2023 (11) TMI 563 - AT - Service Tax

Refund claim - laying of pipeline for the project of Gujarat Water Supply Sewerage Board (GWSSB) - taxable under Industrial or Commercial Construction Service or not - HELD THAT - As per the fact the appellant have provided the service of laying of pipeline for the project of Gujarat Water Supply Sewerage Board (GWSSB). The laying of pipeline for the government cannot be considered as Industrial or Commercial Construction Service. This issue has been considered in the various judgments - In the case of THE COMMISSIONER OF CGST AND CENTRAL EXCISE, SURAT VERSUS M/S BMS PROJECTS PRIVATE LTD. 2017 (9) TMI 1386 - GUJARAT HIGH COURT the Hon,ble Gujarat High Court has held that 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. It was therefore concluded that the pipelines were not laid to facilitate any commercial or industrial activity. Thus, it is settled that service of laying of pipeline for Gujarat Water Supply Sewerage Board (GWSSB) is not falling under the service of industrial or commercial construction service. In the present case also since the appellant is not liable to pay the service tax they are legally entitled for the refund of service tax already paid - there are no infirmity in the order of the Commissioner (Appeal) - appeal of Revenue dismissed.

Summary

Issues Involved:
1. Taxability of laying pipeline services under Industrial or Commercial Construction Service.
2. Entitlement of refund of Service Tax paid by the respondent.

Summary:

Issue 1: Taxability of Laying Pipeline Services
The primary issue was whether the laying of pipelines for the Gujarat Water Supply & Sewerage Board (GWSSB) falls under the category of Industrial or Commercial Construction Service and is therefore taxable. The Tribunal referenced multiple judgments, including those from the Gujarat High Court and various benches of the Tribunal, which consistently held that the service of laying pipelines for GWSSB does not qualify as Industrial or Commercial Construction Service. The rationale was that GWSSB's activities, primarily aimed at providing drinking water, do not constitute commercial or industrial activities. The Tribunal cited cases such as *BMS Projects Pvt. Ltd.*, *Dinesh Chandra Agarwal Infracon P. Ltd.*, and *Larsen & Toubro Ltd.*, which supported the view that GWSSB's operations are not commercial in nature, given their primary objective of public welfare and lack of profit motive.

Issue 2: Entitlement of Refund of Service Tax
Given the determination that the service of laying pipelines for GWSSB is not taxable under the Industrial or Commercial Construction Service, the Tribunal upheld the respondent's entitlement to a refund of the Service Tax already paid. The Tribunal noted that since the service was not taxable, the respondent was legally entitled to the refund. The Tribunal dismissed the Revenue's appeal, affirming the order of the Commissioner (Appeal) that granted the refund to the respondent.

Conclusion:
The Tribunal concluded that the service of laying pipelines for GWSSB does not fall under the taxable category of Industrial or Commercial Construction Service, and therefore, the respondent is entitled to a refund of the Service Tax paid. The appeal by the Revenue was dismissed, and the order of the Commissioner (Appeal) was upheld.