2009 (3) TMI 292 - AT - Service Tax

Appellant had undertaken laying of long distance pipelines for drinking water project and contracted with M/s. Gujarat Water Supply and Sewerage Board (GWSSB). The Revenue proceeded against the appellant on the ground that they have undertaken the services of commercial or industrial construction for which no service tax was being paid by them. - we find that sale of water is not a primary function of the GWSSB - the letter from Member Secretary of GWSSB indicates that GWSSB primarily executes water supply and sewerage works for the benefit of both the rural and urban communities, and water supplied at highly subsidized rates laying of pipelines for GWSSB cannot be considered as commercial or industrial construction - Prima facie, we feel that the appellants have made out a Strong case on merits. stay granted

Summary

The appellate tribunal CESTAT, Bangalore, consisting of S/Shri T.K. Jayaraman and M.V. Ravindran, heard an appeal where the appellant was required to discharge a service tax liability of Rs. 7,15,36,082 along with interest and a penalty of Rs. 8,00,00,000 under Section 78, in addition to a penalty at the rate of two percent per month on the service tax amount under Section 76 of the Finance Act, 1994. The appellant had laid long distance pipelines for a drinking water project under contract with M/s. Gujarat Water Supply and Sewerage Board (GWSSB). The Revenue claimed that the appellant had undertaken services of 'commercial or industrial construction' without paying service tax. The learned Jt. CDR argued that the appellants were engaged in commercial activities as they laid pipelines to carry water purchased by GWSSB, which was sold at subsidized rates to local bodies and higher rates to industries. However, the learned Consultant pointed out the Gujarat Act No. 18 of 1979, which establishes the GWSSB for the development and regulation of water supply and sewerage services in Gujarat. The tribunal reviewed Section 14 of the Act, which outlines the duties and functions of the Board, and found that the primary function of the GWSSB was not the sale of water but to execute water supply and sewerage works for rural and urban communities. A letter from the Member Secretary of GWSSB further clarified that the Board was not a commercial organization selling drinking water, but a service sector establishment providing a basic requirement to the people. Consequently, the tribunal waived the entire dues demanded in the impugned order and allowed the stay application. The tribunal also allowed a miscellaneous application for early hearing of the appeal, with the matter scheduled for hearing on 5th June 2009.