CESTAT: No Service Tax on Services of Road Repair and Maintenance from 16.06.2005 to 26.07.2009

CESTAT: No Service Tax on Services of Road Repair and Maintenance from 16.06.2005 to 26.07.2009

The Bangalore Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that service tax for the period from 16th June 2005, to 26th July 2009, does not apply to maintenance and repair services related to the upkeep of roads.

The bench, comprising D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member), referenced judgments from the Allahabad High Court in Delta Erectors Pvt. Ltd. v. UOI and the Madhya Pradesh High Court in M. P. Audhyogik Kendra Vikas Nigam v. Chief Commissioner. These cases established that the service tax for the period from 2005–2006 to 30th September 2008, is not applicable to the maintenance and repair services of roads.

During the period from 2005–2006 to 30th September 2008, the appellant provided management, maintenance, or repair services for state and national highway roads. The department alleged that the service tax was applicable under the taxable category of management, maintenance, or repair service. Consequently, a show-cause notice was issued to the appellant for the recovery of service tax amounting to Rs. 1,87,03,880, along with interest and penalty.

The question at hand was whether maintenance or repair services concerning roads, particularly state and national highways, were liable to service tax between 2005 and 2006 and 30th September 2008.

The assessee argued that the matter is addressed by the retroactive amendment enacted in 2012 through Section 143 of the Finance Act, 2012, which introduced Section 97 into the Finance Act, 1994.

Section 97 of the Finance Act, 1994, provides a special exemption in specific cases concerning the management, maintenance, or repair of roads. It stipulates that no service tax shall be imposed or collected for the management, maintenance, or repair of roads during the period from 16th June 2005 to 26th July 2009.

The tribunal overturned the service tax demand, ruling in favor of the assessee allowing their appeal.