THE COMMISSIONER OF CENTRAL TAX, BENGALURU EAST COMMISSIONERATE v. P. J. B. ENGINEERS PVT. LTD.

(PER: HON'BLE MR. JUSTICE K.V. ARAVIND) Heard Sri Akash B. Shetty, learned counsel for the appellant-Revenue and Sri M.S. Nagaraj, learned counsel for the respondent-Assessee.

2. This appeal is filed by the Revenue challenging the Final Order No. 20200/2020 in STA No. 2644/2011, dated

18.02.2020, passed by the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Bengaluru1.

3. This Court by order dated 30.01.2023 admitted the appeal to consider the following substantial questions of law; (1) Whether in facts and circumstances of the case whether the tribunal is right in holding that the activities of the assessee Respondent fall within the definition of “Work in relation to 1 CESTAT - 3 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR Railway”. Hence entitled for exemption in Notification No.17/2005-ST 07/06/2005? (2) Whether the Railway line laid which his incidental to carry out transactions entered into which are commercial in nature, can be classified as exempted service under Notification No.17/2005-ST 07/06/2005? (3) Whether the definition of Railway as contemplated under Section 2(31) of Railway Act, 1989 includes the private Railway lines laid out purely to facilitate and incidental to commercial activity undertaken by the private entities so as to claim exemption under the said Notification?

4. The brief facts are that the assessee provided site formation and excavation services to M/s. JSW Steel Limited, Bellary, and classified such services as works contract. Insofar as the services provided in connection with “railways” are concerned, the same were claimed to be exempt under the provisions of Notification No.17/2005, dated 07.06.2005. Similarly, the excavation work and laying of railway lines in - 4 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR respect of M/s. Karnataka Power Corporation Limited, Bellary2, were also claimed to be exempt under the said notification.

4.1 A show-cause notice dated 18.05.2010 was issued to the assessee calling upon it to show cause as to why the service tax in respect of the services rendered to M/s. JSW Steel Limited should not be demanded and recovered under Section 73(a) of the Finance Act, 19943. The assessee submitted its reply contending that the scope of work executed for M/s. JSW Steel Limited was in the course of construction of railways and slewing tippler lines, including works relating to the signal and communication system for broad gauge railway sidings and the marshalling yard for KPCL. The assessee further contended that such services are exempt from service tax under Notification No.17/2005.

4.2 The Commissioner of Service Tax, by order dated

26.05.2011, rejected the contention of the assessee, holding that Notification No.17/2005 exempts works relating to railways meant for public use and does not extend to railways 2 KPCL 3 Finance Act - 5 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR constructed for industrial or commercial purposes. Accordingly, an order confirming the demand was passed.

4.3 Aggrieved by the said order, the assessee preferred an appeal before the CESTAT. The CESTAT, under the impugned order dated 18.02.2020, following the decision of the CESTAT, Mumbai Bench, in Afcons Infrastructure Limited v. Commissioner of Central Excise, Mumbai-II4, held that the assessee is not liable to pay service tax on the construction of private railway sidings.

5. Sri Akash B. Shetty, learned Standing Counsel appearing the appellant, submits that Notification No.17/2005, dated 07.06.2005, exempts certain services from service tax when such services are provided to any person by any other person in the course of construction of railways. It is contended that the exemption is confined to services rendered in the course of construction of “railways”. 4 2015 (38) S.T.R. 194 (Tri.-Mumbai) - 6 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR

5.1 Referring to sub-section (31) of Section 2 of the Railways Act, 19895, learned counsel submits that the expression “railway” means a railway, or any portion thereof, for the public carriage of passengers or goods. It is therefore contended that the term “railways” would mean Government railways owned by the Central Government. Consequently, the notification would not apply to services rendered in connection with the construction of railways for a private person or private entity and for commercial purpose.

5.2 Learned counsel further submits that the assessee executed the work for M/s. JSW Steel Limited on private land, at the cost of M/s. JSW Steel Limited, and that the railway siding was constructed solely for its commercial activity. It is contended that the exemption under the notification is intended only for infrastructure relating to public purposes and does not extend to similar services rendered for non-public or commercial purposes. It is the specific contention of the appellant that the purpose of laying the railway track was 5 Railways Act - 7 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR purely commercial in nature and, therefore, the assessee is not entitled to claim exemption under the said notification.

6. Sri M. S. Nagaraja, learned counsel appearing for the respondent–assessee, submits that Notification No.17/2005 is required to be read in its plain and unambiguous terms. It is contended that the notification does not draw any distinction between Government railways and private railways. In the absence of such distinction the notification, impermissible to read into it words or classifications which are not expressly provided.

6.1 Learned counsel further submits that for the subsequent years, similar services rendered by the assessee have been granted exemption under the said notification. On these grounds, learned counsel prays for dismissal of the appeal.

