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TMI Blog2025 (2) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... s. M/s. Shree Hindustan Fabricator failed to pay service tax on these services by availing benefit of exemption vide entry No. 12, 13 and 25 of Notification No. 25/2012-ST dated 20.06.2012. According to the department, the service provided by the respondent was falling under the category "Erection, Commissioning or Installation Service" and the said service is taxable under the Finance Act, 1994. In these circumstances, a show cause notice dated 9th March, 2016 was issued to the respondent M/s. Shree Hindustan Fabricators demanding service tax for the period of 2014-15. The adjudicating authority vide order dated 30.03.2017, confirmed the demand of Service Tax amounting to Rs.1,13,44,908/- against the respondent M/s. Shree Hindustan Fabricators under Section 73(2) of the Finance Act, 1994. The officer concerned also confirmed the demand of interest and imposed penalty of Rs. 11,34,491/- on the respondent M/s. Shree Hindustan Fabricators. Feeling aggrieved from this order, the appellant filed appeal before the Commissioner CGST and Central Excise, in which it was pleaded that exemption was, available to them under Notification No. 25/2012-ST as clarified vide Circular No. 199/09/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the people for its economic views. Contrary to the above, the Surat Municipal Corporation (SMC) is a local self-Government body which sells the water to huge number of commercial establishments and Industrial manufacturers at commercial rate. Apart from that the water is also sold to various theaters, hospitals, textile and diamond markets at purely commercial rate, but the water is not supplied at subsidised rate to any Gram Panchayat, Taluka Panchayat, etc. Thus, the referring to and relying upon the case law cited M/s. Indian Hume Pipe Co. Ltd (Supra) & Nagarjuna Construction (Supra) is erroneous and thus Order-In-Appeal needs to be reviewed on this ground alone. 2.1 It has also been argued by the Learned AR that the Commissioner (Appeals) has also erred in not appreciating the fact that the adjudicating authority has considered the contention of the assessee as regards the services rendered being covered under exemption Notification No. 25/2012-ST dated 20.06.2012. It has been concluded by the adjudicating authority that exemption from service tax is applicable only when it is provided in relation to services other than for commercial industry or any other business or professi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Authorized Representative and the Learned Counsel for the respondent and perused the record. 4.1 The Learned Authorized Representative has challenged the impugned order mainly on the ground that Commissioner (Appeals) has wrongly placed reliance on the decision of Hon'ble Tribunal in Indian Hume Pipe Co. Ltd Vs. CCE (2008) 16 STT 136 (Chennai-CESTAT) and Nagarjuna Construction Vs. CCE Hyderabad (2009-TIOL-1156-CESTAT-BNG) as fact of both the cases are different form the present case. We do not agree with the contention of the Authorized Representative and we are of the opinion that the principles laid down in the above-mentioned cases are fully applicable in the facts of the present case. The Learned AR has also challenged the impugned order on the ground that benefit of exemption Notification No. 25/2012-ST dated 20.06.2012 cannot be extended for services provided to SMC as it is not applicable if such service is provided for commerce, industry or any other business or profession. In the present case according to him, SMC provides water to all industries based in industrial areas are at a non-subsidized rate. It was worth mentioning that the Respondents are entitled to get exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable to them. Further, CBEC has clarified the position vide Circular No. 199/09/2016-Service Tax dated 22.08.2016, that in respect of services provided to the Government, a local authority or a governmental authority with regard to water supply, the relevant Entry No. 12(e) and 25(a) of the Notification No. 25/2015-ST dated 20.06.2012 provides for service provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of ............... pipeline, conduit or plant for water supply, water treatment or sewerage treatment of disposal. 4.4 Entry No. 25(a) provides for services provided to government, a local authority or a governmental authority by way of .................. carrying out any activity in relation to water supply, public health, sanitation, conservancy, solid waste management or slum improvement and upgradation. For the purpose of this Notification, "Government authority" means an authority or a board, or any other body set up by an Act of Parliament or a State Legislature; or established by Government, with 90% or more particip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the pipes pass through sumps with boosters at intervals, if necessary. This activity will not involve erection." 4.8 In the impugned order, reliance has also been placed upon the case of M/s. Nagarjuna Construction vs. CCE, Hyderabad [2009-TIOL-1156-CESTAT-BANG], wherein it was held that GWSSB could not be treated as a commercial organization for selling drinking water to the community. This is a service sector establishment for fulfilling the needs of the people for this basic requirement. It was held that GWSSB primarily executes water supply and sewerage works for the benefit of both the rural and urban communities, excluding the municipal corporations. And the charges collected by them were nominal charge which was imposed by the State Government with a view to create a sense of responsibility and awareness towards the service amongst the people for its economic use. 4.9 The Learned Commissioner (Appeals), in view of the above discussion, came to the conclusion that water supply project is an infrastructure facility and a civic amenity which the State provides in public interest and not an activity of commerce or industry. Thus, the services provided