Original works exemption for railway construction and gauge conversion applies; service tax and penalty were not sustainable.

Construction of new railway lines and gauge conversion from MG to BG was treated as "original works" because the notification exempts services by way of construction, erection, commissioning or installation of original works pertaining to railways, and the valuation rules define original works to include all new constructions. On the railway certificates showing new line construction and gauge conversion, the activity fell within Serial No. 14 of Notification No. 25/2012-ST. The exemption applied, no service tax was payable, and the penalty was not sustainable.

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Issues: Whether the appellant's activity of constructing new railway lines and gauge conversion work amounted to "original works" for the purpose of Serial No. 14 of Notification No. 25/2012-ST dated 20.06.2012, and whether service tax and penalty were payable.

Analysis: Serial No. 14 of the notification grants exemption to services by way of construction, erection, commissioning or installation of original works pertaining to railways. The explanation to Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006 defines "original works" to include all new constructions. The certificates issued by the Railways stated that the work undertaken by the appellant was for construction of new railway lines and gauge conversion of MG lines to BG lines. On that material, the activity was treated as a new construction and therefore as original work falling within the exemption entry.

Conclusion: The appellant was entitled to the exemption under Serial No. 14 of Notification No. 25/2012-ST dated 20.06.2012, no service tax was payable, and the penalty was not sustainable. The appeal was allowed.

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