Service Tax Relief on Works for RDA and NRDA Townships under 2012 Notification: Supreme Court to Hear L&T’s Appeal [Read Judgement]
The Supreme Court is expected to determine the scope of the exemption available to infrastructure projects undertaken for statutory development authorities under Service tax Notification.
The Supreme Court of India will hear an appeal filed by Larsen & Toubro Limited (L&T) challenging the order of the CESTAT, which dealt with the scope of Service Tax exemptions under Notification No. 25/2012-ST dated 20.06.2012 for works executed for the Raipur Development Authority (RDA) and Naya Raipur Development Authority (NRDA).
This is about whether the township development works undertaken by L&T for these authorities qualify for exemption under Entries 12(a) and 12(e) of the notification, and the applicability of the extended limitation period under Section 73(1) of the Finance Act, 1994.
The Tribunal had noted that L&T had entered into agreements with RDA and NRDA for extensive infrastructure development works in the Kamal Vihar and Naya Raipur townships, including construction of stormwater drains, sewage networks, water supply systems, pumping stations, and roads.
While L&T claimed exemption under S.No. 12(a) of Notification No. 25/2012-ST, contending that both authorities were “Governmental Authorities” engaged in non-commercial public development, the Department held that the projects were commercial in nature, as the developed land was later sold on a profit basis.
The Entry 12(a) of Notification No. 25/2012-ST, provides “Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession.”
The CESTAT observed that since RDA and NRDA sold developed plots at commercial rates, their activities fell within the scope of commerce and business, disqualifying L&T’s claim under Entry 12(a).
However, it held that certain works, such as water supply networks and sewage systems, were covered under Entry 12(e), which exempts services relating to “pipeline, conduit or plant for (i) water supply, (ii) water treatment, or (iii) sewerage treatment or disposal.”
The Tribunal concluded that pumping stations and interconnected reservoirs could fall under “plant” within this entry, and remanded the matter to the adjudicating authority to determine which parts of the RDA and NRDA projects qualified for the exemption.
The Tribunal also ruled that Section 73(1) of the Finance Act, 1994, which allows extended limitation only in cases of willful suppression or intent to evade tax, could not be invoked, holding that the issue was interpretational and that L&T had acted under a bona fide belief.
The section reads that “Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, by reason of fraud or collusion or willful misstatement or suppression of facts or contravention of any provisions of this Chapter or the rules made thereunder with intent to evade payment of service tax, the Central Excise Officer may, within five years from the relevant date, serve notice on the person chargeable with the service tax.”
Accordingly, the Tribunal set aside the penalty and remanded the matter for fresh adjudication limited to determining the eligibility of works under Entry 12(e) and the related refund claims under Section 102 of the Finance Act, 1994, which provides for retrospective exemption for the period from 01.04.2015 to 29.02.2016.
Aggrieved by the order of the CESTAT, L&T appealed to the Supreme Court and challenged the Tribunal’s partial denial of exemption under Entry 12(a) and seeks clarity on whether township development works for statutory development authorities constitute “non-commercial” projects eligible for service tax exemption.
The Bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan has tagged L&T’s appeals with Civil Appeal No. 2300/2025 for hearing, and the Supreme Court is expected to determine the scope of the exemption available to infrastructure projects undertaken for statutory development authorities under Notification No. 25/2012-ST.
The matter is listed on 14th November 2025.
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