Laying of Pipelines is Not Subject to Service Tax

Mum­bai CESTAT in the mat­ter of Surindra Engi­neer­ing Co. Ltd vs. CCE, Mum­bai 2014 TIOL 2007 CESTAT MUM, held that unless the activ­i­ty under­tak­en results in the emer­gence of an “erect­ed, installed and com­mis­sioned plant, machin­ery, equip­ment or struc­ture”, the activ­i­ty will not come under the cat­e­go­ry of erec­tion, com­mis­sion­ing and instal­la­tion service.

In this case, the Appel­lant under­took man­u­fac­ture and sup­ply of pipes to Maha­rash­tra Jee­van Prad­hikaran and as per the con­tract, apart from the sup­ply of pipes they were also required to under­take the activ­i­ty of lay­ing, con­nect­ing, joint­ing pipeline for water sup­ply projects till the stage of test­ing and com­mis­sion­ing of raw and pure water by pump­ing machin­ery and in the view of the depart­ment, the said activ­i­ty of 1the Appel­lant was clas­si­fi­able under “erec­tion, instal­la­tion and com­mis­sion­ing service”

There­after, The Bench observed The facts of the present case are more or less iden­ti­cal with the facts in the Indi­an Hume Pipes Co. Ltd. case where­in it was held that lay­ing of pipeline for water sup­ply projects will not come under the cat­e­go­ry of erec­tion, com­mis­sion­ing and instal­la­tion service.

Fur­ther the same view was tak­en by this Tri­bunal in the case of Hyundai Heavy Indus­tries Co. Ltd. 2013-TIOL-1370-CESTAT-MUM where­in it was held that lay­ing of sub­ma­rine pipelines would not come with­in the purview of erec­tion, com­mis­sion­ing and instal­la­tion ser­vice. Fur­ther, in the case of PSL Ltd. this Tri­bunal not­ed that lay­ing of pipelines for water sup­ply projects would come under the “con­struc­tion ser­vice” and since only com­mer­cial con­struc­tion is liable to ser­vice tax and the pipelines for water sup­ply are not com­mer­cial activ­i­ties, the same would not be taxable.

Accord­ing­ly, the demand of Ser­vice tax under erec­tion, com­mis­sion­ing and instal­la­tion ser­vice on the activ­i­ty of lay­ing of pipeline was set aside by the CESTAT.