Internal road-laying in infrastructure projects: dispute over 12% vs 18% output tax rate; 18% levy set aside, reassessment ordered.

The dominant issue was whether infrastructure development works involving laying of internal roads attracted output tax at 12% or 18%. The HC held that the assessing authority failed to properly consider material evidence, namely a certificate issued by the competent Executive Officer, which was relevant to classification and the applicable rate, rendering the levy at 18% on the road-laying component unsustainable. Consequently, the impugned assessment order was set aside only to the extent it levied tax at 18% on the road works, and the matter was remitted to the assessing authority to redo the assessment afresh after considering the said certificate; the petition was disposed of.

---

---

1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the adjudication order levying GST at 18% on the works component relating to laying of internal roads (infrastructure/road works) was sustainable, in light of the certificate issued by the Industrial Area Local Authority stating that the roads are treated as public roads and maintained for the benefit of all stakeholders including the general public.

(ii) Whether the Court should interfere with the assessment order in respect of tax levied on other components apart from the road-laying works, and whether the assessing authority should pass separate year-wise orders.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Sustainability of levy at 18% on internal road-laying works; necessity of fresh determination

Legal framework: The Court dealt with the adjudication made under Section 73 of the GST Act and considered the petitioner's reliance on Entry-3 of Notification No.24 of 2017 dated 21.09.2017, as pressed in argument, for the applicable rate of tax on road works treated as public in nature.

Interpretation and reasoning: The Court considered that, during pendency, a certificate dated 11.12.2025 was produced from the Executive Officer, Industrial Area Local Authority, stating that the roads laid were for facilitating industrial activity and the movement of general public, vehicles and goods, that such roads are treated as public roads, and are maintained for the benefit of stakeholders including the general public. On that basis, the Court held that the petitioner had made out a case requiring reconsideration of the applicable rate of tax for the road-laying works by the assessing authority afresh, taking the said certificate into account.

Conclusions: The adjudication order was set aside only to the extent it levied tax at 18% on the works executed in relation to laying of roads. The assessing authority was directed to redo the assessment for the road-laying component after considering the certificate dated 11.12.2025.

Issue (ii): Extent of judicial interference with other components and requirement of year-wise orders

Legal framework: The Court confined its interference to the specific component requiring reconsideration and addressed the manner in which the reassessment should be undertaken for the relevant financial years.

Interpretation and reasoning: The Court expressly limited the setting aside of the adjudication order to the road-laying works, and found that the remaining portions of the assessment concerning other components did not warrant interference. Further, since the dispute related to multiple financial years, the Court directed the authority to issue separate orders for each financial year while redoing the assessment for the road component.

Conclusions: The assessment order was left undisturbed for other components. The assessing authority was directed to pass separate orders year-wise while completing the fresh determination for the road-laying works.

---