By TIOL News Service

MUMBAI, MARCH 19, 2014: THE appellant is the Chief Engineer (Mechanical), Water Resources Department of the Government of Maharashtra. The appellant undertook erection of various types of sluice gates and hoses for the dams constructed in various districts of Maharashtra, such as, Amravati, Akola, Washim, Yavatmal, Buldhana districts for the Vidharbha Irrigation Development Corporation, Tapi Valley Irrigation Development Corporation and Krishna Valley Development Corporation.

The Commissioner of Central Excise, Customs & Service Tax, Nashik/Nagpur was of the view that the appellant was liable to pay service tax on these activities under the category of 'Erection, Commissioning and Installation Service'.Accordingly, the demands of Rs.1.37 Crores for the period 01/04/2007 to 31/03/2011; Rs.2.42 Crores for the period 01/04/2006 to 31/03/2011 and Rs.86.66 lakhs for the period 01/04/2006 to 31/03/2011 were confirmed along with interest and penalties.

While seeking Stay from the CESTAT against these three orders-in-original, the appellant had submitted as under -

++ the appellant is Government department and they have undertaken the work of erection of sluice gates for the dams constructed by the aforesaid Corporations which are also statutory corporations of the Government of Maharashtra.

++ They are not a "commissioning and installation agency" envisaged under Section 65 (29) of the Finance Act, 1994 and they are not rendering service to anybody else except to themselves i.e. the Government of Maharashtra.

++ Both the provider of service and recipient of the service are part and parcel of the Government of Maharashtra and, therefore, service to self cannot be considered as a taxable service.

The Bench observed -

"5. We have carefully considered the rival submissions. The activity undertaken by the appellant is of erection of sluice gates in the agricultural dams constructed by the various corporations. Section 65 (39a) defines erection, commissioning and installation service as erection, commissioning of installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise or installation of items such as electrical and electronic devices, plumbing, drain laying, thermal insulation, sound insulation, fire prevention, lifts and escalator, fire escape staircases or travelators. Section 65 (105) (zzd) defines a taxable service as a "service rendered to any person by a commissioning and installation agency in relation to erection, commissioning and installation". The Chief Engineer, Water Resources Department of the Government of Maharashtra is not a commissioning and installation agency as they do not undertake these activities for anybody else except themselves. Further, the erection and commissioning or installation should be in relation to plant, machinery, equipment or structures. As clarified by CBEC vide circular No. 790/09/2004 dated 17/09/2004 erection of structures referred to therein means civil corks to installation / commissioning of a plant and machinery. Agricultural dam or sluice gates thereto cannot be considered as a plant and machinery or equipment or structures thereof. They are in the nature of infrastructural construction catering to the needs of agriculture. They are excluded from the purview of service tax levy both under the category of commercial and industrial construction service and Works Contract services specifically."

Holding that the appellant had a strong prima facie case in their favour, the Bench had granted waiver of pre-deposit and ordered a Stay in the matter. We reported this order as 2013-TIOL-500-CESTAT-MUM.

Incidentally, only one of the appeals was heard recently if the preamble to the order is to be taken as correct. Nonetheless, as the other two appeals also involved the same issue, perhaps it is a technical omission requiring a corrigendum.

Be that as it may, the submissions made earlier were reiterated by the appellant and the respondent Revenue.

And the Bench held -

"5. …The activity undertaken by the appellant is of erection of sluice gates in the agricultural dams constructed by the various corporations. Section 65(39a) defines erection, commissioning and installation service as erection, commissioning of installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise or installation of items such as electrical and electronic devices, plumbing, drain laying, thermal insulation, sound insulation, fire prevention, lifts and escalators, fire escape staircases or travelators. Section 65(105)(zzd) defines a taxable service as a "service rendered to any person by a commissioning and installation agency in relation to erection, commissioning and installation”. The Chief Engineer, Water Resources Department of the Government of Maharashtra is not a commissioning and installation agency as they do not undertake these activities for anybody else except themselves. Further, the erection and commissioning or installation should be in relation to plant, machinery, equipment or structures. As clarified by CEBC vide circular No. 790/09/2004 dated 17/09/2004 erection of structures referred to therein means civil works to installation/commissioning of a plant and machinery. Agricultural dam or sluice gates thereto cannot be considered as a plant and machinery or equipment or structures thereof. They are in the nature of infrastructural construction catering to the needs of agriculture. They are excluded from the purview of service tax levy both under the category of commercial and industrial construction service and Works Contract services specifically."

Holding that the activity undertaken by the appellant falls outside the purview of service tax, and therefore, the appellant is not liable to pay any service tax, the appeal was allowed.

(See 2014-TIOL-419-CESTAT-MUM)