2023 (4) TMI 8 - AT - Service Tax

Sewerage pipelines not taxable as 'works contract' services under service tax rules

M/s Shri Jain and Rai Construction Company Versus Commissioner of Customs, Central Excise & Service Tax, Ujjain

The Tribunal held that laying pipelines for sewerage purposes, not for commerce or industry, did not constitute 'works contract' services for service tax ... Classification of services - works contract service or not - appellant claims that the services provided would not fall under ‘works contract’ for the reason that laying of the pipeline/conduit was not for the purpose of commerce or industry - extended period of limitation - HELD THAT:- The issue as to whether laying of the pipeline for conduit purposes would fall within the definition of ‘works contract’ was elaborately considered by a Larger Bench of the Tribunal in M/S. LANCO INFRATECH LTD. AND OTHERS VERSUS VERSUS CC, CE & ST, HYDERABAD [2015 (5) TMI 37 - CESTAT BANGALORE (LB)] where it was held that Construction of pipeline or conduit (otherwise than under a turnkey/EPC mode), when executed for Government/Government undertakings for transmission of water or sewerage would be outside the ambit of levy of tax, in terms of the definition itself, since this would undisputedly fall within the ambit of sub-clause (b) of WCS. A Division Bench of the Tribunal in M/S ANGRAJ CIVIL PROJECTS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, LUCKNOW [2018 (12) TMI 251 - CESTAT ALLAHABAD], after making reference to the aforesaid Larger Bench decision of the Tribunal in Lanco Infratech Ltd., also held that the activity of laying of pipeline would not be for the purpose of commerce or industry and, therefore, would not fall within the definition of ‘works contract’ services. Thus, in view of the Larger Bench decision of the Tribunal in Lanco Infratech Ltd. and the Division Bench of the Tribunal in Angraj Civil Projects Pvt. Ltd., it has to be held that laying of pipeline for sewerage purposes would not fall within the definition of ‘works contract’ services since it was not for commerce or industry purposes. Extended period of limitation - HELD THAT:- It is not necessary to examine the contention raised by the learned counsel for the appellant that the extended period of limitation, as contemplated under the proviso to section 73(ii) of the Finance Act, could not have been invoked in the facts and circumstances of the case. Appeal allowed. Issues:1. Whether laying of the pipeline for conduit purposes falls within the definition of 'works contract' for service tax liability.2. Whether the extended period of limitation under the proviso to section 73(ii) of the Finance Act could be invoked.Analysis:1. The appellant, a construction company, was awarded a contract by the Government for sewerage purposes. The issue revolved around whether the services provided by the appellant, specifically laying of pipelines, would be taxable under 'works contract' for service tax liability. The appellant argued that the pipeline work was not for commerce or industry, relying on section 65(105)(zzzza) of the Finance Act. The Assistant Commissioner confirmed the demand of service tax, stating that the services provided were not excluded from the provision. The Commissioner (Appeals) upheld this decision, citing a circular clarifying that construction works subject to VAT/Sales tax would attract service tax. The appellant contended that the services were not taxable under 'works contract,' emphasizing the exclusion clause of the Finance Act.2. The Tribunal referred to a decision in Lanco Infratech Ltd. vs Commissioner of Customs, Central Excise & Service Tax, Hyderabad, where it was held that laying pipelines for water supply or sewerage disposal for Government purposes would not attract service tax under 'works contract.' Another case, Angraj Civil Projects Pvt. Ltd. vs Commissioner of Central Excise & Service Tax, Lucknow, supported this view, stating that laying pipelines for non-commercial purposes did not fall under 'works contract' services. Based on these precedents, the Tribunal concluded that laying pipelines for sewerage purposes, not for commerce or industry, did not constitute 'works contract' services. Therefore, the impugned order was set aside, and the appeal was allowed.3. The issue regarding the extended period of limitation under the proviso to section 73(ii) of the Finance Act was deemed unnecessary for examination, given the determination that the pipeline work did not qualify as 'works contract' services. The Tribunal's decision to set aside the Commissioner (Appeals)'s order was based on the interpretation that the pipeline laying for sewerage purposes did not fall within the ambit of 'works contract' for service tax liability.