TaxTMI 
TaxTMI 
2010 (8) TMI 54
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....water in the State of Gujarat. As the appellant was not paying any service tax on the said service, investigations were conducted at their end. It was revealed that the contract for laying long distance pipe lines for transfer of water in the State of Gujarat was awarded to them by M/s. Gujarat Water Supply and Sewerage Board (herein after referred as GWSSB), an independent body constituted under the Gujarat Act No. 18 of 1979, which is called as Gujarat Water Supply and Sewerage Board Act, 1978. As the Revenue entertained a view that services being provided by the appellant to M/s. GWSSB are covered by the category of "Commercial or Industrial Construction Service", they carried on further investigation to find out the status of GWSSB. Statement of various persons were recorded during the course of investigations and on the basis of which proceedings were initiated against the appellant by way of issuance of show cause notice dated 10,10.2007 for the period June 2005 to March 2007 for recovery of service tax under the category of Commercial or Industrial Construction Services. The said show cause notice stands culminated into an impugned order passed by Commissioner, 3. We have....
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....arified that the said body is an establishment for rapid development and proper regulation of water supply and sewerage activity in the State of Gujarat, The source of water for supply by the said establishment is either its own in terms of Well/ Tube-well or stand purchased from Sardar Sarovar Narmada Nigam Limited (herein after referred as SSNNL for short), irrigation department or from M/s. Gujarat Water Infrastructure Limited (herein after referred as GWIL). In the pipeline project installed under the Sujalam Suflam Yojna, based on the Narmada canal, the water is either received from SSNNL or from GWIL and is purchased at the rate of Rs. 1 per 1000 liters. He further clarified that the rural and urban people of the state are the ultimate customers and the charges are being recovered at a very nominal subsidized rates as per norms of the Government of Gujarat fixed from time to time. The recovery from the rural people is at the rate of Rs. 14 per head annually, which keep on varying as per the new guidelines fixed by the Govt. of Gujarat. He also further disclosed the manner of grant of contracts etc. for laying of pipelines. He submitted the copies of annual accounts etc. 8.....
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....spose of property, both movable and immovable and to contract, and may sue or be sued by its corporate name. As per Section 14 and 15 of the said of 1978, the GWSSB has to render all necessary services in regard to water supply and sewerage to the State Government and local bodies and on request to private institutions or individuals also. As per Section 42 (2) of the GWSSB Act, 1978 they are suppose to prepare balance sheet. These ingredients clearly prove that GWSSB is a body corporate and therefore, the services provided by the GWSSB would not come within the ambit of "sovereign function" 15.4 It is found that for supplying the water, GWSSB has either its own source of water in the form of wells/ tubewells or it purchases water from Sardar Sarovar Narmada Nigam Limited, Irrigation Department or from M/s. Gujarat Water Infrastructure Limited. Shri B.K. Shingala, Chief Engineer of GWSSB in his statement has stated that in the pipeline projects installed under the Sujalam Sufalam Yojna, based on the Narmada Canal, the water is ether received from SSNNL or GWIL They purchase water @ Rs. 1/- per 1000 Liters from SSNNL or at the rate declared by GWIL or as per the guidelines fixed ....
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.... both the sides, we find that there is no dispute about the legal position that the category of service of "Commercial or Industrial Construction" creates liability to pay service tax on the construction activities if the pipelines or conduits are used or to be used primarily for Commerce or Industry. The Board circular No. 116/10/2009-ST dated 15.09.2009 has clarified that canals constructed by the Government or under Government projects are not liable to service tax under Commercial or Industrial Construction service. For better appreciation, we reproduce Para 2 of the said circular :- "2. Thus the essence of the definition is that the "Commercial or Industrial construction service" is chargeable to service tax if it is used, occupied or engaged either wholly or primarily for the furtherance of commerce or industry. As the canal system built by the Government or under Government projects, is not falling under commercial activity, the canal system built by the Government will not be chargeable to service tax. However, if the canal system is built by private agencies and is developed as a revenue generating measure, then such construction should be charged to service tax." In....
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.... in the State; (k) to carry out applied research for efficient discharge of the duties and functions of the Board; (I) to perform such of the duties and functions, which are being performed by the Gujarat Public Health Engineering Service, as may be specified, from time to time; (m) to perform and discharge such other duties and functions as are allotted to the Board under other provisions of this Act or as may be entrusted to it by the State Government." The perusal of the above duties and functions of the Board clearly show that sale of water is not the primary function of the Board. It is also clear that the water purchased by the Board is being distributed to rural and urban areas for the purpose of irrigation and drinking at different rates which are subsidized and even the operating cost also does not stand recovered by them. To setup an establishment for water supply is a part of the duties and functions of the State to provide its citizens with a better living. In these circumstances, it cannot be held that laying of pipelines for the Board is for the purpose of undertaking any commercial activities by the Board, and the appellant would be covered by said servic....