COMMISSIONER OF CENTRAL EXCISE, RAJKOT Vs. PSL LTD.

JUDGEMENT

(1.) COMMISSIONER of Customs & Central Excise, Rajkot has filed this appeal along with stay petition in the case of M/s. PSL Ltd. (Pipe Coating Division), against the order of the Commissioner (Appeals), Rajkot. On verification of the balance sheet for the year 2005 -2006 it was observed that the respondent had undertaken the job of laying the coated pipes on behalf of their customers M/s. Larsen & Toubro Ltd. The Revenue later found that they had not obtained the registration in the category of Erection, Commissioning and Installation. The original adjudicating authority on adjudication confirmed the demand of Rs. 4,36,720/ - towards Service Tax and imposed an equal amount of penalty and separate penalties under Sections 77 & 78. Commissioner (Appeals) set aside this order and allowed the appeal filed by the party.

(2.) THE main contention of the respondents was that they are not covered under the taxable head of Erection, Commissioning and Installation Services as defined under the Finance Act, 1994; that the clarification vide C.B.E. and C. Circular No. 62/11/2003 -S.T., dated 21 -8 -2003 dealing with installation and commissioning is applicable to them and accordingly the appellant are not undertaking any commissioning of the pipeline. They also stated that as per the clarification issued by the C.B.E. and C. vide Circular No. 80/10/2004, dated 17 -9 -2004 that government constructions will not be commercial in nature and hence not taxable. They relied upon the following case laws also :

(3.) COMMISSIONER (Appeals) set aside the impugned order and allowed the appeals filed by the party. While filing the appeal and stay petition the Revenue is of the view that the activity carried out by the party falls under the definition of erection, commissioning and installation as observed by Commissioner (Appeals) but did not find any reason to deviate from the lower authority. It was pointed out that the service provided by the assessee fell well within the definition of erection, commissioning or installation and therefore erred in placing reliance on the C.B.E. and C. circular dated 17 -9 -2004 and that the charging Section 66 of the Finance Act, 1994 read with clause (105)(zzd) and (39a) of Section 65 also does not provide for such definition or exclusion of levy. It is a fact that income of laying is not included in the assessable value of goods cleared at the factory gate, as the laying of pipes does not involve manufacturing activity. Therefore, the income of laying the pipes and making them ready for use is service, which has been provided by the noticee and is other than manufacturing activity. This activity of laying the pipes making it ready for use is covered under the service tax under the category of Erection, Commissioning and Installation as defined under Section 65(39a) of the Act and is taxable service under Section 65(105)(zzd) of the Act.