Road Restoration Charges Paid by Business to PWD Are Taxable Supply Under RCM, Not Compensatory Damages: GSTAT Lucknow

The Tribunal held that road restoration charges paid by a gas pipeline company to the PWD are consideration for a fee-for-service, not passive damages, and fall squarely within the RCM net.

The Goods and Services Tax Appellate Tribunal, Lucknow Bench, has dismissed two appeals filed by Torrent Gas Limited, upholding the rejection of refund claims totalling ₹9,67,651 (₹5,82,719 and ₹3,84,932) of GST paid under the Reverse Charge Mechanism on road restoration charges paid to the Public Works Department, Uttar Pradesh. [Torrent Gas Limited v. Commissioner, CGST & Central Excise Commissionerate, Kanpur]

Members Santosh Kumar Srivastava (Judicial) and Arvind Kumar (Technical) held that the road restoration charges are a direct fee for a specific infrastructure restoration service — a planned administrative arrangement — and not passive compensation for a contractual breach or liquidated damages.

The appellant, a natural gas distribution company, had obtained permission from PWD to lay gas pipeline networks by cutting public roads in Kanpur. After restoring the roads, PWD charged restoration fees calculated on the basis of the structural volume of excavation work. The appellant paid GST under RCM on these charges and subsequently sought a refund, arguing that the charges were compensatory in nature and did not constitute a "supply" under Section 7(1) of the CGST Act.

The Tribunal rejected this argument, noting that the transaction was entirely distinct from a unilateral wrongful act or post-injury civil damages. The appellant had voluntarily applied for permission, and PWD performed a distinct, physical repair service with fees explicitly calculated on excavation volume — establishing bilateral transactional reciprocity within Section 2(31).

On the appellant's claim of exemption under Notifications No. 12/2017 and 14/2017-Central Tax (Rate), the Tribunal held that while routine road maintenance is a sovereign function under Articles 243G and 243W of the Constitution, custom request-driven road repair executed for a private commercial entity's business pipeline rollout steps outside the government's generic sovereign capacity. Entry 6(d) of Notification No. 12/2017 explicitly excludes services provided by the government to a "business entity" from general tax immunity.

The Tribunal also dismissed the appellant's reliance on favourable refund orders received for identical facts in Rajasthan and Punjab, holding that a summary refund order from one state jurisdiction does not operate as a binding legal precedent over an appellate authority of another state.

On the DIN issue, the Tribunal found that since the entire refund workflow was processed through the authenticated electronic GST portal, the mere technical absence of a physical DIN did not by itself invalidate the proceedings.

2026-juristway.com-3024-GSTAT(Lucknow)-GST  |  GSTAT Lucknow  |  APL/61/LCK/2026 & APL/62/LCK/2026  |  07.10.2026