2008 (12) TMI 44 - AT - Service Tax

Whether the laying down of pipe line for supply of water would get covered by definition of Commercial and Industrial services - - direction to deposit a part amount was made - issue prima facie stand decided by the Tribunal decision in the case of Indian Hume Pipe Ltd. that where it was held that construction of pipe line for supply of water cannot be held to be an activity of Commerce or Industry therefore in present case, direction to deposit a part amount would be unjust stay granted

Summary

Issues:
1. Whether laying down of pipeline for water supply by Gujrat Water Supply & Sewerage Board falls under "Commercial and Industrial services" for service tax liability.
2. Challenge of the stay order directing deposit of Rs. 40 lakhs by the appellants.
3. Applicability of Tribunal decisions on similar issues to modify the stay order.

Issue 1: Definition of "Commercial and Industrial services" for service tax liability
The Tribunal directed the appellants to deposit Rs. 40 lakhs pending the decision on whether laying down a water supply pipeline qualifies as "Commercial and Industrial services" under Section 65(25)(b) of the Finance Act, 2005. The Tribunal observed the issue as arguable and not conclusive at that stage, hence the partial deposit order.

Issue 2: Challenge of the stay order
The appellants challenged the Tribunal's stay order in the High Court through a writ petition. The High Court disposed of the petition by allowing the appellants to approach the Tribunal to point out any errors on record. Subsequently, the appellants filed a modification application seeking to dispense with the deposit condition based on Tribunal decisions and legal precedents.

Issue 3: Applicability of Tribunal decisions on similar issues
The appellants argued that recent Tribunal decisions, such as the Indian Hume Pipe Co. Ltd. case, have established that laying down a water pipeline does not constitute a commercial or industrial activity subject to service tax. They also cited the Hindustan Lever Ltd. case, emphasizing that subsequent court decisions should form the basis for modification of stay orders. Referring to the Tata Chemical Ltd. case and the Bombay High Court judgment in Sarla Performance Fibers Ltd. case, the appellants contended that modification of stay orders is within the Tribunal's inherent power.

In light of the precedents and the Tribunal's decision in the Indian Hume Pipe Co. Ltd. case, the Tribunal found that the issue regarding the water pipeline construction had already been addressed. Consequently, the Tribunal modified the earlier order and waived the requirement for the appellants to deposit the duty or penalty amount. The modification application was disposed of accordingly, emphasizing the applicability of recent Tribunal decisions and legal principles in altering stay orders.