2013 (10) TMI 132 - AT - Service Tax

Appellant's Service Tax Appeal Denied, Deposit Required for Merit Hearing

The Tribunal ruled that the appellant, engaged in laying pipelines for water supply, was not able to establish a prima facie case for a complete waiver of ... Management, Maintenance or Repair Services – Penalty and Interest u/s 76, 77 and 78 of the Finance Act – Held that:- The appellant contended that he had been awarded a contract of laying pipelines and also pumping operation, maintenance and repair of such pipelines along with pumping machinery for supply of water to various district and taluka places – Relying upon Nagarjuna Construction Co. Vs. CCE Hyderabad [2010 (5) TMI 232 - CESTAT, BANGALORE] - he had been engaged in discharge of sovereign function of supply of water to the citizens by laying the pipelines - the sovereign function if executed by a contractor, such activity cannot be under the category taxable services and no Service Tax was leviable on such activity. Waiver of Pre-deposit - The issue needs deeper consideration as it was not free from doubt - though the ld. Counsel had relied upon various case laws, the facts of those case laws and the facts in this case needs to be considered before arriving at the final conclusion which can be done only at the time of final disposal of appeal - Since the issue was not free from doubt and the appellant was aware from the tender document that the appellant may have to discharge the Service Tax, the appellant had not made out a prima facie case for complete waiver of the amounts involved. Issues:1. Waiver of Service Tax liability, interest, and penalty for the period 01.10.2006 to 31.03.2011.2. Whether the appellant, engaged in laying pipelines for water supply, is liable to pay Service Tax.Detailed Analysis:Issue 1:The Stay Petition sought a waiver of Rs.2,00,06,391 confirmed as Service Tax liability, interest, and penalty under Sections 76, 77 & 78 of the Finance Act, 1994 for the period 01.10.2006 to 31.03.2011.Issue 2:The appellant contended that they were awarded a contract for laying pipelines and pumping operation, maintenance, and repair for water supply, arguing that such activities are part of the sovereign function of supplying water and, therefore, not subject to Service Tax. The appellant cited various Tribunal decisions and a CBEC Circular to support their claim.The respondent, however, highlighted that the contract was for operation, maintenance, and repair of pumping machinery and stations, not for laying pipelines. The respondent emphasized that the appellant was informed of the Service Tax liability by the Gujarat Water Supply & Sewage Board (GWSSB) and should collect it from the service recipient.The Tribunal observed that the appellant had indeed executed a contract with GWSSB for operation, maintenance, and repair of various infrastructure related to water supply. While the appellant claimed there was no Service Tax component in the bid, GWSSB specified in the tender document that the appellant might have to discharge the Service Tax liability. The Tribunal acknowledged the need for deeper consideration of the facts and case laws cited by the appellant before making a final decision. Due to the lack of clarity and the appellant's awareness of the potential Service Tax liability, the Tribunal ruled that the appellant had not established a prima facie case for complete waiver of the amounts involved.The Tribunal directed the appellant to deposit Rs.10 lakhs within eight weeks to proceed with the appeal on merit. Upon compliance, the recovery of the amounts was stayed until the appeal's final disposal.