Laying of telecom cables alongside roads found outside taxable service; works contract classification leads to appeal allowed.

Laying of telecom cables under or alongside roads falls outside taxable service under the service-tax definition, following Circular No.123/5/2010-TRU which excludes such activity. The contractors' activities were held to be works contract services characterized as composite contracts involving supply of materials and labour; therefore the Supreme Court precedent on composite works contracts applies and supports non-taxability. The impugned demand was set aside and the appeal allowed, with consequential relief as per law.

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Issues: Whether laying of cables under or alongside roads by the service provider for telecom operators is leviable to service tax.

Analysis: The issue was examined with reference to the statutory scope of taxable services under Section 65(105) of the Finance Act, 1994 and the administrative clarification issued by the Board in Circular No.123/5/2010-TRU dated 24.05.2010 which specifies the tax status of activities such as laying of cables under or alongside roads. The analysis applied the legal characterisation of the service rendered - whether it falls within 'commercial or industrial construction service', 'erection, commissioning or installation services', or remains outside the scope of taxable services - and considered classification of the contracts as works contracts or composite contracts involving supply of materials and labour. Prior Tribunal decisions applying the Board circular to laying of optical fibre and similar activities were followed.

Conclusion: Laying of cables under or alongside roads by the service provider is not a taxable service under Section 65(105) of the Finance Act, 1994; the impugned order is set aside and the appeal is allowed in favour of the assessee.

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