2015 (9) TMI 479 - HC - Service Tax

Commissioning or installation of construction service - Activity of laying, jointing, testing and commissioning of PSC Pipes, construction of pumps, civil structures, supply, delivery and commissioning of submersible pump set and turbine pump sets, maintenance etc. - Held that - As rightly pointed out by the Tribunal, the Assessee was entrusted with the task of laying a long distance pipeline to enable the Tamil Nadu Water Supply and Drainage Board to supply water. It was an activity in public interest, to take care of the civic amenities liable to be provided by the State. Therefore, the Tribunal was right in holding in favour of the Assessee. - Decided against the revenue.

Summary

Issues:
1. Whether the service rendered by M/s. Indian Hume Pipe Co., Ltd., in laying, jointing, testing and commissioning of PSC Pipes, construction of pumps, civil structures, supply, delivery and commissioning of submersible pump set and turbine pump sets, maintenance etc., is chargeable to Service Tax.
2. Whether the activity carried out by the Assessee is a construction activity or an activity of erection, installation, and commissioning, and if the Assessee is liable to pay service tax.

Analysis:
1. The appeal under Section 35G of the Central Excise Act, 1944, was admitted based on the question of whether the services provided by the Assessee are subject to Service Tax. The Assessee was involved in manufacturing pre-stressed concrete pipes supplied to the Tamil Nadu Water Supply and Drainage Board for water supply projects.
2. The Commissioner of Central Excise contended that the Assessee provided taxable services under the categories of commissioning or installation during specific periods, demanding service tax under the Income Tax Act. The Customs, Excise, and Service Tax Appellate Tribunal allowed the Assessee's appeal, leading to the Revenue's appeal.
3. The Tribunal found that the Assessee's activity did not fall under erection, commissioning, or installation but was part of a construction activity exempt from service tax. The Tribunal clarified that laying pipelines in this context was considered a construction activity, not commercial in nature.
4. The amendment to the definition of "commissioning or installation of construction service" post-June 16, 2005, included the construction of pipelines or conduits. Therefore, after this date, there was no dispute regarding the nature of the Assessee's activity, precluding the department from questioning it.
5. Referring to a precedent, the Tribunal highlighted that laying pipelines for water/sewerage transmission, including associated works, should be classified as construction services, not commercial or industrial services. The Tribunal upheld that the Assessee's task of laying a pipeline for public interest, aiding civic amenities, was not subject to service tax.
6. The Tribunal's decision in favor of the Assessee was upheld, dismissing the Civil Miscellaneous Appeal. The judgment clarified the nature of the Assessee's activity, emphasizing its public interest aspect, leading to the conclusion that the Assessee was not liable to pay service tax for the services provided.