2009 (8) TMI 638 - AT - Service Tax

Repair of roads works contract service stay of demand Held that - the applicant has registered themselves with the Commercial Tax Department, for the works contract executed by them for the purpose of rendering services of improvement/reasphalting of the roads. It is seen that their activity has been assessed by the Commercial Tax Department as such and the tax is deducted at source. We are of the considered view that these activities would get covered under the works contract, then the activity rendered prior to 1-6-2007 will not be taxable under the management, maintenance or repair services. Further we find from 1-6-2007 even if the activity gets covered under the works contract, there is specific exclusion for works contracts in respect of roads. We find that the applicants had made out a prima facie case for the waiver of the pre-deposit of the amount involved in respect of works contract as regards the improvement and repair of the roads.

Summary

Issues:
1. Whether the activity of formation or improvement/re-asphalting of existing roads for various authorities is liable for service tax under Management Maintenance or Repair services.

Analysis:
The case involved a dispute regarding the liability of service tax on the activity of formation or improvement/re-asphalting of existing roads for authorities like National Highway Authority, Public Works Department, etc. The appellant bid for maintenance/management/re-asphalting contracts, and lower authorities concluded that these activities fell under the category of management, maintenance, or repair of immovable property. The definitions of maintenance, repair, improvement, and asphalting were discussed, emphasizing that maintenance includes reasonable improvements without altering the purpose. It was clarified that re-asphalting aims to restore the road's condition, not create a new road, thus constituting road maintenance. The tribunal noted that the appellant's activities were registered as works contracts by the Commercial Tax Department, and prior to 1-6-2007, they would not be taxable under management, maintenance, or repair services. Even post-1-6-2007, there was a specific exclusion for works contracts related to roads. The tribunal found a prima facie case for waiving the pre-deposit amount for works contract activities related to road improvement and repair.

The tribunal also addressed a separate demand for construction of staff quarters for a port trust. While the appellant failed to justify a waiver for this amount, they were directed to deposit the sum. However, for the service tax liability concerning road improvement and re-asphalting, the tribunal granted a complete waiver of the amount subject to compliance with the pre-deposit condition for the staff quarters construction. The recovery of the balance amounts was stayed pending the appeal's disposal.

In conclusion, the tribunal ruled in favor of the appellant regarding the service tax liability on road improvement and re-asphalting activities, considering them as works contracts and granting a waiver of the pre-deposit amount. The decision highlighted the distinction between creating new roads and maintaining existing ones, emphasizing that the latter falls under road maintenance, exempt from service tax under specific provisions.