By TIOL News Service

MUMBAI, DEC 29, 2016: THE appellant were awarded a contract for providing and laying spiral welded/fabricated M.S. Pipeline for Nerala lift irrigation scheme.

On examination of the JV deed and on perusal of work order dated 18.01.2007, the department took a view that the said activity would get covered under the category of "Erection, Commissioning or Installation Services".

SCN was issued and the Adjudicating authority confirmed the demand by rejecting the claim claim of the appellant that the activity would fall under "Commercial and Industrial Construction Services" and is eligible for exemption.

The appellant is before the CESTAT and makes a detailed submission to conclude that –

+ the main activity undertaken by the Appellant is laying of pipeline, which is primarily not for the purpose of commerce and industry and consequently not taxable under Works Contract Services.

+ the definition of taxable services of works contract excludes inter alia, works contract in respect of dams. The work undertaken by the Appellants is in respect of dams.

The AR justified the demand and also submitted that the appellant had been contesting before the lower authorities that the services rendered by them would fall under "Commercial and Industrial Construction Services" and, therefore, their stand now that the services fall under WCS, since never argued, should not be considered and allowed before the Tribunal.

The Bench observed –

"4. …, we find that the work executed by the appellant by a contract entered with M/s Vidarbha Irrigation Development Corporation, Nagpur for providing and laying spiral welded/fabricated M.S. Pipe line for raising main and its allied works like construction of manifold, pumping machinery, switch yard an all cable work for electric supply them (from M.S.E.B. point onwards) including all related civil, mechanical and electrical works as per design and drawing, commissioning, testing of the entire pipe line and pumping machinery including maintenance for two years after completion of the scheme. It can be noticed from the description of the work awarded to the appellant, it is a contract turnkey project which results in an erected structure with installation of pumping machinery, electrical switch yard and other related civil, mechanical and electrical structures, in our considered view would get covered under head "Commercial and Industrial Construction Services". This specific issue was before the Larger Bench of the Tribunal in the case of Lanco Infratech Ltd. - 2015-TIOL-768-CESTAT-BANG-LB, wherein the Larger bench has settled that the law and held that irrigation projects/lift irrigation projects would get covered under CICS prior to January 2007 but eligible for exemption. We also find strong force in the contention of the appellant that the issue is now covered under Hon'ble Supreme Court in the case of Larsen & Toubro Ltd. - 2015-TIOL-187-SC-ST, in the said case the Hon'ble Apex Court was considering the same issue of vivisected contract for taxability under different categories. After considering the law, their lordships in paragraph 24 held as under:- x x x

It is undisputed in the case in hand, contract entered by the appellant is a works contract/turnkey project to be handed over M/s Vidarbha Irrigation Development Corporation, Nagpur. As the issue is squarely covered by the judgment of Hon'ble Apex Court, we hold that the impugned order is unsustainable."

In the matter of the submission of the AR that the appellant should not be allowed to raise the claim of the services as being classifiable under WCS, the Tribunal held that since the issue is question of law, it could be raised.

The impugned order was set aside and the appeal was allowed.

(See 2016-TIOL-3353-CESTAT-MUM)