TaxTMI 
TaxTMI 
2023 (11) TMI 563
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.... has been held that service of laying of pipeline and installation of pumping station provided to Gujarat Water Supply & Sewerage Board (GWSSB) is not Industrial or Commercial Construction Service. Accordingly, the same is not taxable under the said head. In support, he placed reliance on the following judgments: • Commissioner of CGST & C.Ex. Surat Vs. BMS Projects Pvt. Ltd.- 2018 (8) GSTL 13 (Guj.) • Dinesh Chandra Agarwal Infracon P. Ltd. Vs. CCE, Ahmedabad 2011 (21) STR 41 (Tri.- Ahmd.) • Larsen & Toubro Ltd. Vs. Commissioner of Service Tax, Ahmedabad- 2011 (22) STR 459 (Tri.- Ahmd.) • Nagarjuna Construction Co. Ltd. Vs. Commr. Of C. Ex., Hyderabad- 2010 (19) STR 259 (Tri.-Bang.) 4. On the careful consideration of the submission made by both the sides and perusal of record, we find that as per the fact the appellant have provided the service of laying of pipeline for the project of Gujarat Water Supply & Sewerage Board (GWSSB). The laying of pipeline for the government cannot be considered as Industrial or Commercial Construction Service. This issue has been considered in the following judgments: • In the case ....
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.... such service is taxable service under the category of commercial and industrial construction service as defined under Section 65(25b) of the Finance Act, 1994 (hereinafter to be referred to as 'the Act' for short). When such demand was confirmed by the Commissioner, the assessee approached the Tribunal. The Tribunal by the impugned judgment reversed the decision of the Commissioner by relying on two decisions of the Tribunal involving similar issues in case of Dinesh Chandra Agarwal Infracon P. Ltd. v. C.C.E., Ahmedabad reported in 2011 (21) S.T.R. 41 (Tri.-Ahmd.) and in case of Larsen & Toubro Ltd. v. Commissioner of Service Tax, Ahmedabad, reported in 2011 (22) S.T.R. 459 (Tri.-Ahmd.). The Tribunal has not recorded its independent detailed reasons but primarily relied on the earlier decisions on the issue. Learned counsel for the department has made available a judgment of Bangalore bench of the Tribunal in case of Nagarjuna Construction Co. Ltd. v. Commr. of C.Ex., Hyderabad reported in 2010 (19) S.T.R. 259 (Tri.-Bang.), in which similar issue came up for consideration and was discussed at length. We have perused such judgment in which, the Tribunal has analyzed the constitutio....
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....d or to be used primarily for commercial or industry. In this context, the Tribunal noted that GWSSB was constituted under an Act for carrying out following duties and functions : "(a) To prepare, execute, promote and finance the schemes for supply of water and for sewerage and sewage disposal; (b) 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; (c) To prepare draft State Plans for water supply, sewerage and drainage on the directions of the State Government. (d) To assess the requirements of materials and arrange for their procurement and utilization; (e) To assess the requirements of materials and arrange for their procurement and utilization; (f) To establish State standards for water supply and sewerage services; (g) To review annually the technical, financial, economic and other aspects of water supply and sewerage system of every scheme of the Board of the local-bodies which have entered into an agreement with the Board; (h) To establish and maintain a facility to review and apprise....
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.... be used primarily for Commerce or Industry. The Board Circular No. 116/10/2009-S.T., dated 15-9-2009 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 fact the above legal position stands accepted by the Commissioner in his impugned order. However, he has held that GWSSB is engaged in the Commercial activities. 12. Examining the above issue, we refer to Gujarat Act No. 18 of 1979, u....
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....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 services by making him liable to payment of service tax. 14. At this stage, we also taken note of the Tribunal's decision in the case of M/s....
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....sessee on merits, we do not intend to pass any separate order on the plea of limitation. Appeal is disposed off accordingly." • In the case of Larsen & Toubro Ltd. this Tribunal has passed the following order: 14. Before we proceed to decide whether the pipeline laid in this case can be said to have been used or used primarily for commerce or not, it is necessary to deal with the submissions that GWSSB is a commercial organization and therefore the pipeline laid for them and used for carrying the water meant for sale to Panchayat, local body etc. can be said for "commerce". 15. The submissions made to support the view that GWSSB is a commercial organization in the impugned order and the submissions made before us are : (i) Water was purchased @ Re. 1/- per ltr. and sold from the price @ Rs. 2/- per ltr. to Panchayats to price @ Rs. 15/- per ltr to industrial units. Thus, water was being sold at a much higher rate and therefore just because the charges levied were fixed by Government, it does not take away the essential character of the activity, which is "commerce". The examples of the oil companies, power utility companies were cited to show....
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....is classifiable as commercial or industrial establishment. Further, the auditors have clearly observed that the balance sheet and Income-Expenditure account dealt with by this report comply with the accounting standards applicable to non-commercial and non-business entities. Enactment passed by peoples of representatives of Gujarat treats the purpose of the Board as Water Supply and Sewerage; Member Secretary considers the definition of Board as non-commercial one and facilitating supply of water; Annual Report has no profit and loss account; auditors clearly observe that annual report complies with the accounting standards applicable to non-commercial, non-business entities and have raised no objection to the procedure adopted by the Board. The annual report would have been placed before Government of Gujarat. Under these circumstances, we fail to understand how we can consider GWSSB as a commercial organization or the purpose of pipeline laid for them by various contractors as one for commerce i.e. to say to buy and sell water. The name of the scheme for which pipeline was laid was also Mehsana District Water Supply Scheme. 17. The next question that is to be answered is....