2019 (4) TMI 1202 - AT - Service Tax

Commercial and Industrial Construction Services - services of laying of pipeline for M/s. Jaipur Development Authority and M/s. Public Health Engineering for transportation of water by them - HELD THAT - There is no dispute about the factual position that the alleged services were provided by the appellant to M/s. Jaipur Development Authority and M/s. Public Health Engineering. All the activities which stand mentioned by the adjudicating authority in the above referred paragraphs were activities connected to laying of pipelines. The said pipelines are being used by the service recipient for transportation of water, as per the constitutional duty of the said service recipients to provide clean water to the public. An identical situation was considered by the Tribunal in the case of NAGARJUNA CONSTRUCTION CO. LTD. VERSUS COMMR. OF C. EX., HYDERABAD 2010 (5) TMI 232 - CESTAT, BANGALORE where it was held that laying of pipelines for transportation of water, which is meant for further distribution to the public at large would not be covered by the expression Commercial , so as to attract the service tax liability. Extended period of limitation - HELD THAT - The fact that the matter was under litigation before the Tribunal and was ultimately concluded in favor of the assessees - also the issue was not free from doubt and there could be a bonafide belief on the part of the assessee to entertain a view that since the said activity is being done for the statutory authorities, the same would not be taxable. As such, the demand is barred by limitation. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of service tax liability under "Commercial and Industrial Construction Services" for laying of pipelines, Applicability of Tribunal decisions on non-taxability of pipeline laying for commercial activities, Classification of activities under different service categories, Tax liability under works contract service, Justifiability of demand under construction services, Applicability of longer period of limitation, Evidence of deliberate suppression for invoking longer period, Bar on demand due to limitation.

Analysis:
The judgment by the Appellate Tribunal CESTAT New Delhi addressed various critical issues. Firstly, the Tribunal confirmed a service tax liability of ?95.33 Lakhs against the appellant for providing services of laying pipelines for specific customers under the category of "Commercial and Industrial Construction Services." The appellant argued that the pipeline laying was not for commercial purposes, citing Tribunal decisions and a High Court ruling supporting non-taxability of similar activities for public authorities.

The Commissioner's order observed that activities like laying pipelines, construction of water tanks, and installation of hand-pumps fell under taxable categories like "Erection, Commissioning and Installation Services" and "works contract service." The appellant contended that these activities were related to laying pipelines for transportation and should not be taxed under the mentioned categories. The appellant also raised concerns about incomplete documentation and the Commissioner's classification of services.

The Tribunal noted that all activities mentioned were connected to laying pipelines for water transportation by the service recipients for public welfare. Citing previous decisions, the Tribunal held that such services for public benefit did not fall under the "Commercial" category for service tax liability. The Tribunal criticized the Commissioner's inconsistent classification and lack of justifiable adjudication principles.

Furthermore, the appellant's argument relied on a Supreme Court decision regarding non-taxability of works contract services before a specific date. The Tribunal found no demand for works contract service post that date in the show cause notice. Additionally, the Tribunal examined the invocation of a longer period of limitation due to alleged deliberate suppression by the appellant. It concluded that mere non-filing of returns could not solely justify invoking the longer period, especially when the issue was under litigation with doubts about taxability.

Ultimately, the Tribunal set aside the impugned order, allowing the appeal with consequential relief as per law. The judgment highlighted the importance of proper classification, adherence to legal principles, and evidence-based decisions in taxation matters, emphasizing the need for clarity and consistency in tax assessments.