Retrospective exemption for road maintenance services eliminated the service tax demand and related penalties for the disputed period.

Section 97 of the Finance Act, 2012 granted retrospective exemption for management, maintenance and repairs of roads for the period 16.06.2005 to 26.07.2009. The disputed service tax demand for road maintenance activities fell within that exempted period, so the statutory basis for the levy disappeared. Consequential penalties also could not survive once the underlying tax demand was removed. The demand and penalties were set aside, and the assessee's appeal was allowed.

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Issues: Whether service tax demand and penalties confirmed on the activity of management, maintenance and repairs of roads for the period October 2005 to July 2009 survived in view of the retrospective exemption.

Analysis: Section 97 of the Finance Act, 2012 granted retrospective exemption for management, maintenance and repairs of roads for the period from 16.06.2005 to 26.07.2009. The disputed period fell within the exempted span, and the retrospective amendment removed the basis for the demand as well as the consequential penalties.

Conclusion: The demand and penalties could not be sustained and were set aside in favour of the assessee.

Final Conclusion: The appeal was allowed and the impugned order was set aside.

Ratio Decidendi: When Parliament grants a retrospective exemption covering the very activity and period in dispute, the resulting tax demand and consequential penalties cannot stand.

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