Tribunal overturns service tax demand on BSNL for trenching & laying cables.

The Tribunal allowed the Appeal, setting aside the demand for service tax on trenching and laying of PLB pipes and cables for BSNL. The Appellant's activities were found not to fall under Commercial and Industrial Construction service as per the Finance Act, 1994. Penalties were lifted, but taxes collected and deposited were deemed appropriate, denying any refund. The decision was based on a 2010 Board Circular exempting laying of cables under or alongside roads from taxable services, supported by relevant case laws.

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Issues involved: Determination of liability to service tax on trenching and laying of PLB pipes and cable works for BSNL under the head of "Commercial and Industrial Construction service."

The Appellant was engaged in services involving trenching and laying of PLB pipes and cables mainly for BSNL. The Appellant had obtained service tax registration on 01.11.2006 and started filing returns from February 2007. A show cause notice (SCN) was issued demanding service tax for a certain amount, which was adjudicated exparte as the Appellant did not respond. The Adjudicating Authority confirmed the demand of tax along with penalty, stating that the activity fell under Commercial and Industrial Construction service (CICS).

The Appellant appealed to the Commissioner (Appeals) citing a Board Circular dated 24.05.2010, which clarified that laying of cables under or alongside roads is not a taxable service. However, the Commissioner dismissed the Appeal noting that the Circular came after the period in question and part of the tax had been reimbursed by the service receiver from 2007.

Before the Tribunal, the Appellant presented the Board Circular of 2010, which discussed the applicability of service tax on laying of cables under or alongside roads. The Circular stated that such activity is not taxable under any clause of the Finance Act, 1994. The Appellant also relied on certain case laws to support their contention.

After considering the arguments and case laws presented, the Tribunal found that the Appellant did not provide any taxable service under the relevant section of the Finance Act, 1994 regarding the activity of laying cables under or alongside roads for BSNL. The Appeal was allowed, the demand was set aside, and penalties imposed were also lifted. However, the taxes collected and deposited by the Appellant were deemed to be rightly done, and no refund was granted in this regard.

In conclusion, the Appeal was allowed by the Tribunal, and the demand for service tax was set aside based on the clarification provided in the Board Circular and the specific nature of the Appellant's activities.

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