2014 (8) TMI 708 - AT - Service Tax

Waiver of pre deposit - works contract - Turnkey Projects including engineering, procurement and construction or commissioning (EPC) projects. - interest under Section 75 - penalties under Sections 77 and 78 - Held that - works were for pipe-line construction since the pipe-line construction was for provision of drinking water supply and irrigation, the works were outside the ambit of the taxable service enumerated in 65 (105)(zzzza)(b) - prima facie case in favour of the petitioner and grant waiver of pre-deposit in full and stay of further proceedings, pending disposal of the appeal - Stay granted.

Summary

Issues: Classification of works contract service under Section 65 (105) (zzzza) of the Finance Act, 1994.

Analysis:
1. The judgment pertains to an appeal challenging an adjudication order confirming a service tax demand on the grounds of the classification of the works contract service provided by the petitioner. The dispute revolves around whether the works executed fall under sub-clause (e) of Section 65 (105) (zzzza) as turnkey projects including engineering, procurement, and construction projects, or under sub-clause (b) for construction of a pipeline primarily for commerce or industry.

2. The Revenue and adjudicating authority argue that the works executed, including excavation, reinforcement of cement, and construction of pump-house for water flow, are indicative of turnkey projects falling under sub-clause (e). On the other hand, the petitioner contends that the works should be classified under sub-clause (b) as they were primarily for public utility, providing drinking water to the Govt. of Andhra Pradesh, and hence, outside the taxable service scope under sub-clause (b).

3. The appellate tribunal notes a similar nature of works considered in a previous case where it was prima facie established that construction of pipelines for drinking water supply and irrigation falls outside the taxable service ambit under sub-clause (b) of Section 65 (105) (zzzza). Based on this precedent, the tribunal finds a strong prima facie case in favor of the petitioner and grants a waiver of pre-deposit and a stay on further proceedings pending appeal disposal.

4. Consequently, the tribunal rules in favor of the petitioner, granting the waiver of pre-deposit and a stay on further proceedings, aligning with the earlier decision that works related to the construction of pipelines for public utility purposes like drinking water supply are not taxable under the specific sub-clause (b) of the Finance Act, 1994. The judgment emphasizes the importance of correctly classifying works contract services to determine the applicability of service tax under the relevant provisions of the Act.