ST - Pipeline laying executed for Govt as part of irrigation, water supply, or sewerage projects not exigible to tax under CICS : CESTAT
By TIOL News Service
ALLAHABAD, MAR 23, 2017: THE appellant, engaged in various activities of construction of civil structures including pipelines for sewage etc. is in appeal against the order passed by CCE, Noida, demanding service tax of Rs.13,48,28,865/- with interest and penalties.
Pursuant to audit, it appeared to Revenue that the appellants have not paid service tax on 'erection, commissioning and installation service' being construction of sewage pumping station, water treatment plants, sewage treatment plant and sewage works.
The appellant assessee had contended that the works of laying of pipelines for sewage etc. are not for commerce and trade and as such the same is exempted from service tax in terms of provisions of Explanation (ii)(b) of Section 65 (105)(zzzza) of the Finance Act, 1994.
The adjudicating authority did not buy this argument resulting in the impugned order which has been appealed against.
It is submitted that the issue is no longer res integra inasmuch as the same has been considered in detail by the Larger Bench in the case of LancoInfratech Ltd - 2015-TIOL-768-CESTAT-BANG-LB andit is concluded that "construction of a pipeline/conduit for transmission of water/sewerage and involving associated works like digging of the earth, supporting masonry structures, refilling the earth, jointing of different lengths of pipes for laying the 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 but as CICS and 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 exigibleto 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.
And further that the LB ruling has been followed and relied by Madras High Court in the case of Indian Hume Pipes Company Ltd. - 2015-TIOL-2049-HC-MAD-ST wherein for similar works executed of laying of pipes for water supply, the High Court held that laying of long-distance pipelines to enable State Water Supply and Drainage Board to supply water in public interest and to take care of civil amenities, the Tribunal rightly held that the said activity is a part of "construction activity" not commercial in nature, hence, not covered under erection, commissioning or installation service and hence, is exempted from service tax levy.
It is also submitted that in respect of erection and commissioning of service station (electrical) for supply of water under JNNURM, only Rs.3,25,200/- is attributable to erection/Labour part and at best, service tax is only leviable on this amount. Moreover, since all the transactions were found duly recorded in the books of accounts and in view of the confusion prevailing regarding classification/exemption, the issue is wholly interpretational and the extended period of limitation is not invokable.
The Bench observed -
"5…, we are satisfied that the issue now stands settled by the Larger Bench of this Tribunal in M/s LancoInfratech Ltd. (supra) and also confirmed by order of the Hon'ble Madras High Court (supra) in Indian Hume Pipes Ltd, wherein it has been held that such works executed by the appellant in the nature of sewerage works, laying of pipe and for water supply falling under Explanation (ii) (b) fall under the definition of "works contract service" and were also exempted under the classification ‘commercial and industrial construction service' prior to 1/6/2007, as explained by the Larger Bench. Further, we find that the issue is wholly interpretational and thus the longer period of limitation is not invokable under the facts and circumstances. Accordingly, we allow the appeal setting aside the impugned order, except the demand for normal period, if any, in the case of erection of service station for the gross amount of Rs.3,25,200/- for labour/charges…"
The appeal was disposed of.
(See 2017-TIOL-963-CESTAT-ALL)
