Public utility works may fall outside commercial construction service where the recipient board functions non-commercially and subsidised supply is shown.

Pipeline-laying work for a statutory water supply board was found, at the prima facie stage, not to be clearly taxable as commercial or industrial construction service. The Tribunal relied on the board's public utility functions under the State enactment, its role in executing and maintaining water and sewerage schemes, and the fact that water was supplied at highly subsidised rates rather than on a commercial basis. On that footing, the demand for service tax and penalties did not justify recovery at the interim stage, and complete waiver of the demanded dues was granted with stay against recovery pending final hearing.

---

---

Issues: Whether the activity of laying pipelines for a statutory water supply board was, prima facie, taxable as commercial or industrial construction service so as to justify recovery of the service tax demand and penalties at the interim stage.

Analysis: The Board's functions under the governing State enactment showed that its primary role was to execute and maintain water supply and sewerage schemes for the benefit of the public, and not to engage in commercial sale of water. The material placed before the Tribunal also indicated that water was supplied at highly subsidised rates and that the Board was not functioning as a commercial organisation. On that basis, the pipeline-laying activity for the Board could not, at first sight, be treated as commercial or industrial construction for service tax purposes.

Conclusion: The appellant made out a strong prima facie case for complete waiver of the demanded dues and for stay against recovery.

Final Conclusion: Interim protection was granted to the appellant, and the appeal remained pending for final hearing.

Ratio Decidendi: Where the recipient statutory body performs a public utility function and the activity is shown to be non-commercial and subsidised, the related works contract may not, prima facie, fall within commercial or industrial construction service at the interim stage.

---