2018 (12) TMI 251 - AT - Service Tax

Classification of service - Works contract service or Erection Commissioning and Installation service - non-payment of service tax - amount collected from the Uttar Pradesh Jal Nigam qua the work contract for laying sewer pipe/sewerage system - Held that - This is a work of civil construction in nature because the activities not merely includes the transmission of water in the laid pipelines but includes the construction also of the space where these pipelines were to be laid down. From no stretch of imagination such an activity can be called as Erection Commissioning and Installation Service. Since the said activity, in the present case, has not been provided to a commercial undertaking but to a state owned Authority i.e., Uttar Pradesh Jal Nigam the question of any taxability to it has legislatively being excluded - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant's service falls under 'Erection, Commissioning and Installation Service' for service tax liability?
2. Whether the appellant's service provided to a Government Authority is taxable under the Works Contract Service definition?
3. Whether the demand raised against the appellant is justified based on the legislative intent?

Analysis:
1. The appellant, registered with Service Tax, was providing Work Contract Service to a Government Authority but had not paid service tax. The Department alleged the service to fall under 'Erection, Commissioning and Installation Service' and demanded payment. The appellant argued that the service falls under a different sub-clause of the Works Contract Definition, citing relevant case law. The Tribunal analyzed the nature of the appellant's activity and concluded it did not qualify as 'Erection, Commissioning and Installation Service' but as a non-commercial construction activity, thus not taxable under the Works Contract Service definition.

2. The Department justified the demand, citing legislative intent to exclude only non-commercial/non-industrial constructions from Works Contract Service. The appellant contended that since the service was provided to a Government Authority, it should not be taxable. The Tribunal examined the definitions under the Finance Act and case law references. It concluded that the appellant's activity of laying pipelines/sewerage system for a state-owned Authority did not attract service tax as it fell under non-commercial, non-industrial purposes, in line with the legislative exclusion.

3. The Tribunal considered the Department's argument that the appellant's activity constituted 'Erection, Commissioning and Installation Service' under the Works Contract Definition. By analyzing case law and legislative provisions, the Tribunal determined that the nature of the appellant's work did not align with the definition provided, as it involved civil construction for public interest. Therefore, the demand raised against the appellant was deemed unjustified, and the appeal was allowed, setting aside the impugned order.