Custom, Excise & Service Tax Tribunal
Gammon India Ltd vs Commissioner Of Service Tax, Mumbai-I on 2 April, 2014
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT No. I APPEAL No. ST/695/11-Mum (Arising out of Order-in-Original No. 339/23/V/2011/COMMR/KS/ST dated 2.11.2011 passed by Commissioner of Central Excise, Mumbai-V) For approval and signature: Honble Mr. S.S. Kang, Vice President Honble Mr. P.K. Jain, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Gammon India Ltd. Appellant Vs. Commissioner of Service Tax, Mumbai-I Respondent Appearance: Shri Prakash Shah, Advocate, for appellant Shri V.K. Agarwal, Additional Commissioner (AR), for respondent CORAM: Honble Mr. S.S. Kang, Vice President Honble Mr. P.K. Jain, Member (Technical) Date of Hearing: 2.4.2014 Date of Decision: 2.4.2014 ORDER NO Per: S.S. Kang Heard both sides.
2. The appellant filed this appeal against the impugned order passed by the Commissioner of Central Excise whereby a demand of Rs.5,72,39,249/- is confirmed with interest on the ground that the appellant provided commercial or industrial construction service. A penalty of equal amount is also imposed under Section 78 of the Finance Act.
3. The brief facts of the case are that the appellant entered into a contract with Gujarat Water Supply and Sewerage Board for laying long distance pipelines for transport of water within the Surendranagar District in the State of Gujarat. The Revenue issued a show cause notice demanding service tax on the ground that the appellant had provided commercial and industrial construction service as provided under Section 65(25b) of the Finance Act, 2005.
4. The learned counsel appearing on behalf of the appellant submitted that this issue is already settled by the following decisions of the Tribunal:-
(i) Nagarjuna Construction Co. Ltd. vs. CCE, Hyderabad reported in 2010 (19) STR 259;
(ii) Dinesh Chandra Agarwal Infracon P. Ltd. vs. CCE, Ahmedabad reported in 2011 (21) STR 41;
(iii) Larsen & Toubro Ltd. vs. CST, Ahmedabad reported in 2011 (22) STR 459.
5. The contention of the appellant in the case of Larsen & Toubro Ltd. (supra) is that the Gujarat Water Supply and Sewerage Board placed work order for laying pipelines and the demand is made on the same grounds as in the present case and the Tribunal set aside the order confirming the demand and imposing penalties. The Tribunal held as under:-
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 that just because Government fixes the rate and there is a cross-subsidy, the charges cannot be said to be non-commercial.
(ii) It was also said that GWSSB was covered under Industrial Dispute Act, 1947 and therefore is industry.
(iii) GWSSB was authorized to raise money and also to give loans to Government or local bodies. Therefore, it can be seen that GWSSB is functioning like any commercial entity by raising money from banks and financial institutions, advancing loans and recovering interest for the same. The very fact that advancing loans is one of the objective behind setting up of GWSSB, GWSSB is meant for generating services and earning profit on its activities.
16.?Whether GWSSB can be categorized as a industry or not, is not relevant at all. In fact, the learned SDR himself has submitted that the definition of the services does not talk about the status or the definition of the service receiver. Any service receiver irrespective of its status or definition or composition, if utilizing the pipeline for commerce or industry, will render the provider liable to Service Tax. Therefore, strictly speaking, by Revenues own submissions, the status of GWSSB is not relevant. Nevertheless, this issue as to whether the GWSSB can be considered as a commercial organization, was discussed in detail in M/s. Nagarjuna Construction Co. Ltd. case and we agree with the views taken in that case. The Gujarat Act No. 18 of 1979, under which GWSSB was set up has a preamble which reads as An Act to provide for the establishment of a Water Supply & Sewerage Board for the rapid development and proper regulation of water supply and sewerage services in the State of Gujarat. The responsibility of the Board is rapid development and proper regulation of water supply and sewerage services and not commercial or industrial activity. The provision in the act enabling the Board to borrow money or lending money or receiving grant for entering into contract, have been incorporated to serve the purpose for which the Board has been set up. The objective is to execute water supply and sewerage work for the benefit of both rural and urban communities as mentioned by Member Secretary in his letter dt. 14-6-07. A perusal of the Annual Report of the company would show that there is no profit and loss account at all which would be found in any organization, which 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 whether the pipeline can be said to have been used or used primarily for commerce or industry. The only point that has been stressed by the Revenue is that the GWSSB is buying water @ Re. 1/- per ltr. and selling at Rs. 2/- per ltr. to Rs. 15/- per ltr. The definition uses words used for commerce or primarily used for commerce. This would mean that Revenue is required to show that the purpose of construction of pipelines is for commerce or primarily for commerce. Commerce would mean buying and selling not necessarily for profit according to Revenue. But, the question here is the purpose of buying water by GWSSB was for selling or not. Obviously, the purpose of buying water and bringing it from Narmada Dam was not for selling it, but for supplying it to needy people. In this case, buying and selling is incidental. The purpose is supply of water to the needy citizens of the State. The term used for commerce would mean that only purpose would be buying and selling, which is definitely not the case here. The term used primarily for commerce would mean that primary purpose should be buying and selling and the other purposes also may be served incidentally. In this case, purchase and sale of water are incidental and the main purpose is supply of water to needy citizens of the State.
6. The ratio of the above decision is fully applicable on the facts of the present case. In view of the above decision, the impugned order is set aside and the appeal is allowed.
(Dictated in Court) (P.K. Jain) Member (Technical) (S.S. Kang) Vice President tvu 1 4