by the appellant to Sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintenance of Sewerage System. The usage charges recovered by the Board from Gram Panchayat, Nagar Palika and Nagar Panchayat are at highly subsidized rate and therefore, cannot be considered as an industry in the sense that the said word is used in the definition of taxable entry. The Board was sustaining on the grants released by the State Government. The pipelines constructed were for providing drinking water facilities to the people of the State through different Gram and Taluka Panchayats. Only a small portion of the water was provided to the industry at commercial rates-levy of tax set aside" Therefore, respectfully following the above decision which are binding on me, I hold that the appellant is not liable for payment of service tax and I do not find any merit in confirmation of the demand of service tax merely on the ground that the services of 'fixing and laying of pipelines for supply of water and drainage' provided by the appellant to the SMC, were used for commerce or industry. Since the Order in Original is not sustainable on merits, I do not go into the other contentions raised by the appellant on Limitation, Interest and penalty." 4.1 From the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s final order no. A/10337-10338/2020 dated 29.01.2020 reported under 2020 (2) TMI 110-CESTAT Ahmedabad has already decided the matter in favour of the respondent assessee wherein this Tribunal has held as follows:- "4. Learned Counsel argued that the ground relating raised before the lower authorities and has been raised for the first time in tribunal. Learned Authorized Representative argued that the appellants have contended that the activity would fall under Works Contract Service. He pointed out that there is no exemption under Works Contract Service in the negative list. Leamed Authorized Representative further pointed out the services provided by them was not to SMC or GWSSB in all cases but was to other contractors who were in turn providing services to GWSSB, SMC & Surat Urban Development Authority. Learned Authorized Representative pointed out that the activity done by them is squarely covered under the definition of ECIS. He pointed out that the definition of ECIS at the material time reads as follows: "Erection, Commissioning or Installation" means any service provided by a commissioning and installation agency, in relation to,- (1) erection, commissioning or insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy on erection, commissioning or installation. The impugned order found that up to 16-6-95, the assessee had rendered the taxable activity of erection, commissioning or installation of a plant. The Commissioner found that "plant represented a fixed investment for carrying out certain institutional activity for business". The water supply system involving pipelines is therefore seen as a plant. The activity undertaken by IHPL is construction of pipeline by earthwork excavation, conveying and lowering of PSC/MS pipes and MS specials, AC pipes, PVC pipes, CI/GI pipes and jointing materials into the trench; laying to proper grade and alignment; refilling the trenches with excavated soil after laying of pipes, construction of sluice valve pits, scour valve pits, air valve pits, thrust blocks, etc. 8.1 We find ourselves in agreement with the appellants' reading of the expressions contained in the relevant entry, namely, 'erection, commissioning or installation'. We find it elementary that 'erection' connotes construction or building of a structure and laying of pipeline does not involve erection. We find no ambiguity in the expression installation. It applies to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age means a cluster of buildings or a building in which machinery are installed usually for manufacture of goods. Long distance pipeline is not even remotely associated with this common understanding of the word plant. We also find that a water supply project is an infrastructure facility and a civic amenity the State provides in public interest and not an activity of commerce or industry. The impugned order also did not hold it to come under a service of commercial or industrial nature as submitted by the Id. Consultant for the 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." 5.2 While affirming the decision of tribunal in case of INDIAN HUME PIPE(supra), the Hon'ble High Court of Madras relied on the decision of Larger Bench of tribunal in case of LANCO INFRATECH LTD. 2015 (38) S.T.R.709 (Tri.-LB). Hon'ble High Court observed as follows: "10. On the question as to what happens if the case is covered by Section 65(25b), a larger Bench of the Customs, Excise and Service Tax has already held in Lanco Infratech Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant in respect of activities relating to laying of pipelines for Surat Municipal Corporation, Gujarat Water Supply and Sewerage Board (GWSSB), Canal Division, NHAI And M/s. Surat Urban Development Authority. 5.5. The revenue has also argued that in some cases the appellant have acted as sub-contractor and not as main contractor. We find that the said argument is of no use as the demand has been raised solely under the category of ECIS and in view of the decision of Hon'ble High Court of Madras and the Large Bench cited above, no demand under the said head can be raised against the appellant. 6. The second part of the dispute relates to service tax under the category of Business Auxiliary Service. A demand of 1,23,856 has been sustained in respect of sales commission received by the appellant from M/s. Electrosteel Castings Ltd., M/s. Lanco Industries Ltd., and M/s. Pacific Pipe Systems Pvt. Ltd. It has been argued by the appellant that the specific sub-clause of the Business Auxiliary Service under which tax is sought to be demanded has not been identified. He placed reliance on the decision of tribunal in case of SWAPNIL ASNODKAR (supra). We find that in Para 6.1 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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