2008 (12) TMI 140 - AT - Service Tax

Modification application of order in which out of demand of 1.3 crore, pre-deposit of 40 lac was ordered - modification application filed when HC granted permission to approach Tribunal for rectification of error - appellants mainly contended that the issue now stand decided by two decisions of the Tribunal. In the case of Indian Hume Pipe Co. Ltd., it has been held that construction of pipeline for supply of water cannot be held to be an activity of Commercial and Industrial services - issue prima facie stand decided by the Tribunal - as such, pre-deposit is waived

Summary

Issues:
1. Whether the laying down of a pipeline for water supply by a state board falls under "Commercial and Industrial services" for service tax purposes.
2. Challenge of a stay order directing the deposit of a specific amount by the appellants.
3. Consideration of previous tribunal decisions and court judgments in modifying the order.

Analysis:
1. The tribunal initially directed the appellants to deposit Rs. 40 lakhs out of a total confirmed duty of Rs. 1,30,10,476, pending a decision on whether laying down a water supply pipeline falls under "Commercial and Industrial services" as per Section 65(25)(b) of the Finance Act, 2005. The tribunal acknowledged the arguable nature of the issue and the lack of financial hardship plea from the appellants, leading to the partial deposit directive.

2. The appellants challenged this order in the Gujarat High Court through a writ petition. The 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 based on the contention that two tribunal decisions, particularly the Indian Hume Pipe Co. Ltd. case, had already determined that laying a water pipeline is not a taxable service.

3. The appellants argued that the issue had been settled by the Indian Hume Pipe Co. Ltd. case and cited the Hindustan Lever Ltd. case to support the modification application based on subsequent court decisions. They also referenced the Tata Chemical Ltd. case and a Bombay High Court judgment to emphasize the tribunal's inherent power to modify stay orders. Considering the precedents and the settled nature of the issue, the tribunal found merit in the appellants' arguments and dispensed with the pre-deposit condition, modifying the original order accordingly.

In conclusion, the tribunal, after considering the relevant legal precedents and arguments presented by the appellants, modified the initial order to dispense with the requirement of depositing a partial amount, as the issue regarding the classification of laying down a water pipeline had been effectively settled by previous tribunal decisions and court judgments.