Service Tax Exemption Applicability on Works Contract Executed for Odisha Lift Irrigation Corporation Ltd: Orissa HC to Hear Matter soon [Read Order]

The Orissa High Court has admitted a writ petition challenging the applicability of service tax exemption on a works contract executed for the Odisha Lift Irrigation Corporation Ltd., a government entity.

The petitioner, represented by Mr. Sunil Mishra, referred to Notification No. 25/2012 – Service Tax, dated June 20, 2012, which grants exemption from service tax on certain services provided to governmental authorities.

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Mr. Mishra argued that the adjudicating authority had rightly dropped the proceedings, recognizing that the works contract was executed for the Odisha Lift Irrigation Corporation Ltd., a government corporation falling within the ambit of the said exemption.

However, the Additional Commissioner, GST & Central Excise, Bhubaneswar, acting on the directions of the Principal Commissioner, challenged the adjudication order. The Commissioner (Appeals) subsequently allowed the appeal by order dated 29th January, 2025 without appreciating the exemption's applicability, leading the petitioner to approach the High Court.

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Mr. Sujan Kumar Roy Choudhury, appearing on behalf of the revenue authorities, opposed the maintainability of the writ petition, stating the availability of an alternative remedy before the appellate tribunal.

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However, the Court found prima facie merit in the petitioner's arguments and opted to examine the legality of the impugned order. The bench observed that “Since the appellate authority has failed to apply the terms of exemption notification dated 20th June, 2012 to determine the service tax liability, and acted at the instruction of the Principal Commissioner, the appellate order has been challenged in this writ petition.”

Chief Justice Harish Tandon and Justice M. S. Raman inclined to consider the following issues:

1. whether the transaction in question falls within the fold of exemption notification; and
2. whether the Odisha Lift Irrigation Corporation Ltd., is comprehended within the meaning of ‘governmental authority’ so that the service provided by execution of works contract in respect of Government Corporation would fall within the scope of exemption notification dated 20th June, 2012?

As an Interim relief, the Court directed that the appellate order dated January 29, 2025, shall not be given effect to until the next hearing. The revenue authorities have been granted four weeks to file their counter-affidavit.

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The matter has been posted for hearing on May 15, 2025, and the Court has granted an interim stay on the implementation of the impugned appellate order dated January 29, 2025 passed by the Commissioner (Appeals), GST, Central Excise & Customs, Bhubaneswar.

To Read the full text of the Order CLICK HERE

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