2011 (8) TMI 698 - HC - Service Tax

Appellant engaged in manufacture of FRP pipes and also laying GRP pipes - pipe laying activity involves trenching, bedding and laying inside the trench and aligning - Revenue demanded service tax under category of Erection, Commissioning and Installation Service - Held That - plumbing, drain laying or other installations for transport of fluids etc., was included in the definition of erection commissioning or installation , for the first time, on 16th June 2005. Period for which the demand has been raised does not cover the services of the petitioner for imposition of service tax.

Summary

Issues:
Challenge to order confirming demand of service tax, Maintainability of writ petition due to alternative statutory remedy, Interpretation of service tax categories, Definition of 'commissioning or installation', Inclusion of plumbing activities in service tax categories, Taxation on execution of works contract

Analysis:
The petitioner challenged the order confirming the demand of service tax by invoking the writ jurisdiction of the court under Article 226 of the Constitution. It was noted that the petitioner had an alternative statutory remedy of appeal against the impugned order, which the respondent argued made the writ petition not maintainable. The court observed that the writ petition was admitted without notice to the respondent, and considering the legal nature of the question raised, decided to hear the case on merit rather than relegate the petitioner to the alternative statutory remedy.

The petitioner, engaged in the manufacture of FRP Pipes and laying of GRP Pipes, received a show cause notice demanding service tax under categories of 'Erection, Commissioning and Installation' and 'Scientific or Technical Consultancy services'. The petitioner contended that their activities did not fall under the definition of 'commissioning or installation' as per Section 65(28) of the Finance Act, 1994. The respondent argued that laying of pipes was integral to plant machinery and thus attracted service tax. However, the court noted amendments to the definition of 'erection, commissioning or installation' which included plumbing activities only from June 2005, postdating the demand raised against the petitioner.

The respondent's contention that the petitioner's activities fell under the category of execution of works contract was refuted by the court, citing the definition of works contract under Section 65(105)(zzzza) which excluded the petitioner's activities from the scope of service tax. The court found that the demand raised against the petitioner was not sustainable in law due to misinterpretation of the provisions of the Finance Act, 1994. Consequently, the writ petition was allowed, and the impugned order confirming the demand of service tax was quashed, with no costs imposed.