Commercial or Industrial Construction Service does not cover public water-supply pipelines where the activity is a statutory utility function.

Laying pipelines for the Gujarat Water Supply and Sewerage Board was not taxable as Commercial or Industrial Construction Service because the pipelines were not used primarily for commerce or industry and the service provider was not engaged in a commercial activity. The Board's statutory role was to develop and regulate public water supply and sewerage as a public utility, with water supplied at subsidised rates and operating costs not fully recovered. A departmental circular also indicated that canal systems built under Government projects were outside the charge where they were not part of a commercial activity. Service tax was therefore not leviable.

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Issues: Whether laying of pipelines for the Gujarat Water Supply and Sewerage Board was a taxable service under the head of Commercial or Industrial Construction Service, so as to attract service tax.

Analysis: Liability under the relevant service tax entry arose only if the pipeline or conduit was used, or was to be used, primarily for commerce or industry, and the service provider was a commercial concern. The Board was constituted under a statute to develop and regulate water supply and sewerage services in the State. Its functions showed that supplying water to the public and local bodies was a public utility activity, not a primary commercial venture. The water was supplied at subsidised rates, and the operating cost itself was not recovered. The Board circular also clarified that canal systems built by the Government or under Government projects were not chargeable as commercial construction where they were not part of a commercial activity.

Conclusion: The pipeline work was not used for commerce or industry, and the service rendered by the appellant did not fall within Commercial or Industrial Construction Service. Service tax was therefore not leviable.

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