Pipeline laying and joining for water supply project treated as taxable installation service; appeal rejected for wrong forum u/s35L(2)

The dominant issue was appellate jurisdiction under the Excise Act where the dispute concerned whether the assessee's activity (laying/connecting/joining pipelines for a water supply project) constituted a taxable service under "erection, commissioning or installation service" and consequent eligibility for abatement under Notification No. 1/2006. Applying s. 35L(2) (inserted w.e.f. 06.08.2014 and held clarificatory) and the HC's prior ruling that questions of taxability/excisability relate to the rate of duty/service tax for assessment, the HC held that an appeal from CESTAT on such issues lies only to the SC and not under s. 35G. The appeal was dismissed as not maintainable, with liberty to pursue remedies in law.

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Issues:
1. Whether laying, connecting, joining pipeline for water supply project falls within "Erection, Commissioning or installation Service" as defined under section 65(105)(zzd) of the Finance Act, 1994 and is taxable under the Service TaxRs.
2. Whether the respondent-assessee is entitled for abatement under Notification No.1 of 2006, dated 1st March 2006Rs.

Analysis:

Issue 1:
The case involved the question of whether the activity of laying pipelines for water supply projects falls under the category of "erection, commissioning, and installation service" as defined in the Finance Act, 1994. The Tribunal, in its order, relied on precedents and circulars to determine that laying pipelines does not constitute erecting, installing, or commissioning plant, machinery, equipment, or structure. It was held that pipelines do not fall under the definition of taxable services as per section 65(105)(zzd) of the Finance Act, 1994. The Tribunal also cited a similar case involving submarine pipelines and concluded that laying pipelines is more appropriately classified under "commercial or industrial construction service" rather than erection, commissioning, or installation service.

Issue 2:
The second issue pertained to the entitlement of the respondent-assessee for abatement under Notification No.1 of 2006, dated 1st March 2006. The Tribunal allowed the appeal of the assessee, setting aside the order passed by the Adjudicating Authority, which had initially held that the service tax rendered by the assessee fell under the category of "erection, commissioning, and installation service." The Tribunal's decision resulted in the dismissal of the appeal filed by the revenue. Counsel for the respondent supported the Tribunal's view by referencing a previous judgment and questioning the maintainability of the appeal before the High Court based on the provisions of section 35L of the Central Excise Act, 1944.

The High Court, after considering the arguments presented, held that the appeal was not maintainable before the Court due to jurisdictional issues. The Court cited a previous case to support its decision, stating that the issue of taxability and excisability falls under the purview of the Supreme Court as per the provisions of section 35L of the Excise Act. Consequently, the Court disposed of the appeal, leaving the appellant free to pursue remedies under the law.

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