The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the service tax cannot be levied on the activity of laying pipelines provided to the Government under ‘Works Contract Service’. Indian Hume Pipe Co. Limited, the appellant assessee was engaged in the manufacture of various sizes of PSC (Pre-Stressed Concrete) Pipes and had Central Excise Registration as manufacturer and also had obtained Service Tax Registration for providing various output services.
The assessee had entered into a contract with Tamilnadu Water and Drainage Board (TWAD) which was a turnkey/composite contract for the supply of PSC pipes, for laying of the pipes as well as for executing other installations for the transportation of water as per terms of the contract of water project formulated by TWAD Board. The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand for the short-paid service tax under ‘Works Contracts Service’ for the period 04.06.2009 to 12.01.2010.
R. Sudhinder, the counsel for the assessee contended that the activity carried out by the assessee was laying of the pipelines and the same would be exempt from levy of service tax for the reason that it is not in the nature of providing services for Commercial or Industrial purposes and the service was carried out to drink water supply of TWAD.
R. Rajaraman, the counsel for the department contended that the assessee did not pay service tax on the consideration received in respect of such contracts and the activity would fall under “Works Contracts Services” with effect from the date of 01.06.2007.
The Bench observed that in the case of Lanco Infratech Ltd. Vs CC, the court held that the activity of laying of pipelines as stated in clause
(b) of the definition of Works Contract Services as well as turnkey projects involving laying of the pipelines and other connected activities when provided to Government would be exempt from levy of service tax.
The two-member bench comprising Sulekha Beevi (Judicial) and Vasa Seshagiri Rao (Technical) held that the laying of pipelines was outside the purview of levy of service tax, under works contract service.