HC have no jurisdiction to entertain appeal related to taxability of service

Commissioner of Service Tax Vs Surindra Engineering Co. Ltd (Bombay High Court)

Sub-section (2) to section 35L was inserted with effect from 6th August 2014, i.e., prior to the passing of the order impugned in the present appeal by the CESTAT. Even otherwise, this Court in the case of Commissioner of Central Excise, Mumbai-V Vs. Reliance Media Works Ltd. ³ has held that insertion of sub-section (2) to section 35L was clarificatory, and therefore, the issue of taxability and excisability would be an issue relating to rate of duty of excise/services for the purpose of assessment for which an appeal from the order of the Tribunal could be entertained only by the Hon’ble Supreme Court and not by the High Court in terms of sections 35G of the Excise Act.

In view of the clear mandate, sub-section (2) of section 35L of the Excise Act, since the issue involved in the present appeal pertains to whether the service rendered by the assessee is a taxable service or not, in our opinion, this Court would have no jurisdiction to entertain the appeal.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. This appeal has been fled under section 35G of the Central Excise Act, 1944 read with Finance Act, 1994 against the order dated 14^th August 2014 passed the Customs Excise and Service Tax Appellate Tribunal, Mumbai (CESTAT), whereby the appeal preferred by the appellant herein was dismissed as withdrawn, and the one filed by the respondent was allowed.

2. The following questions of law have been framed for our consideration :

(i) Whether laying, connecting, joining pipeline for water supply project falls within “Erection, Commissioning or installation Service” as defined under section 65(105)(zzd) of the Finance Act, 1994 and is taxable under the Service Tax?

(ii) Whether the respondent-assessee is entitled for abatement under Notification No.1 of 2006, dated 1st March 2006?

3. Briefy stated the material facts are as under :

(a) The assessee undertakes the job of erection and commissioning of project work of laying of pipelines. It was observed that for the financial years 2003-04, 2004-05, 2005-06 and 2006-07, the assessee had received different amounts in respect of erection and commissioning/ installation work on account of which no service tax was paid. It was stated that rendering of service of erection and commissioning, as defined under section 65(105)(zzd) of the Finance Act, 1994, made the assessee liable to levy of service tax with the effect from 1^st July 2003.

(b) A show cause notice was issued to the assessee which was adjudicated upon by the order in original dated 7th January 2010 by the Commissioner, Service Tax, Mumbai. It was held that the service tax rendered by the assessee fell under the category of “erection, commissioning and installation service”.

(c) An appeal was preferred before the CESTAT, by the assessee, as also by the appellant herein, to the extent that the adjudicating authority had allowed the benefit of abatement under Notification No.01 of 2006, dated 1^st March 2006.

4. The Tribunal, vide order impugned dated 14^th August 2014, held that the activity of laying of pipelines for water supply projects would not come under the category of erection, commissioning and installation service. For this, it relied upon in the case of Commissioner of C.Ex., Tiruchirapalli Vs. Indian Hume Pipe Co. Ltd. ¹, on the ground that the facts in both cases were identical. Reliance was also placed on the Board’s Circular no.123/5/2010 TRU, dated 24^th May 2010, which prescribes that unless the activity undertaken results in the emergence of an erected, installed and commissioned plant, machinery, equipment or structure, the activity would not come under the category of erection, commissioning and installation service. It was held that the pipelines could not be construed as plant, machinery or equipment or structure. The said Circular was also relied upon to the extent it clarified that laying of cables under or alongside road or railway tracks, etc. was not a taxable service under section 65(105)(zzd) of the Finance Act, 1994 and on that analogy held that laying of pipeline also would not be construed as a taxable service.

The Tribunal also observed that a similar view had been taken in the case of Commissioner of S.T., Mumbai Vs. Hyundai Heavy Industries Co. Ltd.², wherein it was held that laying of submarine pipelines would not come within the purview of erection, commissioning and installation service and that would be more appropriately classifiable under “commercial or industrial construction service” in terms of section 65(25b)(b) of the Finance Act. The Tribunal accordingly allowed the appeal of the assessee and set aside the order passed by the Adjudicating Authority. As a necessary consequence, the appeal fled by the revenue was dismissed.

5. Counsel for the respondent Mr.Shah initially tried to support and buttress the view expressed by the Tribunal by placing reliance upon the case of Indian Hume Pipe Co. Ltd. (Supra), wherein it was held that the activity of laying distance pipelines to supply water, in public interest, was a part of a ‘construction activity’ not commercial in nature and accordingly not covered under ‘erection, commissioning and installation service’. The SLP preferred against the said judgment is also stated to have been dismissed by the Hon’ble Supreme Court vide order dated 29^th April 2016.

6. In the alternate, counsel for the respondent Mr.Shah questioned the maintainability of the present appeal itself before this Court in view of the provisions of section 35L of the Central Excise Act, 1944 ( for short, ‘The Excise Act’) which reads as under :

35L. (1) Appeal to Supreme Court.—An appeal shall lie to the Supreme Court from—

(a) any judgment of the High Court delivered—

(i) in an appeal made under section 35G; or

(ii) on a reference made under section 35G by the Appellate Tribunal before the 1st day of July, 2003;

(iii) on a reference made under section 35H, in any case which, on its own motion or on an oral application made by or on behalf of the party aggrieved, immediately after passing of the judgment, the High Court certifies to be a fit one for appeal to the Supreme Court; or

(b) any order passed before the establishment of the National Tax Tribunal by the Appellate Tribunal relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment.

(2) For the purpose of this Chapter, the determination of any question having a relation to the rate of duty shall include the determination of taxability or excisability of goods for the purpose of assessment.

7. Sub-section (2) to section 35L was inserted with effect from 6th August 2014, i.e., prior to the passing of the order impugned in the present appeal by the CESTAT. Even otherwise, this Court in the case of Commissioner of Central Excise, Mumbai-V Vs. Reliance Media Works Ltd. ³ has held that insertion of sub-section (2) to section 35L was clarificatory, and therefore, the issue of taxability and excisability would be an issue relating to rate of duty of excise/services for the purpose of assessment for which an appeal from the order of the Tribunal could be entertained only by the Hon’ble Supreme Court and not by the High Court in terms of sections 35G of the Excise Act.

8. In view of the clear mandate, sub-section (2) of section 35L of the Excise Act, since the issue involved in the present appeal pertains to whether the service rendered by the assessee is a taxable service or not, in our opinion, this Court would have no jurisdiction to entertain the appeal.

9. Be that as it may, we hold that the present appeal is not maintainable before this Court leaving it free to the appellant to avail its remedies under law.

10. The appeal is accordingly disposed of.