7. Considered the submissions of learned counsel for the parties and perused the records.

8. The assessee has provided services of site formation and allied works to M/s. JSW Steel Limited in - 8 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR connection with railways and has, therefore, claimed exemption under Notification No.17/2005. The Tribunal, following the decision of the CESTAT, Mumbai Bench, has held that the assessee is not liable to pay service tax on the construction of private railway sidings. The Revenue has sought to draw a distinction between Government railways and private railways.

9. The Notification No.17/2005, dated 7.6.2005, reads as under; "Notification: 17/2005-S.T. dated 07-Jun-2005 Site formation and clearance, excavation and demolition services etc. when provided in the course of construction of roads, airport, railways, transport terminals, bridges, tunnels, dams and ports - Service tax exemption In exercise of the powers conferred by sub- section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the site formation and clearance, excavation and earthmoving and demolition and such other similar activities, referred to in sub-clause (zzza) of clause (105) of section 65 of the Finance Act, provided to any person by any other person the course of - 9 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports or other ports, from the whole of service tax leviable thereon under section 66 of the said Finance Act.

2. This notification shall come into force on the 16th day of June, 2005."

10. Section 2(31) of Railways Act defines 'railways' as, "railway" means a railway, or any portion of a railway, for the public carriage of passengers or goods, and includes- (a) all lands within the fences or other boundary marks indicating the limits of the land appurtenant to a railway;

11. Section 2(20) of Railways Act defines "Government railway" as under; "Government railway" means a railway owned by the Central Government.

12. It is a settled position of law that while interpreting a fiscal statute, the same has to be read in its plain and unambiguous terms, and neither addition of words nor omission of words in the statutory text is permissible. It is equally well settled that, in order to claim the benefit of an exemption - 10 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR notification, strict compliance with the conditions stipulated therein is required.

13. The Hon’ble Supreme Court, in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company and Others6, has further held that where ambiguity arises in compliance of conditions in an exemption notification, the same is required to be interpreted in favour of the Revenue.

14. On a plain reading of Notification No.17/2005, it is unambiguously clear the Central Government has exempted services such as site formation and clearance, excavation and earth moving, demolition, and other similar activities, when provided to any person by any other person in the course of construction of roads, airports, railways, transport terminals, bridges, tunnels, dams, ports and other infrastructure projects, from the whole of service tax leviable thereon under Section 66 of the Finance Act. The notification thus grants exemption to services rendered in connection with a host of infrastructure projects from the levy of service tax. 6 (2018) 9 SCC 1 - 11 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR

15. On a plain reading of the notification, it is difficult to draw any distinction between Government railways and railways constructed for commercial purposes, or between railways meant for public carriage of passengers or goods and those laid for commercial use. There is no indication in the notification, nor any exception carved out, disqualifying services rendered in relation to railways constructed for commercial purposes from the benefit of exemption. In the absence of any such specific intention expressed in the notification, it is neither permissible nor possible to interpret the same as being confined only to works relating to public railways.

16. The expression “railways” as used in the notification takes within its fold, services rendered in relation to the construction of railways, whether for public or commercial purposes and whether owned by the Government or by private entities. What is emphasized in the notification is the creation of infrastructure. Once the services are rendered in relation to the infrastructure specified in the notification, it becomes immaterial whether the railway is private or Government- - 12 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR owned, or whether it is intended for public use or commercial usage. In the absence of any express exclusion, such a distinction cannot be introduced by interpretation.

17. It is also relevant to note that at the time of issuance of the notification, it was within the knowledge of the authorities that railway lines are also laid for commercial purposes. Despite such knowledge, no distinction was made in the notification. The intention of the Central Government, as can be gathered from the plain language employed, was to grant exemption to services rendered relation infrastructure, in the present case, railways.

18. Therefore, so long as the services are provided in relation to the construction of railways, the notification exempts such services from the whole of service tax leviable thereon. The interpretation adopted by the Commissioner amounts to reading words into the notification, which is impermissible in law. The Tribunal, by following the decision of the CESTAT, Mumbai Bench, involving an identical nature of work and the very same notification, has rightly held that service tax is not payable on the construction of private railway sidings. - 13 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR

19. We note one more aspect, namely, that carriage of goods is itself one of the commercial activities of the railways. Though M/s. JSW Steel Limited has set up railway infrastructure for its own commercial purposes, the same constitutes an extension of railway infrastructure and ensures commercial benefit to the railways as well. The laying of railway lines within the premises of M/s. JSW Steel Limited would enure to the benefit of the railways by augmenting railway infrastructure.

20. Having regard to the object of issuing notification, which is to encourage the construction of various infrastructure projects, one such being railways, any distinction between railways meant for public carriage of passengers or goods and those laid for commercial use is impermissible.

21. For the reasons stated above, we find no reason to differ from the findings recorded by the CESTAT. The substantial questions of law are answered in favour of the assessee and against the Revenue. - 14 - NC: 2026:KHC:1166-DB CEA No. 12 of 2021 HC-KAR

22. Accordingly, the appeal filed by the Revenue stands dismissed. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE MV List No.: 1 Sl No.: 36