2024 (12) TMI 1240 - AT - Service Tax

Pipeline laying services to municipal corporation qualify for service tax exemption under N/N. 25/2012

C.C.E. & S.T. -SURAT-I Versus SHREE HINDUSTAN FABRICATOR

CESTAT Ahmedabad dismissed revenue's appeal regarding service tax exemption for pipeline laying services. The appellant provided water supply and sewerage ... Exemption from service tax on services provided by the appellant for government and its agencies as per N/N. 25/2012 dated 28.06.2012 - work of fixing and laying of the pipelines for water supply and drainage to Surat Municipal Corporation and Ors. HELD THAT:- From the facts of the matter, it can be seen that the appellant has been provided services of lying down the water supply pipelines and sewerage discharged pipeline etc. for Surat Municipal Corporation which is a statutory body and not a profit making organization, the services provided by SMC are of non commercial nature and the water pipeline which have been laid by the respondent assessee for the Surat Municipal Corporation are for non commercial purpose. The provisions of the N/N. 25/2012-ST dated 20.06.2012 under serial no. 12E and Serial No. 25A are fully applicable applicable towards activity undertaken by the respondent assessee and therefore fall under the category of the exempted services. In view of the above decision of the Gujarat High Court in BMS Projects Pvt Ltd vs Commissioner of Central Excise-Surat [2017 (9) TMI 1386 - GUJARAT HIGH COURT] and as well as by perusal of the mega N/N. 25/2012 dated 20.06.2012. There are no doubt that the activity undertaken by the respondent assessee falls under the category of exempted services. Since the facts in the present appeal are similar to the one which have been decided in the above cited decision of the Hon'ble Gujarat High Court. The appeal filed by the revenue does not have any merit, therefore the same is set aside. Appeal dismissed. Issues Involved:1. Applicability of Service Tax Exemption under Notification No. 25/2012.2. Classification of Services Provided by the Appellant.3. Demand of Service Tax under Business Auxiliary Service.4. Interest and Penalty under Sections 75, 76, and 77 of the Finance Act, 1994.Issue-wise Detailed Analysis:1. Applicability of Service Tax Exemption under Notification No. 25/2012:The appellant provided services of fixing and laying pipelines for water supply and drainage to the Surat Municipal Corporation (SMC). The appellant claimed exemption from service tax under Notification No. 25/2012, which exempts services provided to the government or its agencies. The department argued that since SMC charges for water supply, the services fall under the category of work contract service and are not exempt. However, the Commissioner (Appeals) found that the services provided by the appellant to SMC, a local authority, were covered under the exemption notification as they were not for commercial purposes but for fulfilling statutory duties. The Tribunal upheld this view, citing the Gujarat High Court's decision in a similar case, which emphasized that services for public utility, even if a small portion is charged commercially, are exempt.2. Classification of Services Provided by the Appellant:The department classified the services under 'Erection, Commissioning or Installation Services' (ECIS), arguing that the services were not exempt as per the negative list. The Tribunal, however, found that the services did not fall under ECIS. The Tribunal referred to previous judgments, including the Larger Bench decision in Lanco Infratech Ltd., which clarified that laying pipelines for water supply or sewerage for government projects is not taxable under ECIS if not primarily for commercial purposes. The Tribunal determined that the services were non-commercial and exempt under the notification.3. Demand of Service Tax under Business Auxiliary Service:The department also raised a demand under Business Auxiliary Service for sales commission received by the appellant from certain companies. The appellant contended that the specific sub-clause under which the tax was demanded was not identified. However, the Tribunal found that sufficient clarity was provided in the Show Cause Notice regarding the charge under Business Auxiliary Service. Therefore, the demand under this category, along with interest and penalties, was upheld.4. Interest and Penalty under Sections 75, 76, and 77 of the Finance Act, 1994:The original order invoked penalties under Sections 76 and 77 and interest under Section 75 for the service tax demand. However, since the primary demand under ECIS was set aside, the Tribunal did not delve into these contentions. The penalties and interest related to the Business Auxiliary Service demand were upheld, consistent with the confirmation of the service tax demand under that category.In conclusion, the Tribunal dismissed the revenue's appeal, affirming the exemption of the appellant's services under Notification No. 25/2012 and setting aside the service tax demand under ECIS. The demand under Business Auxiliary Service was confirmed, along with the associated interest and penalties.