and therefore, the appellant is not liable to pay any service tax - Decided in favour of assessee.

Summary

Issues:
- Liability to pay service tax on erection activities undertaken by the Chief Engineer (Mechanical), Water Resources Department of the Government of Maharashtra.

Analysis:
The appeal before the Appellate Tribunal CESTAT Mumbai was against an Order-in-Original passed by the Commissioner of Central Excise, Customs & Service Tax, Nashik, confirming a demand for service tax on the appellant for erection activities related to dams in Maharashtra. The appellant, a government department, argued that they were not a commissioning and installation agency as defined under the Finance Act, 1994, and the service provided was to the Government of Maharashtra itself, making it a non-taxable service. The Revenue, represented by the Addl. Commissioner, maintained the position taken by the lower authorities.

Upon examination, the Tribunal found that the appellant's activities of erecting sluice gates in agricultural dams did not fall under the definition of commissioning and installation service as per Section 65(39a) of the Finance Act, 1994. The Chief Engineer was not a commissioning and installation agency and the structures involved were not classified as plant, machinery, or equipment. The circular issued by CEBC clarified that erection of structures referred to civil works related to plant and machinery installation, which did not apply to agricultural dams or sluice gates. These structures were deemed infrastructural constructions for agricultural purposes, exempt from service tax under commercial and industrial construction service and Works Contract services.

Consequently, the Tribunal ruled in favor of the appellant, stating that the activities undertaken were outside the scope of service tax, and therefore, the appellant was not liable to pay any service tax. The appeal was allowed, overturning the demand imposed by the Commissioner.