Laying of Pipelines is Not Subject to Service Tax Levy
Recently Mumbai CESTAT in the matter of Surindra Engineering Co. Ltd vs. CCE, Mumbai 2014 TIOL 2007 CESTAT MUM, the has 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. Though the department has filed an appeal before the Hon'ble High Court of Madras against the said decision, no stay has been obtained by the department in respect of the said decision.
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.