GRAPHITE INDIA LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE appeal arises from Order -in -Original No. 10/ST/2008, dated 30 -12 -2008 passed by the Commissioner of Central Excise & Customs, Nashik. Vide the impugned order, a Service Tax demand of Rs. 1,04,77,307/ - has been confirmed on the appellant M/s. Graphite India Ltd. for the period 16 -6 -2005 to 31 -3 -2008 in respect of Commercial or Industrial Construction Services undertaken by them for M/s. Gujarat Industrial Development Corporation. Further interest has been levied on the said Service Tax demand confirmed apart from imposing equivalent amount of penalty under Section 78 of the Finance Act, 1994. Aggrieved of the same, the appellant is before us. The brief facts of the case are as follows: -

(2.) THE learned Counsel for the appellant submits that GIDC is a Government of Gujarat Undertaking and its main objective is establishing and organizing industrial estates and commercial centres. As part of this activity, they are required to provide amenities such as roads, supply of water or electricity, street lights, drainage, sewerage etc. and such activities are basically creation of infrastructure and, therefore, cannot be considered as commercial or industrial in nature. In the present case, pipelines have been laid for providing water supply through GIDC compound, Versa to GIDC, Waterway at Dahej and providing water supply would not come under the category of Commercial or Industrial Construction. It is his further contention that the C.B.E. & C. vide Circular No. 80/10/2004 -S.T., dated 17 -9 -2004 had clarified that the tax is limited only in case the service is provided by a commercial concern. Similarly, vide Circular No. 116/10/2009 -S.T., dated 15 -9 -2009, the C.B.E. & C. had clarified that canal system built by the Government will not be chargeable to Service Tax as it does not come under the commercial or industrial construction activity. In view of the Circulars, the appellant was under the bona fide belief that they were not liable to pay any Service Tax on the construction of pipelines for GIDC. He further relies on the decision of this Tribunal in the case of Dinesh Chandra Agarwal Infracon P. Ltd. - : 2011 (21) S.T.R. 41 (T), PSL Ltd. -2013 (31) S.T.R. 570 (T), Nagarjuna Constructions -2010 (19) S.T.R. 259 (T), wherein this Tribunal has held that laying of pipelines for water supply will not amount to commercial activity and, therefore, Service Tax is not attracted on laying of pipeline for water supply. It is his further contention that the department was well aware of the activities undertaken by the appellant as early as 2005 when Service Tax was demanded on the said activity vide letter dated 18 -1 -2005 under the category of Testing and Analysis Services'. The department had also undertaken audit of the records from time -to -time and, therefore, the extended period of time could not have been invoked for confirmation of Service Tax demand. It is his further contention that since the appellant bona fidely believed that the activity undertaken did not amount to 'Commercial or Industrial Construction', there was a reasonable cause for his failure to pay Service Tax and hence, penalty should be waived invoking the provisions of Section 80 of the Finance Act, 1994. Accordingly, he pleads for setting aside the impugned order and allowing the appeal.

(3.) WE have carefully considered the submissions made by both sides.