By TIOL News Service

CHENNAI, SEPT 07, 2015: THIS is an appeal by revenue against the order of Tribunal in case of M/s Indian Hume Pipes Co Ltd reported in 2008-TIOL-1665-CESTAT-MAD. The appellant is engaged in laying, jointing, testing and commissioning of pipe lines for supply of water. The assessee rendered the services to Tamil Nadu Water Supply and Drainage Board. The period involved is from 01.07.2003 to 30.09.2006. It is the case of the department that the assessee is liable to pay service tax under Erection, Commissioning or Installation service. The Tribunal vide above order set aside the demand and the revenue is before the High Court.

After hearing both sides, the High Court held:

There are two issues. If there is a finding on fact as to whether the activity carried on by the Assessee was a construction activity or an activity of erection, installation and commissioning, then there can be no appeal on such question of fact.

With effect from 16.6.2005, the definition of the expression "commissioning or installation of construction service" under Section 65 (25b) was amended to include the construction of a pipeline or conduit. Therefore after 16.6.2005 there was no dispute. Consequently, the department cannot now raise a question as to the very nature of the activity carried on by the appellant.

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. v. Commissioner of Customs, Central Excise and Service Tax, Hyderabad - 2015-TIOL-768-CESTAT-BANG-LB as follows:

"Considered in the light of the precedents referred to herein above; the definitions of ECIS and CICS; the Board clarification dated 07.01.2010; the Dictionary meanings ascribed to the word "conduit"; and provisions of Section 65A(2)(a) and (b), we conclude that construction of a pipeline / conduit for transmission of water/ sewerage and involving associated works like digging of the earth, supporting pipeline/ conduit, construction of pumping stations together with associated machinery and other construction works, including for transmission of water in lift irrigation projects, cannot be classified under ECIS. These services are only classifiable as CICS. Where the pipeline/ conduit laying is executed for Government or Government undertakings as part of irrigation, water supply, or sewerage projects, the works are not exigible to service tax under CICS (prior to 01.06.2007), since these are not primarily for commercial or industrial purposes and are excluded from the scope of the taxable services qua the exclusionary clause definition of CICS, in Section 65(25b) of the Act."

As rightly pointed out by the Tribunal, the Assessee was entrusted with the task of laying a long distance pipeline to enable the Tamil Nadu Water Supply and Drainage Board to supply water. It was an activity in public interest, to take care of the civic amenities liable to be provided by the State. Therefore, the Tribunal was right in holding in favour of the Assessee. Hence, the question of law is answered in favour of the Assessee.

(See 2015-TIOL-2049-HC-MAD-ST)