Pipeline-laying for public water supply held outside service tax where work was not commercial or industrial in nature.

Laying, jointing, testing and commissioning of a long-distance pipeline for a public water supply project was treated as pipeline-laying work for civic utility, not as erection, commissioning or installation in the commercial sense. Although the post-16.06.2005 definition included construction of a pipeline or conduit, the relevant larger bench principle applied to hold that pipeline or conduit laying for Government or Government undertakings in water supply or sewerage projects is not taxable where it is not primarily for commercial or industrial purposes. The factual finding that the work was essentially pipeline laying supported the conclusion that service tax was not chargeable.

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Issues: Whether the activity of laying, jointing, testing and commissioning of pipelines and related works for a public water supply project was chargeable to service tax as erection, commissioning or installation service, or whether it was classifiable as construction activity and outside the tax net.

Analysis: The activity was found to be laying of a long-distance pipeline for a water supply board in aid of civic amenities and public utility. The service tax provisions, as amended from 16.06.2005, specifically included construction of a pipeline or conduit within the relevant definition, but the larger bench ruling relied upon held that pipeline or conduit laying for Government or Government undertakings in water supply or sewerage projects is not exigible under the taxable service category where the activity is not primarily for commercial or industrial purposes. The finding of fact that the work was essentially pipeline laying, and not erection, commissioning or installation in the commercial sense, supported the assessee's case.

Conclusion: The activity was not chargeable to service tax and the issue was decided in favour of the assessee.

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