FRESH WATER SUPPLY INCOME

[Haresh Raithatha]

ONE OF OUR CLIENT IS ENGAGED IN BUSINESS OF PROVIDING FRESH WATER BY TANKERS TO BARGES AND FOR OTHER FABRICATION WORK FOR CONSUMPTION PURPOSE. HE HAS NOT CHARGED SERVICE TAX ON INCOME BILL MADE FOR FRESH WATER SUPPLY BECAUSE HE CHARGES FOR COST OF WATER AND NOT TANKERS. THE RATE CHARGED PER TANKER IS RS. 2800 FOR BIG TANKERS AND RS. 1500 FOR SMALL TANKERS.

HE HAS RECEIVED NOTICE FROM SERVICE TAX DEPARTMENT THAT HE HAS NOT PAID SERVICE TAX ON SUPPLY OF FRESH WATER TO THE BARGES MENTIONING THAT THE SAID SERVICE FALLS UNDER CATEGORY OF PORT SERVICES.

KINDLY GUIDE IN THIS MATTER, WHETHER SERVICE TAX IS APPLICABLE OR NOT?

THANKING YOU IN ADVANCE.

[KASTURI SETHI]

The Department's objection is right. See Board's Circular No.B/11/1/2001-TRU dated 9.7.2001.Para No.2.1(i) refers. Also read the following case laws:-

JAISU DREDGING & SHIPPING VERSUS COMMISSIONER OF CENTRAL EXCISE, RAJKOT  [ 2014 (1) TMI 93 - CESTAT AHMEDABAD ]

WESTERN AGENCIES PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2008 (8) TMI 90 - CESTAT, CHENNAI ]

[KASTURI SETHI]

Since Board's circulars are binding on the department's officers, so there is every likelihood that the demand will be confirmed. As per Section 73(8) of CGST Act, 2017, the party can save penalty, if tax is paid along with interest within thirty days from the date of issue of show cause notice.

AI Summary

Port services classification makes tanker supplied fresh water taxable; pay tax and interest to mitigate penalties. Supply of fresh water by tankers to barges is classified as port services and attracts service tax per Board Circular No. B/11/1/2001-TRU (para 2.1(i)) and supporting tribunal precedents; characterization as mere recovery of water cost does not negate taxability. Board circulars bind departmental officers, and payment of tax with interest within thirty days of a show cause notice can avert penalty under the transitional provision analogous to Section 73(8) CGST Act, 2017.