The Patna High Court has dismissed a writ petition filed by Bihar Rajya Pul Nirman Nigam Limited (BRPNNL), a state-owned infrastructure company, challenging a demand of Rs. 38.79 crore in service tax along with interest and penalty for the financial years 2015-16 to 2017-18.
The Bench of Justice Rajeev Ranjan Prasad and Justice Sourendra Pandey upheld the findings of the Adjudicating Authority under Section 73(1) of the Finance Act, 1994. The authority had concluded that BRPNNL was liable to pay service tax on “centage” — a fixed percentage of project cost received from the Bihar government — and on toll-related services rendered to contractors for managing toll collections on behalf of the State.
The petitioner/assessee argued that being a wholly government-owned entity formed for public infrastructure development, the services it rendered — particularly bridge and road construction — were exempt under the Mega Exemption Notification No. 25/2012-ST and fell within the scope of Article 243W of the Constitution.
The department contended that BRPNNL merely functioned as an executing agency, outsourcing work to contractors, and was not directly constructing infrastructure. The “centage” charges constituted consideration for taxable services, including technical and project management assistance, and were not simply reimbursement of administrative expenses. The petitioner failed to prove that it qualified as a “governmental authority” under the Finance Act or that its services fell under the exemption notification. Toll collection support services provided to private vendors were taxable even though the toll itself was not.
The court dismissed the claim that BRPNNL was part of the government for tax purposes, noting that it is a company incorporated under the Companies Act and not established by an Act of Parliament or State Legislature. It does not perform any municipal function as listed under Article 243W of the Constitution. Its accounts are not audited under Article 150 of the Constitution, further disqualifying it as “Government.”
The court accepted the petitioner’s argument regarding service tax on penalties recovered from contractors. It cited the CBIC Circular No. 178/10/2022-GST and CESTAT rulings to conclude that such penalties are compensatory in nature and not consideration for tolerating an act under Section 66E(e) of the Finance Act.
The court upheld the department’s invocation of the extended limitation period under the proviso to Section 73(1), noting that BRPNNL had failed to file returns and had suppressed material facts.
Case Details
Case Title: Bihar Rajya Pul Nirman Nigam Limited Versus UOI
Case No.: Civil Writ Jurisdiction Case No.9979 of 2024
Date: 09 -05-2025
Counsel For Petitioner: D.V.Pathy, Sr. Advocate, Mr. Sadashiv Tiwari, Advocate, Mr. Hiresh Karan, Advocate, Ms. Shivani Dewalla, Advocate
Counsel For Respondent: Dr.K. N. Singh, Sr. Advocate (ASGI), Mr. Anshuman Singh, Sr. SC, CGST Mr. Shivaditya Dhari Sinha, Advocate
