Pipeline-laying under service tax law: prima facie protection granted where works contract treatment was disputed.

Pipeline-laying work for water supply was examined for service tax treatment under the head of erection, commissioning or installation, with the department alleging that the activity amounted to installation of a plant. The assessees contended that the work formed part of a works contract and could not be vivisected to levy service tax on any segment for the relevant period. On the material before the Tribunal, a prima facie case was found in favour of the assessees, and pre-deposit was waived with recovery of service tax, interest and penalties stayed.

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Issues: Whether the appellants made out a prima facie case for waiver of pre-deposit and stay of recovery of service tax, interest and penalties demanded on amounts received for laying pipelines for water supply, and whether such work could be brought within the category of erection, commissioning or installation under Section 65(39a) of the Finance Act, 1994.

Analysis: The demand was raised on the footing that the pipeline-laying activity constituted erection, commissioning or installation of a plant. The appellants relied on the contention that, for the period in question, the department could not vivisect a works contract so as to levy service tax on any part of the work. On the material placed before the Tribunal, a prima facie case was found in favour of the appellants against the demand.

Outcome: Pre-deposit was waived and recovery of service tax, interest and penalties was stayed.

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