The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that the commercial or industrial construction services undertaken for the government for non-commercial purposes were not liable to pay service tax.
G S Dodia, the appellant assessee undertook the activity of conducting repairs of pipelines used for transporting drinking water, along with maintenance and repairs of civil structures and all these activities were undertaken for the Gujarat Water Supply and Sewage Board & Gujarat Water Resources Development Corporation.
The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the service tax demand of Rs. 2,00,06,391/- along with the imposition of penalty and interest.
Amal Dave, the counsel for the assessee contended that the activity undertaken by the assessee was classifiable under Commercial and Industrial Construction Service whereby there was a specific entry covering Repair, alteration, renovation, or restoration of, or similar services concerning, building or civil structure, pipeline or conduit.
Further submitted that the show cause notice did not specify the appropriate clause under which the demand was proposed to be raised, the demand being vague could not have been confirmed.
Prabhat K. Rameshwaram, the counsel for the department relied on the decisions made by the lower authorities and contended that the Commissioner classified the activities under Management, Maintenance or Repair Service and confirmed the Service tax under such category of service and the classification of the activities like Repair, alteration, renovation or restoration of, or similar service with, building or civil structure, pipeline or conduit.
The Bench observed that the activity was undertaken for the government and was concerning providing drinking water to villages, which is a sovereign function of the State, the activity was not eligible for Service tax.
The two-member bench comprising Ramesh Nair (Judicial) and C.L Mahar (Technical) remanded back the matter to the adjudicating authority for re-adjudication and reconsider the entire matter based on the Judgments which were passed much after the impugned order.
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