Service Tax on cable laying rejected where binding circular extended exemption to fresh optical fibre cable installation.

A binding CBEC circular dated 24/05/2010 clarified that shifting of overhead cables and laying of cables under or alongside roads did not attract Service Tax. Applying that circular, CESTAT held that laying of fresh optical fibre cables was also outside the levy, and the Revenue's distinction between shifting existing cables and laying new cables was unsustainable. The activity therefore could not be taxed under Erection, Commissioning and Installation Service, and the demand was not maintainable.

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Issues: (i) Whether laying of optical fibre cables and laying of fresh cables under or alongside roads was liable to Service Tax under the category of Erection, Commissioning and Installation Service.

Analysis: The appeal turned on the scope of the CBEC circular dated 24/05/2010. The circular specifically covered shifting of overhead cables/wires as well as laying of cables under or alongside roads and clarified that such activity did not attract Service Tax. On that basis, the Tribunal held that laying of fresh cable was also outside the Service Tax levy and the Revenue's distinction between shifting of cables and laying of new cables was unsustainable.

Conclusion: The activity was not liable to Service Tax, and the demand could not be sustained.

Final Conclusion: The appellate order dropping the demand was upheld and the Revenue's challenge failed.

Ratio Decidendi: Where a binding departmental circular clarifies that laying of cables under or alongside roads does not attract Service Tax, the same treatment applies to laying of fresh cables and the activity cannot be taxed under Erection, Commissioning and Installation Service.

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