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PJ/Case Law/2013-14/2062

Whether activity of laying pipelines leviable to service tax ?

Case:-SHONAN- SIDDHARTH (J.V.) VERSUS COMMISSIONER OF C. EX., NAGPUR

Citation:-2013 (32) S.T.R. 233 (Tri.-Mumbai)

Brief Facts:-The applicants are engaged in the activity of providing and laying spiral welded/fabricated M.S. pipeline for rising main and its allied works like construction of manifold, pumping machinery, switch yard and all cable work for electric supply including all related civil, mechanical and electrical works as per design and drawing, commissioning, testing of the entire pipeline including maintenance. The department was of the view that the activity undertaken by the applicants covered under ‘Erection, Commissioning, or Installation Services.” Therefore, the demand of Rs. 2,66,61,150/- along with interest and various penalties under the Finance Act, 1994, has been confirmed against the applicants. The applicants are seeking waiver of pre-deposit of the entire demand by way of a stay application.

Appellant Contentions:-The learned Advocate appearing for the applicants submitted that the main activity of the applicants is laying pipeline or irrigation work and the said project was allocated to the applicants by the Vidharbha Irrigation Development Corporation, Government of Maharashtra. Therefore, the activity undertaken by the applicants is appropriately classifiable under ‘Works Contract Service’ and as per the Board’s Circular No. 116/10/2009-S.T., date 15-9-2009, the activity undertaken by the applicants is excluded from the tax liability. Therefore, the impugned order is not sustainable in the eyes of law.
 
Respondent Contentions:-The department was of the view that the activity undertaken by the applicants is covered under ‘Erection, Commissioning, or Installation Services.” Therefore, the demand of Rs. 2,66,61,150/- along with interest and various penalties under the Finance Act, 1994, has been rightly confirmed against the applicants.

Reasoning of Judgment:-On examination, we find that the applicant’s main activity is laying pipeline for irrigation purposes. Prima facie we are of the view that the activity of laying of pipelines falls under the “Works Contract Services” and the same has been excluded from the taxable services vide Board’s Circular No. 116/10/2009-S.T. cited herein above. Therefore, the applicants have made out a prima facie case for waiver of 100% of Service Tax, interest and penalties. Accordingly, we waive the requirement of pre-deposit of the entire amount of service tax, interest and penalties and stay recovery thereof during the pendency of the appeal.

Decision:-Stay granted.

Comment:-The essence of this case is that the activity of laying of pipelines falls under the “Works Contract Services” and the same has been excluded from the taxable service vide Board’s Circular No. 116/10/2009-S.T. date 15-9-2009. Hence, laying of pipelines is not leviable to service tax.

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