Service tax exemption for rural electrification works supplied to government under a public welfare scheme upheld.

Services rendered for rural electrification under a Central Government welfare scheme, and supplied to the State Government, fell within the exemption for construction, erection, commissioning, installation and allied works meant predominantly for use other than in commerce, industry or any business. The activity was therefore covered by Notification No. 25/2012-S.T., and no service tax was payable on the impugned works.

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Issues: Whether services rendered for rural electrification under the Rajiv Gandhi Grameen Vidyutikaran Yojana were exempt from service tax under Notification No. 25/2012-S.T. dated 20.06.2012, and whether no service tax was payable on the impugned works.

Analysis: The contracts were executed for rural electrification under a Central Government scheme and were provided to the State Government. The activity fell within the exemption for services by way of construction, erection, commissioning, installation and allied works supplied to government or governmental authority, where the works are meant predominantly for use other than in commerce, industry or any other business or profession. On this basis, the services were held not to be taxable.

Conclusion: The services were exempt and no service tax was payable.

Final Conclusion: The Revenue's challenge failed and the assessee obtained relief against the service tax demand.

Ratio Decidendi: Services provided to the Government for rural electrification under a public welfare scheme, and meant for use other than in commerce, industry or business, fall within the service tax exemption notification and are not taxable.

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