2015 (6) TMI 307 - AT - Service Tax

Waiver of pre deposit - Capital goods - erection of pipelines - whether appellant is eligible for the Cenvat credit of the service tax paid by the contractors who were laying pipelines for transportation of gas through pipeline - Difference of opinion - Majority order - Held that - appellant is procuring pipes which are imported by them under EPCG system. The said pipes are then handed over to the pipeline laying contractors, who lay the pipes undertake the entire job of pipeline and bill the appellant as for providing the services of commercial or industrial construction services and there is also no dispute that contractors classification of service is not accepted. It is noted that there is no dispute that as to the fact that the pipeline system which is put in place by the contractors is used for rendering of out put services falling under the head of transport of goods (other than water) through the pipeline or conduit services . - services rendered by the pipeline laying contractors would be eligible for Cenvat credit on the ratio of the law as has been laid down by the Hon ble High Court in the case of CCE Vs. Sai Samhita Storages (P) Ltd. - 2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT GSPL had floated a tender for laying of pipeline system of transportation of oil and gas under EPC contract. The pipes which were procured by the award winning contractor and the Cenvat credit of the Central Excise duty paid of such pipeline was availed by GSPL which was disputed and the Tribunal had held the dispute in favour of the Revenue. In the same case, the services were provided by various service providers to the EPC contract winner, was also denied and upheld by the Tribunal on the ground that service providers, provided services to EPC contract winner and not to the said GSPL. The facts of the GSPL case and the facts of the case in hand are totally different as has been already recorded by me. In my view if the services which are rendered by the pipeline laying contractors directly to appellant herein for laying the pipeline and other input services which are required for rendering of the service by the appellant, prima facie the Cenvat credit cannot be denied to the appellant; the same view is applicable in respect of the capital goods which are procured by the appellant directly for construction/laying of the pipeline. - appellants have made out a prima facie case for complete waiver of pre-deposit of the amounts involved - Stay granted.

Summary

Issues Involved:

1. Eligibility for complete waiver of service tax on inputs, input services, and capital goods used in laying down the pipeline for gas transportation.
2. Stay of recovery of service tax, interest, and penalty during the pendency of the appeal.

Issue-wise Detailed Analysis:

1. Eligibility for Complete Waiver of Service Tax:

The primary issue was whether the appellant made out a case for a complete waiver of service tax on inputs, input services, and capital goods used in laying down the pipeline for gas transportation. The appellant argued that they availed Cenvat Credit on services rendered by pipeline laying contractors, other input services for commissioning the pipelines, and duty paid on capital goods like valves, compressors, and pipes. The appellant contended that these services and goods were essential for rendering their output service of transporting gas through pipelines.

The appellant relied on the Tribunal's judgment in the case of GSPL, arguing that the services rendered by pipeline laying contractors directly to the appellant should be eligible for Cenvat Credit. The appellant further argued that the denial of Cenvat Credit was based on an incorrect interpretation that the pipeline, being immovable property, disqualified the credit.

The opposing counsel for the Revenue argued that the pipes used for laying the pipeline became immovable property and thus were not eligible for Cenvat Credit. They also contended that the services rendered by the pipeline laying contractors were related to immovable goods and hence not eligible for providing output services.

Upon review, it was found that the services rendered by the pipeline laying contractors were essential for the appellant's output service of transporting gas through pipelines. The Tribunal noted that the services and goods used for laying the pipeline were integral to the appellant's service provision and thus eligible for Cenvat Credit. The Tribunal referenced the High Court's decision in CCE Vs. Sai Samhita Storages (P) Ltd., supporting the eligibility of such credits.

2. Stay of Recovery of Service Tax, Interest, and Penalty:

The second issue was whether the recovery of service tax, interest, and penalty should be stayed during the pendency of the appeal. The Member (Judicial) opined that the appellant had made out a prima facie case for a complete waiver of pre-deposit of the amounts involved. The Member (Technical), however, held that the appellant should deposit Rs. 25 Crores within two months, with the recovery of the balance amount stayed until the appeal's disposal.

The Tribunal considered the submissions and records, noting that the appellant had a prima facie case for a complete waiver. The Tribunal found that the services and goods used for laying the pipeline were crucial for the appellant's output service and thus eligible for Cenvat Credit. Consequently, the Tribunal granted a waiver of the requirement of pre-deposit of service tax, interest, and penalty, and stayed the recovery thereof during the pendency of the appeal.

Conclusion:

The Tribunal resolved the difference of opinion by concluding that the appellant made out a case for a complete waiver of service tax on inputs, input services, and capital goods used in laying down the pipeline for gas transportation. The Tribunal granted a waiver of the requirement of pre-deposit of service tax, interest, and penalty, and stayed the recovery thereof during the pendency of the appeal. The appeal was directed to be listed for final hearing due to the significant amount involved.