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TMI Blog2010 (5) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... that NCCL had engaged in providing 'Commercial or Industrial Construction Services' during the material period. He demanded service tax of Rs. 7,15,36,082/- (Rupees Seven crores fifteen lakhs thirty six thousand and eighty two only) along with applicable interest. He imposed penalty @ 2% on the demand confirmed against NCCL subject to the maximum of the tax demanded and another penalty of Rs. 8,00,00,000/- (Rupees Eight crores only) under Section 78 of the Finance Act, 1994 (the Act). In the appeal filed before us, NCCL has relied on CBEC Circular No. 80/10/2004-S.T. dated 17-9-2004, the pertinent portion of which reads as follows : "The leviability of service tax would depend primarily upon whether the building or civil structure is 'used, or to be used' for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been prepared to show that revenue generated by GWSSB was mostly (above 90%) on sale of water to Gram Panchayats and Nagar Palikas : Category of User Gross amount collected during 2005-2006 in Rs. Lakhs % of total Amount collected Remarks Nagar Palikas/Nagar Panchayats 1508.71 49.57% Supply of water to local bodies Gram Panchayats 1248.29 41.02% Supply' of water to rural areas Private Institutions/ Industries 286.31 9.41% Commercial use of water Total 3043.31 100% 2.1 The income from sale of water in fiscal 2005-2006 was Rs. 4101.89 lakhs, whereas the expenses towards operation and maintenance of water supply schemes was Rs. 13471.22 lakhs. GWSSB got a grant of Rs. 7481 lakhs. These financial records showed that the operations of GWSSB were not commercially viable, but for the grants from the Government. 3. The appellant argued relying on case law in MSCO Pvt. Ltd. v. Union of India [1985 (19) E.L.T. 15 (S.C.)] that since GWSSB was not engaged in manufacture of any goods, it was not a industry. The primary objective of laying the pipelines was to provide proper drinking water to the citizens. The Member Secretary of GWSSB had clarified thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or (d) repair, alteration, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is - (i) used, or to be used, primarily for; or (ii) occupies, or to be occupies, primarily with; or (iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams;" 6.1 As per the definition a pipeline unless deployed primarily in commerce or industry or work intended for commerce or industry will not be considered to be the outcome of the activity taxable under the entry 65(25b) viz., 'Commercial or Industrial Construction Service'. The thrust of the appellants' argument is that GWSSB is mainly engaged in providing drinking water to rural and urban communities without profit motive. We find from the Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporates raw water cost, filtration cost, pumping cost and all service charges related to this activity. The actual service cost has been, even if capital cost of infrastructure is not accounted, is high enough that the beneficiary people may not afford. However, with a view to create a sense of responsibility and awareness towards the services amongst the people for its economic use, the State Government has imposed a nominal charge to the beneficiary panchayat. However, it is not sufficient enough to recover even the operating cost. Thus, the Gujarat Water Supply and Sewerage Board cannot be treated as a commercial organization selling drinking water to the community. This is a service sector establishment for fulfilling the needs of the people for this basic requirement." 8. The impugned order has proceeded to confirm the demand against the appellants on the ground that the pipeline laid by it was (i) used, or to be used, primarily for; or (ii) occupies, or to be occupies, primarily with; or (iii) engaged, or to be engaged, primarily in, commerce o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny activity, being a profession practiced by an individual or body of individuals, if the number of persons employed by the individuals or body of individuals in relation to such profession is less than ten; or (9) Any activity, being any activity carried on by a cooperative society or a club or any other like body of individuals, if the number of persons employed by the 'cooperative' society, club or other like body of individuals in relation to such activity is less than ten;" 9. We find that GWSSB discharges an important duty and responsibility of the Government to provide drinking water to the people residing in its jurisdiction. As per the Gujarat Act, GWSSB is constituted mainly to ensure supply of drinking water and maintenance of sewerage system in the jurisdiction of the said Board. In the coming days water could be a precious commodity traded for profit and supply of water entailing that business would constitute 'industry'. However, production of drinking water to the community in Gram Panchayats and Nagar Panchayats in the State on recovery of user charges at a highly subsidized rate, we find, does not come within the expression 'industry' used ..... X X X X Extracts X X X X X X X X Extracts X X X X
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