B.S.V. Murthy, Member (T)

1. The appellants are engaged in the business of constructions mainly for Gujarat Water Supply and Sewerage Board (GWSSB) and majority of the construction are for water distribution pipelines network, water treatment plants etc. After the amendment of Finance Act, 1994 on 16-6-2005 construction of long distance pipelines came under the net of commercial or industrial construction service category.

2. An investigation was taken up by the Department and a show cause notice was issued treating construction of pipelines as a service liable to service tax and proposing a demand of Rs. 80,45,420/- which was adjudicated after due process and culminated in confirmation of demand of service tax by Rs. 80,45,420/- with equal amount of penalty, interest and penalty under Section 76 of Finance Act, 1994.

3. Shri Rahul Patel on behalf of the appellants submits that their activity is not liable to service tax at all since GWSSB is not a commercial concern and therefore, their activity is not liable to tax at all. He also submits that the financial position of the company is not very sound and they had only a marginal profit in the previous year.

4. He also submits that they have a strong case on merits.

5. Having regard to the facts and circumstances and the arguments advanced by the party, we order the appellants to deposit an amount of Rs. 25 lakhs (Rupees twenty-five lakhs only) within eight weeks and report compliance on 7-10-2008. Subject to pre-deposit of the amount as mentioned above and reporting compliance, the requirement of pre-deposit of balance amount of duty, penalty etc. is waived and recovery of the balance amount of duty, penalty etc. are stayed during the pendency of appeal.

(Pronounced in Court)