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2017 (9) TMI 1386 - HC - Service TaxCommercial or Industrial Construction Service - service provided by the respondent in laying down long distance pipelines for transfer of drinking water in the State of Gujarat pursuant to a contract awarded by Gujarat Water Supply and Sewerage Board - levy of tax - Held that - GWSSB discharged an important duty and responsibility of providing drinking water to the people, industries etc. The Board was constituted mainly to supply drinking water and maintenance of sewerage system. The usage charges recovered by the Board from Gram Panchayats, Nagar Palikas and Nagar Panchayats are at highly subsidized rates and therefore, cannot be considered as an industry in the sense that the said word is used in the definition of taxable entry. The Board was sustaining on the grants released by the State Government. The pipelines constructed were for providing drinking water facilities to the people of the State through different Gram and Taluka Panchayats. Only a small portion of the water was provided to the industries at commercial rates - levy of tax set aside. Appeal dismissed - decided against Revenue.
Issues:
1. Whether activities of M/s GWSSB fall within the definition of 'commerce' or 'commercial activity' under 'Commercial or Industrial Construction Service'? 2. Whether activities of M/s GWSSB qualify as an 'industry' under Industrial Disputes Act and under 'Commercial or Industrial Construction Service'? 3. Whether the usage of pipelines for transporting water falls within the scope of 'commerce or industry'? 4. Whether CESTAT was justified in its decision regarding commercial or industrial activities of M/s GWSSB? 5. Whether activities for the welfare of citizens are excluded from service tax liability? 6. Whether CESTAT was justified in setting aside the Order in Original and allowing the appeal by M/s BMS Projects Pvt. Ltd.? Detailed Analysis: Issue 1: The Department challenged the CESTAT judgment regarding the classification of activities of M/s GWSSB under the 'Commercial or Industrial Construction Service.' The Tribunal considered the nature of GWSSB's activities, noting that the Board primarily supplied potable water to various parts of the State at non-commercial rates, with only a small portion supplied to industries at higher costs. The Tribunal concluded that the Board's activities did not align with commercial or industrial construction services under the Act. Issue 2: The dispute also involved whether GWSSB's status as an 'industry' under the Industrial Disputes Act and the 'Commercial or Industrial Construction Service' was appropriate. The Tribunal analyzed GWSSB's constitution, functions, and activities, emphasizing its role in providing essential drinking water services to the public and industries. It noted that the Board operated on grants from the State Government and did not have a profit motive, leading to the conclusion that the pipelines laid were not for commercial or industrial purposes. Issue 3: Regarding the usage of pipelines for transporting water, the Tribunal examined whether such activities fell within the scope of 'commerce or industry.' It highlighted GWSSB's core function of supplying drinking water to the public and the minimal commercial aspect of its operations, ultimately supporting the view that the pipelines were not laid for commercial or industrial activities. Issue 4: The Tribunal's decision to set aside the Commissioner's Order in Original and allow the appeal by M/s BMS Projects Pvt. Ltd. was also scrutinized. The Tribunal based its decision on previous rulings and the specific nature of GWSSB's activities, emphasizing the non-commercial and welfare-oriented aspects of the Board's operations. Issue 5: The question of whether activities related to the welfare of citizens are excluded from service tax liability was raised. The Tribunal's analysis focused on the primary objective of GWSSB to provide essential drinking water services to the public, leading to the conclusion that the activities were not primarily commercial or industrial in nature. Issue 6: In conclusion, the High Court dismissed the Tax Appeal, aligning with the Tribunal's view on the nature of GWSSB's activities and the absence of commercial or industrial motives in laying down pipelines for water supply. The judgment emphasized the Board's welfare-oriented functions and the subsidized rates at which water was provided, supporting the decision that the activities did not attract service tax liability.
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