Works contract treatment for optical fibre cable laying kept the service tax demand in abeyance pending appeal.

Fees received for laying optical fibre cables were treated as part of the works contract cost connected with railway projects, rather than as consideration for Business Support Service. On that prima facie view, the activity was considered not appropriately classifiable under Business Support Service for Service Tax purposes, because the underlying work was seen as works contract in relation to railways. A prima facie case was therefore found in favour of the appellant, and recovery of the disputed dues was stayed pending disposal of the appeal.

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Issues: Whether the 13% fees received in relation to contracts for laying optical fibre cables was liable to Service Tax under the head of Business Support Service, and whether the activity was instead part of the works contract cost in respect of railways.

Analysis: The fee was treated as part of the works contract cost for laying optical fibre cables. The activity of laying optical fibre cables was viewed as works contract in relation to railways, and on that basis the service was found, prima facie, not apt for classification as Business Support Service for Service Tax levy.

Outcome: A prima facie case was found in favour of the appellant and recovery of the dues was stayed during pendency of the appeal.

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