Service tax exemption for metro rail testing and commissioning upheld for activities integral to bringing rolling stock into operation.

Testing, integrated testing and trial runs carried out under metro rail contracts were treated as commissioning of original works pertaining to railways, so the activity fell within the exemption in Notification No. 25/2012-ST. The ruling applied the meaning of "original works" to services involving erection, commissioning or installation of plant, machinery or equipment, and held that rolling stock used in metro operations could be treated as plant and machinery. Because the impugned activities formed part of bringing the rolling stock into operational condition, they were covered by the service tax exemption and no service tax was payable on those services.

---

---

Issues: Whether the applicant was entitled to exemption from service tax under Notification No. 25/2012-ST dated 20.06.2012 for testing and commissioning, integrated testing and commissioning, and trial runs of trains undertaken under the metro rail contracts.

Analysis: The exemption under S. No. 14 of Notification No. 25/2012-ST applies to services by way of construction, erection, commissioning or installation of original works pertaining to railways, including metro. The expression "original works" is taken from Rule 2A of the Service Tax (Determination of Value) Rules, 2006, and includes erection, commissioning or installation of plant, machinery or equipment. The contracts required testing, integrated testing and trial runs as part of bringing the rolling stock into operation. Since rolling stock was treated as plant and machinery, the activities undertaken by the applicant were held to amount to commissioning of original works pertaining to metro rail projects.

Conclusion: The applicant was eligible for exemption from payment of service tax under Notification No. 25/2012-ST dated 20.06.2012 for the impugned activities.

Ratio Decidendi: Where testing, integrated testing and trial runs form part of bringing rolling stock into operational condition for a metro rail project, the activity constitutes commissioning of original works pertaining to railways and is covered by the service tax exemption notification.

---