CESTAT Allahabad Holds Soil and Canal Work for Irrigation Department as Exempt Under Mega Exemption Notification

Background of the Dispute

The case of Ravindra Nath Singh Vs Commissioner came before the CESTAT Allahabad against Order-in-Appeal No. 02/ST/Appl/Alld/2026 dated 15.01.2026. The controversy centred around the levy of service tax on specific receipts relating to works executed for:

  • Executive Engineer, Irrigation Construction Division, Robertsganj; and
  • Executive Engineer, Bundhi Division-II, Robertsganj, Sonbhadra.

While a major part of the service tax demand had been dropped at the adjudication stage, the authorities had confirmed service tax of ₹87,861 along with interest and penalties on the above two sets of receipts. The assessee challenged this limited surviving demand as well as the consequential penalties.

Profile of the Assessee and Nature of Activities

The assessee, Shri Ravindra Nath Singh, was registered with the Rural Engineering Services (RES) Department of the Government of Uttar Pradesh. RES acts as a nodal government agency responsible for executing construction and related works for various Government and Semi-Government entities.

During the Financial Year 2016-17, the assessee received consideration from the following offices and bodies:

  • Executive Engineer, Irrigation Construction Division, Robertsganj
  • Executive Engineer, Irrigation, Bundhi Division-II, Robertsganj
  • Rural Engineering Services
  • Zila Panchayat, Varanasi
  • Zila Panchayat, Chandauli

The assessee held registration under the U.P. VAT Act but had not obtained registration under the service tax law. His consistent stand was that the activities undertaken were exempt in terms of Mega Exemption Notification No. 25/2012-ST dated 20.06.2012, and therefore no service tax registration was required.

Evidence Produced Before the Adjudicating Authority

When the proceedings commenced before the adjudicating authority, the assessee produced a comprehensive set of documents, including:

  • Copy of Exemption Notification No. 25/2012-ST dated 20.06.2012
  • Certificates issued by Rural Engineering Services confirming the contract works executed
  • Abstracts of agreements and bills of quantity issued by RES
  • Work orders (Karyadesh) from Zila Panchayat Varanasi and Zila Panchayat Chandauli
  • Form 26AS for Financial Years 2016-17 and 2017-18
  • VAT assessment orders for the relevant financial years

These documents were furnished to show that the services rendered were in the nature of construction and works contract services for government bodies in relation to public infrastructure, which are specified as exempt under the Mega Exemption Notification.

Findings of the Adjudicating Authority

Acceptance of Exemption for RES and Zila Panchayat Works

The adjudicating authority examined the documents and recorded detailed findings. In particular, the authority noted that:

  • The assessee executed works contract services for RES involving “construction of C.C. road and K.C. drain”, and
  • Amount of ₹43,15,775 (after deduction of TDS under Section 194C of the Income Tax Act, 1961) was received for these works.

The adjudicating authority relied on:

  • Certificates issued by Executive Engineer, RES, Sonebhadra Division, and
  • Copies of Agreement Nos. 26/EE/RED/SBR/ dated 17.08.2016, 23/EE/RED/SBR/ dated 17.08.2016, and 30/EE/RED/SBR/ dated 20.09.2015.

These were accepted as genuine and sufficient to establish the nature of work as construction of civil infrastructure for a government department. Consequently, exemption under **Notification No.