2014 (11) TMI 208 - AT - Service Tax

Erection, installation and commissioning services - laying of submarine pipelines - Held that - Board s own Circular dated 24/05/2010 makes it absolutely clear that unless the activity undertaken results in the emergence of an erected, installed and commissioned plant, machinery, equipment or structure , the activity will not come under the category of erection, commissioning and installation service. Pipelines cannot be construed as a plant, machinery or equipment or structure. Further, the said circular also clarifies that laying of cables under or alongside road or railway tracks, etc. is not a taxable service under Section 65(105) of the Finance Act, 1994. If laying of cables cannot be a taxable service, adopting the same logic, the laying of pipeline also cannot be construed as a taxable service. - laying of submarine pipelines would not come within the purview of erection, commissioning and installation service. Further, in the case of PSL Ltd. 2013 (12) TMI 1063 - CESTAT AHMEDABAD this Tribunal noted that laying of pipelines for water supply projects would come under the construction service and since only commercial construction is liable to service tax and the pipelines for water supply are not commercial activities, the same would not be taxable. Thus, it may be seen that this Tribunal has consistently been holding the view that the activity of laying of pipelines would not come within the purview of erection, commissioning and installation service and it would be more appropriate classifiable under Commercial or industrial construction service . laying of pipelines would not come within the category of erection, commissioning and installation service and therefore, the impugned order is not sustainable in law - Following decision of Hyundai Heavy Industries Co. Ltd. 2013 (11) TMI 917 - CESTAT MUMBAI - Decided against Revenue.

Issues:
1. Appeal against service tax demand on erection, installation, and commissioning services.
2. Dispute over categorization of activity under service tax law.
3. Inclusion of value of goods supplied in service tax calculation.
4. Applicability of abatement under Notification No. 1/06 dated 01/03/2006.
5. Interpretation of "erection, commissioning, and installation service" under Section 65(105) of the Finance Act, 1994.

1. Appeal Against Service Tax Demand:
Both the Revenue and the appellant filed appeals against the order-in-original confirming a service tax demand of &8377; 7,62,26,657 on the appellant for erection, installation, and commissioning services. The Revenue contested the re-computation of the service tax demand by the adjudicating authority, considering abatement under Notification No. 1/06 dated 01/03/2006. The appeals were consolidated for consideration and disposal.

2. Dispute Over Categorization of Activity:
The appellant, a manufacturer of pipes, was required to lay, connect, and joint pipelines for water supply projects, triggering a service tax demand categorized as "erection, commissioning, and installation service." The appellant argued that similar activities were not taxable in previous cases and relied on precedents to support their position. They contended that the activity should be classified as a works contract, not under the category of "erection, commissioning, and installation service."

3. Inclusion of Value of Goods in Service Tax Calculation:
The appellant argued that the value of goods supplied should be excluded from the service tax calculation, as they had already paid VAT/Sales Tax on the goods. The appellant claimed that the service tax demand was incorrectly computed by including the entire contract value without deducting the value of goods supplied.

4. Applicability of Abatement:
The appellant contested the computation of service tax demand, claiming that abatement under Notification No. 1/06 dated 01/03/2006 was not appropriately applied. They argued that the value of goods should have been excluded, and the demand was flawed in law due to the incorrect calculation methodology.

5. Interpretation of "Erection, Commissioning, and Installation Service":
The Tribunal analyzed previous judgments and circulars to determine whether laying pipelines for water supply projects falls under the category of "erection, commissioning, and installation service." The Tribunal referenced cases where similar activities were classified differently, emphasizing that laying pipelines did not constitute taxable services under the relevant provisions. The Tribunal concluded that the impugned order was unsustainable in law and allowed the appeal filed by the appellant, rejecting the Revenue's appeal.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive overview of the arguments presented and the Tribunal's decision on each matter.

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