Repair and renewal of public roads are exempt from service tax under Notification 25/2012-ST.

M/s Yash Associates, a registered provider of works contract services, received ₹45,62,894 during FY 2014–15 for road repair and renewal work under two PWD work orders.

A show-cause notice, initiated on the basis of third-party information from the Income Tax Department, led to confirmation of service tax demand of ₹5,63,974, with interest and penalties; a further demand of ₹27,83,571 was dropped.

The Commissioner (Appeals) upheld the confirmed demand, reasoning that the appellant had not produced documents establishing the nature of the FY 2014–15 receipts and that a work order relied upon by the appellant related instead to FY 2015–16.

The appellant appealed to the Tribunal

Whether the ₹45,62,894 received by the appellant in FY 2014–15 was consideration for repair and renewal of public roads provided to the PWD, and therefore exempt from service tax under Entry 13 of Notification No. 25/2012-ST

Whether the Commissioner (Appeals) was justified in sustaining the demand on the ground that the appellant had not established the nature of the FY 2014–15 receipts

Entry 13 of Notification No. 25/2012-ST dated 20 June 2012 exempts specified services relating to a road, including its repair, maintenance, renovation or alteration, where the road is for use by the general public.

The Commissioner (Appeals) had also referred to Rule 2A of the Service Tax (Determination of Value) Rules, 2006, concerning abatement, but the Tribunal’s decision rested on the exemption under Entry 13.

The Tribunal found that the disputed receipts were received in FY 2014–15 and that the payment details appeared in the appellant’s Form 26AS for that year.

It distinguished the work order considered by the Commissioner (Appeals), which related to FY 2015–16, from the disputed FY 2014–15 receipts.

The appellant’s work orders and payment details established that the receipts related to repair and renewal of public roads allotted by the PWD.

Applying Entry 13, the Tribunal held that those services were exempt, so the confirmed service tax demand could not stand.

It set aside the impugned appellate order and allowed the appeal with consequential relief as per law.