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Commercial or Industrial Construction Service - Laying of pipelines for water

supply projects run by Gujarat Water Supply and Sewerage Board, not leviable

to ta! C"S#$#

$%&"'$B$', ("B )*, +))! #%"appellant entered into a contract with M/s Gujarat

Water Supply & Sewerage Board ( GWSSB ) for the work of design, uild, operate

contract for distriution of water under Mehsana !istrict Water Supply Sche"e# $n the

i"pugned order, it has een held that the work e%ecuted y the appellant is classialeas 'co""ercial or industrial construction serice' and liale to Serice a% w#e#f #

*+#+#-# .n this ground, de"and for Serice a% of s#*,00,*,12+ /3 has een conr"ed

with interest as applicale and penalty to the e%tent of 4 percent of Serice a% has

een i"posed under Section 25 of 6inance 7ct, *881 and further penalty has also een

i"posed under Section 2+ of 6inance 7ct, *881#

he issue efore the riunal is whether y purchasing water at one rate and selling at

higher rates, the pipeline constructed can e said to e used or to e used pri"arily for

co""erce or industry so that the actiity undertaken y 9& for GWSSB eco"es liale

to Serice a%#

he 7docate on ehalf of the appellant relied upon the decision of the riunal in the

case of M/s :agarjuna ;onstruction ;o# 9td# (wherein the riunal had

considered the ery sa"e issue# $n that case also, the pipeline was laid for GWSSB # he

riunal took a iew that laying of pipeline for GWSSB for supply of water is not ta%ale

ecause the pipeline was laid under the contract was not for co""erce or industry# he

riunal, in that case, categorically rejected the argu"ent that GWSSB was engaged in

co""ercial actiity ecause it was purchasing water at one price and selling at higher

price to others#

he S! , on the other hand, su"itted that the decision of the riunal in the case ofM/s :agarjuna ;onstruction ;o# 9td# was rendered, relying upon the riunal?s decision in

the case of M/s $ndian @u"e Aipe ;o# 9td#,reported in3# $t was su"itted that the

oseration of the riunal that water supply project eing infrastructure facility and ciic

a"enity proided y State in pulic interest, not an actiity of co""erce or industry was

only .iter dicta# $n that case, the riunal was dealing with the scope of ley on

'erection, co""issioning or installation' serice and the riunal had clearly co"e to the

conclusion that the serice proided in that case was not coered y any of the three

e%pressions used in the serice and therefore the oseration aout water supply project

had no releance to the issue to e decided#

he second su"ission "ade y the S! in this regard was that the decision in the case

of M/s :agarjuna ;onstruction ;o# 9td cannot e applied as the riunal had not

considered the "eaning of 'co""erce' in detail# $t was su"itted that for deciding the

issue, the "eaning of the word 'co""erce' was sine3ua3non# 6ro" the plain reading of

the denition of the serice, it is apparent that any serice receier irrespectie of its

status or denition or co"position, if utiliCing the pipeline for 'co""erce' or 'industry'

will render the serice proider liale for Serice a%#

6irst of all, riunal found the clai" of the learned S! that the riunal did not consider

the "eaning of 'co""erce' while rendering the decision in the case of M/s :agarjuna

;onstruction ;o# 9td case, is not correct# he riunal did consider whether the actiitywas 'co""erce' or not# he riunal took a iew that since the eenue was less than

*/0rd of the cost incurred, the pipeline was not laid to facilitate any co""ercial actiity#

$n Aaragraph 5#*, it was held that laying of pipeline was not industrial actiity#

http://www.taxmanagementindia.com/visitor/detail_case_laws.asp?ID=77684&t=NAGARJUNA+CONSTRUCTION+CO.+LTD.+Versus+COMMR.+OF+C.+EX.%2C+HYDERABAD+-+2010+(5)+TMI+232+-+CESTAT%2C+BANGALOREhttp://www.taxmanagementindia.com/visitor/detail_case_laws.asp?ID=30780&t=INDIAN+HUME+PIPE+CO.+LTD.+Versus+CCE%2C+TRICHY+-+2008+(7)+TMI+71+-+CESTAT%2C+CHENNAIhttp://www.taxmanagementindia.com/visitor/detail_case_laws.asp?ID=30780&t=INDIAN+HUME+PIPE+CO.+LTD.+Versus+CCE%2C+TRICHY+-+2008+(7)+TMI+71+-+CESTAT%2C+CHENNAIhttp://www.taxmanagementindia.com/visitor/detail_case_laws.asp?ID=77684&t=NAGARJUNA+CONSTRUCTION+CO.+LTD.+Versus+COMMR.+OF+C.+EX.%2C+HYDERABAD+-+2010+(5)+TMI+232+-+CESTAT%2C+BANGALORE

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Since the riunal had considered and held that the pipeline was not used or to e used

pri"arily for co""erce or industry, and the riunal had also considered the "eaning of

'co""erce' or 'industry', the ench osered, ??we would e ound y ;o3ordinate

Bench decision and judicial discipline reuires that we follow the sa"e?? #

Whether GWSSB can e categoriCed as an industry or not, is not releant at all# $n fact,

the S! hi"self has su"itted that the denition of the serices does not talk aout the

status or the denition of the serice receier# 7ny serice receier irrespectie of itsstatus or denition or co"position, if utiliCing the pipeline for co""erce or industry, will

render the proider liale to Serice a%# herefore, strictly speaking, y eenue?s own

su"issions, the status of GWSSB is not releant# :eertheless, this issue as to whether

the GWSSB can e considered as a co""ercial organiCation, was discussed in detail in

M/s :agarjuna ;onstruction ;o# 9td case and this ench agreed with the iews taken in

that case#

he ne%t uestion that is to e answered is whether the pipeline can e said to hae

een used or used pri"arily for co""erce or industry# he only point that has een

stressed y the eenue is that the GWSSB is uying water at the rate of e#* /3 per ltr

and selling at s#4 /3 per ltr to s# *-/3 per ltr # he denition uses words 'used for

co""erce' or 'pri"arily used for co""erce'# his would "ean that# eenue is reuired

to show that the purpose of construction of pipelines is for 'co""erce' or 'pri"arily for

co""erce'# ';o""erce' would "ean uying and selling not necessarily for prot

according to eenue# But, the uestion here is the purpose of uying water y GWSSB

was for selling or not# .iously, the purpose of uying water and ringing it fro"

:ar"ada !a" was not for selling it, ut for supplying it to needy people# $n this case,

uying and selling is incidental# he purpose is supply of water to the needy citiCens of

the State# he ter" used 'for co""erce' would "ean that only purpose would e uying

and selling, which is denitely not the case here# he ter" used 'pri"arily for

co""erce' would "ean that pri"ary purpose should e uying and selling and the other

purposes also "ay e sered incidentally# $n this case, purchase and sale of water are

incidental and the "ain purpose is supply of water to needy citiCens of the State#

$n iew of the aoe discussion, the Bench did not nd any reason to disagree with the

iews already taken y the ;oordinate Bench of this riunal in case of M/s :agarjuna

;onstruction ;o# 9td# 7ccordingly, the i"pugned order cannot e sustained and is set

aside#

$n iew of the fact that the appeal is allowed on "erit, there is no need to discuss the

applicaility of e%tended period and the uestion of i"position of penalty also does notarise# 6or the sa"e reason, other grounds canassed 3 the serice is Works ;ontract and

therefore was not liale to Serice a% earlier, is also not reuired to e considered# $n

iew of the aoe discussion, we do not consider it necessary to consider other issues

raised or decisions cited#

$n the result, appeal is allowed with conseuential relief#