Runway Resurfacing at Air Force Station Qualifies for Retrospective Service Tax Exemption: CESTAT

The New Delhi Principal Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside the rejection of a refund claim relating to service tax paid on resurfacing of a runway at an Air Force Station, holding that such activities qualify as exempt civil construction/original works under Sections 102 and 103 of the Finance Act, 1994. The bench of Binu Tamta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that resurfacing and relaying of a runway involves substantial civil engineering works, including demolition and reconstruction of pavement layers, construction of ducts and drains, and application of rigid and flexible overlays. Such activities were found to squarely fall within “repair and maintenance of civil structure” as well as “original works”, particularly in light of the broad definition under Rule 2A of the Service Tax (Determination of Value) Rules, 2006. The dispute arose from a contract awarded in December 2013 by the Military Engineer Service (MES), a department under the Ministry of Defence, for resurfacing of the runway and allied works at an Air Force Station in Gujarat. At the time of execution of the contract, such services were exempt from service tax under Notification No. 25/2012-ST. However, following withdrawal of the exemption with effect from 1 April 2015, service tax was paid for the period April 2015 to February 2016. Most of the tax amount was reimbursed by the service recipient, while a smaller portion was borne by the contractor. Subsequently, the exemption was restored retrospectively through Notification No. 9/2016-ST and by insertion of Sections 102 and 103 in the Finance Act, 1994, enabling refund of service tax paid during the intervening period. A refund claim filed under these special provisions was, however, rejected by the department and the rejection was upheld on appeal, prompting the matter to reach the Tribunal. The tax authorities had denied the refund on multiple grounds, including that resurfacing of a runway did not amount to construction or repair of a “civil structure” or “original works”, that mandatory conditions such as payment of stamp duty and certification by the Ministry of Civil Aviation were not fulfilled, and that the claim was hit by the principle of unjust enrichment. After an extensive examination of the statutory framework, exemption notifications, and the nature of works executed, the Tribunal rejected the department’s narrow interpretation. It observed that the language of the exemption under Notification No. 25/2012-ST and the reintroduced Notification No. 9/2016-ST was materially identical, except for the additional condition regarding pre-1 March 2015 contracts. Since the same services had earlier been accepted as exempt, the department could not take a contrary view for the later period when the exemption was retrospectively restored. The Bench also emphasized that works executed for the Ministry of Defence are inherently non-commercial in nature, satisfying the statutory requirement that the structure be meant predominantly for use other than commerce, industry, or business. Reliance was placed on prior judicial precedents recognizing that services rendered to MES, being a defence establishment, are not linked to commercial activity. Addressing the objection regarding stamp duty, the Tribunal noted that Section 102 uses the expression “where applicable”. Since contracts executed by or on behalf of the Government are exempt from stamp duty under the Indian Stamp Act, 1899, the absence of stamp duty payment could not be used to deny the benefit of retrospective exemption. With respect to Section 103, which deals specifically with construction of airports or ports, the Tribunal observed that while certification by the Ministry of Civil Aviation is prescribed, military airfields are administered by the Ministry of Defence. The legislative phrase “as the case may be” was interpreted purposively to mean that certification by the concerned ministry—in this case, the Ministry of Defence—would suffice. On unjust enrichment, the Tribunal held that the special refund mechanism under Sections 102 and 103 constitutes a self-contained code, distinct from Section 11B of the Central Excise Act. Moreover, the appellant had sought refund of the reimbursed amount directly to the MES, negating any unjust enrichment. Ultimately, while allowing the appeal and setting aside the impugned orders, the Tribunal remanded the matter to the Assistant Commissioner for the limited purpose of reprocessing the refund, directing that the MES be impleaded as a co-applicant in line with recent precedent. Case Details Case Title: M/S G.R. Infraprojects Ltd Versus Commissioner Of Central Excise CGST, Udaipur Case No.: SERVICE TAX APPEAL NO. 52841 OF 2018 Date: 14.01.2026 Counsel For Appellant: Shagun Arora Counsel For Respondent: Jaya Kumari Click Here To Read Order Read More: Madras High Court Orders Provisional Release of Second-Hand Digital Multifunction Machines Imported Without Mandatory BIS Certification, DGFT Authorisation

Runway Resurfacing at Air Force Station Qualifies for Retrospective Service Tax Exemption: CESTAT

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