February 05, 2026 : The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal at New Delhi has remanded a service tax dispute involving a construction contractor, holding that the decisive issue is whether the roads constructed under the contract were meant for use by the general public, which is a mandatory condition for availing service tax exemption.

The Bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) made it clear that the benefit of exemption under the Mega Exemption Notification is strictly limited to roads intended for general public use. Roads constructed within residential complexes, townships, or other areas with restricted access do not qualify.

The appeal was filed by M/s Shri Balaji Construction Company, which was registered with the Service Tax Department for services including management or repair, construction of residential complexes, and construction of commercial or industrial buildings. The dispute arose after the department received third-party information from the Income Tax Department showing that the firm had received ₹54.50 lakh during the financial year 2012–13, with tax deducted at source under Section 194C of the Income Tax Act. On this basis, the department alleged that taxable services had been provided without payment of service tax amounting to ₹6.73 lakh and issued a show cause notice invoking the extended limitation period.

As the contractor neither filed a reply nor appeared for a personal hearing, the adjudicating authority passed an ex parte order confirming the demand.

Before the Commissioner (Appeals), the contractor argued that it had executed work relating to renewal of internal roads in a Jaipur Development Authority area as a sub-contractor, and that the services were exempt under Mega Exemption Notification No. 25/2012-ST. It was claimed that the roads were meant for public use and therefore squarely covered by the exemption.

The Commissioner (Appeals), however, rejected the claim, holding that the exemption applies only to roads meant for use by the general public. Since the roads were described as internal roads intended primarily for residents and their visitors, and no documentary evidence was produced to establish public access, the exemption was denied.

Challenging this finding before the Tribunal, the appellant relied on a work order dated 11 October 2012 issued by the Jaipur Development Authority, contending that the work was carried out under a government authority and was therefore meant for public use. The Revenue countered that the appellant had failed to cooperate at every stage and had not discharged the burden of proving eligibility for exemption.

The Tribunal noted that the appellant had neither responded to the show cause notice nor produced sufficient material before the lower authorities to establish that the roads were meant for the general public. It also referred to its earlier decision in Warsi Buildcon v. Principal Commissioner, which held that exemption for road construction is confined to roads meant for general public use and does not extend to roads within residential complexes or townships meant for restricted use.

At the same time, the Bench observed that, unlike in Warsi Buildcon, the work order in the present case was issued by a government authority. The Tribunal held that the factual question of whether the roads were genuinely meant for the general public or were merely internal roads with limited access required proper examination.

Accordingly, the Tribunal set aside the appellate order and remanded the matter to the original adjudicating authority with directions to examine the relevant documents, ascertain the true nature of the work order, and decide the contractor’s eligibility for exemption in accordance with law. The appeal was allowed by way of remand.

Cause Title: M/s Shri Balaji Construction Co. v. Commissioner
Case No.: Service Tax Appeal No. 50951 of 2020