Service tax exemptions for transmission works, public roads and railway infrastructure apply where the works are integral to statutory use.

Site levelling and civil construction integral to electricity transmission were treated as covered by the transmission-linked exemption, so service tax demand on those works failed. Construction and repair of an approach road used by the general public fell within the road exemption, so that demand also failed. Railway embankment, bridge and siding works were held to fall within the statutory meaning of railway, including sidings and works used in connection with a railway, and the railway exemption applied for the relevant periods; the demand was therefore not sustainable. The disputed demands were deleted, while tax already paid on the undisputed portion remained upheld and penalties were set aside.

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Issues: (i) whether site levelling and civil construction services rendered in connection with transmission of electricity were exempt from service tax; (ii) whether construction and repairing of an approach road used by the general public was exempt; and (iii) whether construction of railway embankment, bridge and siding for a project fell within the railway exemption.

Issue (i): whether site levelling and civil construction services rendered in connection with transmission of electricity were exempt from service tax

Analysis: The services were rendered for setting up and functioning of sub-stations and other works integral to transmission of electricity. The applicable exemption notifications protected services provided in relation to transmission of electricity, and the definition of sub-station under the Electricity Act, 2003 showed that site development and civil construction were part of the transmission infrastructure. The demand could not be sustained merely by treating the activities as independently taxable when their direct nexus with transmission was established.

Conclusion: The demand on these services was not sustainable and was set aside in favour of the assessee.

Issue (ii): whether construction and repairing of an approach road used by the general public was exempt

Analysis: The work order and supporting certificate showed that the road was meant for public use. The exemption under the relevant service tax notification covered construction or repair of roads used by the general public. In the absence of contrary material to dislodge that factual position, the activity fell within the exemption.

Conclusion: The demand on the road construction work was not sustainable and was set aside in favour of the assessee.

Issue (iii): whether construction of railway embankment, bridge and siding for a project fell within the railway exemption

Analysis: The statutory definition of railway under the Railways Act, 1989 includes sidings, branches and works used in connection with a railway. The exemption for original works in relation to railways was available both for the period when railway-related works were excluded from taxable works contract service and after 01.07.2012 under the exemption notification. The fact that the line or siding served a project and not public carriage did not exclude it from the statutory meaning of railway.

Conclusion: The demand on the railway-related work was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded to the extent that the disputed demands on transmission-linked works, road construction, and railway-related works were deleted, while the already paid and appropriated service tax on the undisputed portion remained upheld and the penalties were set aside.

Ratio Decidendi: Where construction or allied works are shown to be integral to electricity transmission, a public road, or railway infrastructure as defined by statute, the corresponding service tax exemptions apply and the demand cannot survive.

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