By TIOL News Service

MUMBAI, SEPT 17, 2013: THIS is a Revenue appeal. The respondent entered into an agreement with M/s. ONGC dated 17/03/2003 for laying of submarine pipelines for the transport of petroleum crude oil from Bombay High and Bassein Field Offshore sites.

The department was of the view that the said activity undertaken by the respondent is exigible to service tax under the category of ‘Commissioning and Installation Service' and accordingly issued a notice dated 01.10.2006 demanding service tax of Rs.3,36,33,940/- for the period 01/07/2003 to 31/03/2004.

The Commissioner of Service Tax, Mumbai passed an O-in-O dated 23/11/2006 &held that laying of pipeline, as part of turnkey projects, would not come under the category of ‘Commissioning and Installation Service' and might be classifiable under ‘Commercial Construction Service' which came into force w.e.f. 16/06/2005. He also noted that though ‘Construction Service' came under the tax net w.e.f 10/09/2004, the said service also would not include within its scope laying of long distance pipeline. Holding that during the impugned period ‘laying of pipeline' was not taxable activity, the CST, Mumbai dropped the demand.

Aggrieved with this dropped order, the Revenue is before the CESTAT and submits –

+ that the respondent actually provided a bundle of services including ‘Commissioning and Installation Service' and the laying of pipeline would be covered under ‘Commissioning and Installation of Plant, Machinery or Equipment' which came under the tax net w.e.f. 10/09/2004 and, therefore, dropping of the demand by the Commissioner is not sustainable in law.

The respondent remained absent.

The Bench observed –

"5.1 During the period of demand Section 65(39A) of the Finance Act, 1944 provided that:

"(39A) ‘Commissioning or Installation' means any service provided by a commissioning and installation agency, in relation to commissioning of installation of plant, machinery or equipment".

Therefore, the activity covered under the tax net is only ‘commissioning or installation of plant, machinery or equipment'. This Tribunal in the case of Indian Hume Pipes Co. Ltd. - (2008-TIOL-1665-CESTAT-MAD) held that pipes or pipeline does not come under the category of ‘plant, machinery or equipment' and therefore laying of pipeline does not come within the scope of ‘Commissioning or Installation Service'. In any case, laying of pipelines has been specifically covered under ‘Commercial Construction Service' which came into effect from 16/06/2005. During the impugned period, the activity of laying of pipeline was not covered under the ‘Commissioning and Installation Service'. Therefore, we do not find any infirmity in the Commissioner's order dropping the demand."

In fine, the Bench held that there was no merit in the Revenue appeal and hence dismissed the same.

(See 2013-TIOL-1370-CESTAT-MUM)