The Commissioner of CGST And Central Excise, Surat Versus M/s BMS Projects Private Ltd.
Service Tax
2017 (9) TMI 1386 – GUJARAT HIGH COURT – 2018 (8) G. S. T. L. 13 (Guj.)
GUJARAT HIGH COURT – HC
Dated:- 21-9-2017
Tax Appeal No. 717 of 2017
Service Tax
MR. AKIL KURESHI AND MR. BIREN VAISHNAV, JJ.
For The Appellant : MR ANKIT SHAH, ADVOCATE
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Department has filed this appeal to challenge the judgment of CESTAT dated 30.01.2017. Following questions are presented for our consideration:
“i) Whether the activities of M/s GWSSB i.e. purchasing and selling water falls within the meaning of 'commerce' or a 'commercial activity' as defined under 'Commercial or Industrial Construction Service' in Sec. 65 (25b) of Chapter V of the Finance Act, 1994?
ii) Whether the activities of M/s GWSSB and its status as an 'industry' under Industrial Disputes Act, 1947 falls within the meanin
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nces of the case, CESTAT was justified in setting aside the Order in Original passed by the Commissioner and in allowing the appeal filed by M/s BMS Projects Pvt. Ltd. ?
2. Respondent is engaged in providing construction services, for which purpose, it is registered in the category of commercial or industrial construction service with the Central Excise Authorities. Issue pertains to levy of service tax on the service provided by the respondent in laying down long distance pipelines for transfer of drinking water in the State of Gujarat pursuant to a contract awarded by Gujarat Water Supply and Sewerage Board ('GWSSB' for short). The stand of the department is that 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
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plan and implement the drinking water supply and sanitation policy and to operate and maintain the water supply schemes to develop human resources for the effective implementation of programmes among others. It was noted that GWSSB was created under statute. It was not enacted under a trade or commerce and was engaged solely in supplying potable water to supply different parts of the State. It was noted that only a small portion of the water is supplied to the industries at a higher cost. Such sale was merely incidental and ancillary to their main objective. The Tribunal noted that 90% of the water supplied by the Board was to the Gram Panchayats, Nagar Palikas and Nagar Panchayats at a non commercial rate. The Board did not have any profit motive in carrying out such activities. In this context, the Tribunal noted the definition of commercial or industrial construction service provided under section 65(25b) of the Act, which reads as under:
'Commercial or Industrial Constructio
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ontext of our case, as per this definition therefore, a service to be included within the meaning of commercial or industrial construction services, different activities specified in clauses
(a) to (d) thereof are such which are used 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 proc
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are being performed by the Gujarat Public Health Engineering Services, as may be entrusted to it by the State Government.”
4. In that context, the Tribunal was of the view that GWSSB discharged an important duty and responsibility of providing drinking water to the people, industries etc. The Board was constituted mainly to supply drinking water and maintenance of sewerage system. The usage charges recovered by the Board from Gram Panchayats, Nagar Palikas and Nagar Panchayats are at highly subsidized rates and therefore, cannot be considered as an industry in the sense that the said word is used in the definition of taxable entry. The Board was sustaining on the grants released by the State Government. It was therefore concluded that the pipelines were not laid to facilitate any commercial or industrial activity.
5. We are broadly in agreement with the view of the Tribunal. The Tribunal noted the purpose for which the Board was constituted and its nature of activities. The pipeline
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