2026-VIL-61-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Providing of services – Demand of tax – Appellant is engaged in providing various taxable services – Department issued show cause notice proposing demand of Service Tax by invoking extended period of limitation – Principal Commissioner confirmed demands proposed in show cause notice – Whether Appellant is liable to pay Service Tax under category of tour operator service – HELD – Appellant operates stage carriage buses between various cities/town/villages, which service is not exigible to service tax. In addition to stage carriage buses, Appellant had entered into an agreement with Rajasthan Tourism Development Corporation (RTDC), according to which, in order to promote tourism within Rajasthan, Appellant operates buses. If a vehicle merely transports passengers from one place to another and charges each passenger a fare, it is more akin to transportation of passengers than a tour operation. In view of above, demand of service tax under category of tour operator service cannot be sustained and is set aside – Appeal disposed of - Denial of credit – Whether denial of CENVAT credit on third party insurance on bus services is sustainable – HELD – Appellant runs stage carriage buses, which service is exempted from payment of service tax. Case of department is that Appellant was not entitled to CENVAT credit, as services rendered by Appellant were exempted. No CENVAT credit can be availed on inputs and input services used in manufacture of exempted goods. Service provided by buses is undisputedly not taxable, therefore, service tax paid on third party insurance of buses which are used for carrying passengers cannot be taken by Appellant. Denial of CENVAT credit on this count needs to be upheld - Invoking of extended period of limitation – Whether invoking of extended period of limitation is justified in facts and circumstances of case – HELD – Appellant is a Governmental Organization and it could have entertained a belief that it was entitled to take CENVAT credit which it was not actually entitled to. Once ST-3 returns are filed, it is for Range officer to scrutinize return, call for any additional information or accounts required. Department cannot say that it was not aware about the activities of Appellant and claim suppression of facts or mis-statement to invoke extended period of limitation. Invoking of extended period of limitation is not justified. Denial of CENVAT credit with interest for extended period of limitation is set aside. Denial of CENVAT credit on third party insurance on bus services is upheld within normal period of limitation. Matter is remanded to Commissioner only for limited purpose of computation.
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