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TMI Blog2010 (5) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... ce' is contrary to the ratio of the Tribunal's decision in Diebold Systems (P) Ltd. v. CCE case - - ST/731/2008 - 819/2010 - Dated:- 17-5-2010 - S/Shri M.V. Ravindran, Member (J) and P. Karthikeyan, Member (T) Shri G. Natarajan, Advocate, for the Appellant. Ms. Joy Kumari Chander, JCDR, for the Respondent. [Order per : P. Karthikeyan, Member (T)]. - M/s. Nagarjuna Constructions Company Ltd., Hyderabad (NCCL) is an assessee registered with the department as provider of taxable service falling under the category 'Commercial or Industrial Construction Services', 'Consulting Engineers Services', 'Erection, Commissioning or Installation Services' etc. During the period 16-6-2005 to 31-3-2007, NCCL were found to have incurred liability under 'Commercial or Industrial Construction Services' as it had executed laying of long distance pipelines in the state of Gujarat under a contract awarded to them by M/s. Gujarat Water Supply and Sewerage Board (GWSSB or the Board). After due process of law, the Commissioner found that NCCL had engaged in providing 'Commercial or Industrial Construction Services' during the material period. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration or distribution of electricity or any other form of power. The GWSSB was not engaged in trade or commerce. It was created under a statute and was solely engaged in supplying potable water to the villages, Nagar Palikas etc. They sold water to others at a higher price; such activity of sale was incidental or ancillary to their main objective. GWSSB cannot therefore be held to be a commercial concern engaged in trade or commerce for profit. The statutory auditors of GWSSB have certified that their accounts had been prepared on the basis of the Accounting Standards applicable to non-commercial/non-business entities. In order to attract levy under 'Commercial or Industrial Construction services,' the impugned pipelines must be used in commerce or industry, or work intended for commerce or industry. They submitted Balance Sheet for the year ending 31-3-2006 of GWSSB which does not show either profit or loss since GWSSB is a Government Organization carrying out sovereign responsibilities of the state Government without profit motive. The following table has been prepared to show that revenue generated by GWSSB was mostly (above 90%) on sale of water to Gram Panchayats and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d when BAS was not on the statute book. Same ratio was laid down in Widia GMBH case [2006 (4) S.T.R. 309]. The Commissioner had not specifically concluded that the subject activity was not covered by 'works contract service'. 5. Revenue has reiterated the reasoning adopted by the Commissioner to confirm the demand and to impose penalty on the appellants. It is argued that GWSSB was in the business of purchase and sale of water and the same did not constitute a social service. It was also submitted that the subject activity may be covered under 'works contract service' w.e.f. 1-6-2007. However, during the material period, the same was covered under 'Commercial or Industrial Construction Service' under Section 65(25b). 6. We have heard both sides. We have carefully perused the case records and the rival submissions. The appellants had undertaken the activity of laying pipeline system for GWSSB during the material period for supply of mainly drinking water to Gram Panchayats and Nagar Panchayats. As per Section 65(25b) of the Act 'Commercial or Industrial Construction Service' means - (a) construction of a new building or a civil structure or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chnical, financial, economic and other aspects of water supply and sewerage system of every scheme of the Board of the local-bodies which have entered into an agreement with the Board; (h) To establish and maintain a facility to review and apprise the technical, financial, economic and other pertinent aspects of every water supply and sewerage scheme in the State; (i) To operate, run and maintain any water works and sewerage system, if and when directed by the State Government, on such terms and conditions and for such period as may be specified by the State Government; (j) To assess the requirements for manpower and training in relation to water supply and sewerage services in the State; (k) To carry our applied research for efficient discharge of the duties and functions of the Board; (l) To perform such of the duties and functions, which are being performed by the Gujarat Public Health Engineering Services, as may be specified from time to time, by the State Government; (m) To perform and discharge such other duties and functions are alloteed to the Board under other provisions of this Act or as may be entrusted to it by the State Government. 7. We also find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyment) Act, 1948 (9 of 1949); (b) any activity relating to the promotion of sales or business or both carried on by an establishment, but does not include (1) any agricultural operation except where such agricultural operation is carried on in an integrated manner with any other activity (being any such activity as is referred to in the foregoing provisions of this clause) and such other activity is the predominant one. Explanation : For the purposes of this sub-clause, agricultural operation' does not include any activity carried on in a plantation as defined in clause (f) of Section 2 of the Planations Labour Act, 1951 (69 of 1951) or; (2) Hospitals or dispensaries; or (3) Educational, scientific, research or training institutions; or (4) Institutions owned or managed by organizations wholly or substantially engaged in any charitable, social or philanthropic service; or (5) Khadi or village industries; or (6) Any activity of the Government relatable to the sovereign' functions of the Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and spa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue. Therefore, the impugned order demanding duty on the activity of laying of pipeline interpreting it to be erection, commissioning and installation of a plant is totally misconceived and unacceptable. 9.1 The Tribunal also held more or less to the same effect in M/s. Lanco Infratech Ltd. v. CST, Hyderabad reported at 2009-TIOL-2139-CESTAT-Bang. When it held while perusing the CBEC Circular No. 116/10/2009-S.T., dated 15-9-2009 that the activities which are concerned with welfare of the citizens of this country has been excluded from the liability of service tax. 10. The appellants had argued before the Adjudicating Authority that the impugned activity was 'works contract service' which was brought under tax net after the material period. The Commissioner found that the work was undertaken on Build and Operate Contract which included design, procurement and supply, construction, commissioning and operation and maintenance and therefore, fell outside the scope of 'Works Contract on turnkey basis'. We find that the Commissioner accepted that the contract involved was a composite contract. While demanding tax on construction service being part of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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