Service Tax Exemption On Laying Pipelines For Water Supply And Drainage: Ahmedabad CESTAT

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that no service tax is payable on laying pipelines for water supply and drainage.The bench of Somesh Arora (Judicial Member) and C.L. Mahar (Technical Member) has observed that the appeals appear to be part of the investigation that has been carried out against M/s. Shree Hindustan Fabricators, and the appellants are only the sub-contractors of the main contractor, M/s. Shree Hindustan Fabricators, and were engaged in providing the service of laying pipelines for water supply and drainage to the Surat Municipal Corporation. The bench noted that the assessee was entrusted with the task of laying a long-distance pipeline to enable water supply. It was an activity in the public interest to take care of the civic amenities liable to be provided by the state. The Director General of Central Excise Intelligence, Vapi, has searched the premises of Hindustan Fabricators in Surat, suspecting that Hindustan Fabricators and his subcontractors are providing services such as the laying of pipelines for water supply and drainage to Surat Municipal Corporation and others. The investigation conducted by the agency has established that the appellants have provided the service of laying pipelines for water supply and drainage for the main contractor, namely M/s. Shree Hindustan Fabricators. Show cause notices have been issued to the above-mentioned appellants as well as to M/s. Shree Hindustan Fabricators, alleging that the appellants have provided erection, commissioning, and installation services and that service tax has not been paid by the appellants to the government exchequer. The show cause notices have been confirmed up to the level of Commissioner (Appeals).The assessee contended that construction of a pipeline or conduit for transmission of water or sewerage and involving associated works like digging of the earth, supporting the pipeline or 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 Erection, Commissioning, and Installation Service (ECIS). These services are only classifiable as commercial and industrial construction services (CICS). Where the pipeline or conduit laying is executed for government or government undertakings as part of irrigation, water supply, or sewerage projects, the works are not subject to service tax under CICS (prior to 1–6–2007), since these are not primarily for commercial or industrial purposes and are excluded from the scope of the taxable services under the exclusionary clause definition of CICS in Section 65(25b).The tribunal, while allowing the appeal, held that the activities undertaken by the appellant could not be classified under ECIS.Counsel For Petitioner: Amber KumarawatCounsel For Respondent: Himanshu P ShrimaliCase Title: Skyway Construction Versus Commissioner of Central Excise & ST, SuratCase No.: Service Tax Appeal No. 11761 Of 2017-DBClick Here To Read The Order

Service Tax Exemption On Laying Pipelines For Water Supply And Drainage: Ahmedabad CESTAT

Mariya Paliwala

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