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2015 (7) TMI 825

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..... upport of pipes and valves i.e. "capital goods" but for laying of pipeline for transport of gas. As input service received by the applicant from EPC contractors and others is not for laying of foundation or making of structure for support of capital goods, same does not fail under the exclusion clause. Applicant is eligible to avail Cenvat Credit of the Service Tax that would be paid by the EPC Contractor/other construction contractors and other service providers (except for Service Tax paid vis a vis construction services for the civil works package for building the pipeline substations) against the applicant's output service tax liability under the taxable output service in the nature of transport of gas through pipelines. - Decided in favour of assessee. - Ruling No. AAR/ST/02-03/2015, Application Nos. AAR/44/ST/03/13, AAR/44/st/05/13 - - - Dated:- 3-7-2015 - V S Sirpurkar And S S Rana, JJ For The Appellant : Shri Sujit Ghosh, Adv For The Department : Shri Amresh Jain (AR) RULING M/s GSPL India Transco Limited (F.No. AAR/44/ST/03/13) and M/s GSPL India Gasnet Limited (F.No. AAR/44/ST/05/13) (hereinafter referred to as applicant) are a subsidiary of Guj .....

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..... are exactly pari materia . The requisite rights of way are obtained through privately negotiated contracts 5. For the purpose of laying pipeline, the applicant would be required to procure steel pipes and valves and further would have to get the pipes and valves installed and commissioned along the identified routes so as to connect the source to the destination. In this regard, the applicant would either grant various turnkey contracts (EPC Contracts) involving supply of pipes as well as installation and commissioning of the said pipes to bring into existence a pipeline connecting the source to the destination or would procure the pipes themselves and separately obtain the services of construction contractors for installation and commissioning of the said pipes to bring into existence a pipeline. EPC Contractors, under no circumstances, have the complete responsibility of bringing into existence the pipeline. Inter-State pipelines like the one envisaged under the proposed business are massive projects for which the applicant would need to appoint myriad contractors for various scopes of work. Further, apart from the construction related services from the EPC Contractors/other .....

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..... the individual pipes issued free of cost by the applicant by welding / using nuts and bolts / other means and bringing into existence a pipeline along the identified route. Such pipes, once connected to each other, are referred to as 'pipelines' in trade parlance, as well as in dictionaries. Such pipelines are then placed under the surface of the earth in trenches which are dug for such purpose. Further, in respect of provision of services for erection and commissioning of pipelines, the EPC Contractors would qualify their services as works contract services as defined under Section 65B (54) of the Finance Act, post July 1, 2012 and discharge Service Tax accordingly. Further, in the light of the fact that such services by EPC Contractors would be composite supplies involving both goods and services, the EPC Contractors would discharge Service Tax on the basis of one of the options given under Rule 2A of Service Tax (Determination of Value) Rules, 2006. 9. Applicant submits that other construction contractors and other service providers who would be providing pure services would raise service invoices and pay service tax thereon at the applicable rates. The gas transmi .....

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..... nstruction of jetty and storage tanks and utilized this credit for providing port service. In that case, Tribunal examined the expression used for providing a output service as appearing in Rule 2 (k) (ii) of Cenvat Credit Rules, 2004 under the definition of input , as it existed then. It is observed by the Tribunal that said definition has restrictive meaning and cannot be given wide import. Tribunal held that cement and steel used in construction of jetty, cannot be said to provide port service. On the same analogy, Revenue has contended that the services used for erection and commissioning of such plant, do not take part directly in providing output taxable service of transportation of gas and also same cannot be considered to be integrally connected in providing output service in view of restrictive definition of input service . On the other hand, applicant submits that in order to put the pipes to effective use, the pipes are required to be connected, installed and embedded inside the earth so as to constitute a pipeline system, so that they can render service of transport of gas through pipeline; that input service from EPC contractors and others to bring into existence t .....

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..... er-alia states as under: Input service means any service - (i) used by provider of output service for providing an output service; or x x x x x But excludes- (A) service portion in the execution of works contract and construction services including service listed under clause (b) of Section 66 E of the Finance Act (hereinafter referred to as specified services) insofar as they are used for - (a) construction or execution of works contract of a building or a civil structure or a part thereof; or (b) Laying of foundation or making of structures for support of capital goods, except for the provision of one or more of the specified services; or x x x x x 13. Rule 3 (1) of Cenvat Credit Rules, 2004 inter-alia envisages that a provider of output service shall be allowed to take credit of Service Tax leviable under Section 66 B of the Finance Act, 1994, paid on any input service by the provider of output services. There is no doubt that the applicant is provider of output service i.e. transport of gas through pipeline and therefore, eligible to take credit of Service Tax paid on input service i.e. construction/ erection, installation and commissio .....

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