2017 (5) TMI 702 - AT - Service Tax

Management, Maintenance or Repair Services - Commercial or Industrial Construction Service - Taxability - Held that - services provided by the appellant in respect of maintenance and repair of roads during the period 16/06/2005 to 27/07/2009 were exempted from payment of service tax under Section 97 ibid - service tax demand not sustainable. Commercial or Industrial Construction service provided in respect of roads are specifically excluded from the purview of levy of service tax in terms of clause (25b) of Section 65 ibid - It is an admitted fact on record that the demand of ₹ 48,99,741/- is towards construction of Toll Plaza and Lanes, which are in relation to the service provided in respect of roads. The phase in respect of roads contained in clause (25b) of Section 65 ibid has a wider connotation and bears the widest possible scope and may be taken to mean for the provision of . Thus, the service tax demand on Toll Plaza and Lanes will not be sustainable in this case. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service tax demand under Management, Maintenance, or Repair Services.
2. Service tax demand under Commercial or Industrial Construction Service.

Analysis:
1. The appellant, a service provider registered with the Service Tax Department, challenged the service tax demand of ?2,85,18,695 under Management, Maintenance, or Repair Services and ?48,99,741 under Commercial or Industrial Construction Service for the period 16/06/2005 to 27/07/2009. The appellant contended that services related to maintenance and repair of roads were exempt from service tax as per Section 97 of the Finance Act, 1994. Additionally, the construction of Toll Plaza and Lanes was argued to be integral to road construction, which falls outside the scope of Commercial or Industrial Construction service as per Section 65(25b). The appellant cited the judgment of the Larger Bench of the Tribunal in Lanco Infratech Ltd. vs. CC, CE & ST, Hyderabad to support their position.

2. The Department, represented by the DR, upheld the findings of the impugned order. However, upon hearing both parties and reviewing the case records, the Tribunal found merit in the appellant's arguments. The Tribunal observed that services provided for maintenance and repair of roads during the specified period were indeed exempt from service tax as per Section 97. Regarding the construction of Toll Plaza and Lanes, the Tribunal interpreted the phrase "in respect of roads" in Section 65(25b) broadly, suggesting it encompasses services "for the provision of" roads. Consequently, the service tax demand of ?2,85,18,695 and ?48,99,741 was deemed unsustainable. Therefore, the Tribunal set aside the impugned order and ruled in favor of the appellant, allowing the appeal.

In conclusion, the Tribunal, comprising Shri S.K. Mohanty and Shri B. Ravichandran, found in favor of the appellant, setting aside the service tax demands under Management, Maintenance, or Repair Services and Commercial or Industrial Construction Service. The judgment highlighted the exemption of service tax for maintenance and repair of roads under Section 97 and the broad interpretation of services related to road construction under Section 65(25b).