The Customs, Excise & Service Tax Appellate Tribunal (CESTAT),New Delhi, has set aside a service tax demand of Rs. 9.31 crore along with penalties and interest.
The bench of Dr. Rachna Gupta (Judicial Member) and A.K. Jyotishi (Technical Member) observed that the MoU did not establish the appellant as a provider of maintenance, manpower, or cleaning services; rather, the appellant merely facilitated salary disbursement for CSSPL’s unskilled workers. The reliance on Rule 5 was invalid, since reimbursements could not be included in the taxable value prior to 2015. No evidence showed RMS received consideration beyond worker wages, supporting its claim of acting as a pure agent. The department failed to prove any fraud or suppression justifying invocation of the extended limitation period. Since the SCN was issued in April 2017 for a period beginning in 2011, the entire demand was held time-barred.
The case stemmed from allegations that appellant/ Rakesh Maintenance Service (RMS) failed to discharge service tax liabilities between October 2011 and March 2016.
The dispute arose after the tax department alleged that appellant was providing taxable services — including maintenance and repair, manpower supply, and cleaning services — without proper registration until August 2013, and subsequently misdeclared the taxable value in its returns. Investigators relied on a memorandum of understanding (MoU) between RMS proprietor Rakeshdhar Dubey and Clear Secured Services Pvt. Ltd. (CSSPL) to frame the demand.
RMS contested the show cause notice (SCN) as vague and misclassified, arguing that the same activity was categorized under three different taxable heads. The appellant maintained that Dubey was only disbursing salaries to CSSPL’s manpower as a “pure agent”, not providing independent taxable services.
Further, counsel argued that the department wrongly invoked Rule 5 of the Service Tax Valuation Rules, which had already been struck down as unconstitutional by the Supreme Court in Union of India vs. Intercontinental Consultants(2018). For the post-2015 period, when a new agreement classified RMS under manpower supply services, it was argued that the service tax liability rested on CSSPL under the reverse charge mechanism, not RMS, thereby avoiding double taxation.
The tribunal held that the show cause notice was misclassified, time-barred, and unsustainable in law. Consequently, the entire demand of Rs. 9.31 crore, along with interest and penalties on RMS and its proprietor, was quashed.
“The appellant had never provided the services alleged in the show cause notice… When the entire demand is set aside, the penalty also has no basis of sustenance,” the bench ruled.
Case Details
Case Title: Rakesh Maintenance Service Versus Commissioner of CGST
Case No.: Service Tax Appeal No. 51219 Of 2020
Date: 08.07.2025
Counsel For Appellant : Anurag Mishra, Advocate
Counsel For Respondent: Rajeev Kapoor, Authorised Representative
Mariya is the Senior Editor at Juris Hour. She has 5+ years of experience on covering tax litigation stories from the Supreme Court, High Courts and various tribunals including CESTAT, ITAT, NCLAT, NCLT, etc. Mariya graduated from MLSU Law College, Udaipur (Raj.) with B.A.LL.B. and also holds an LL.M. She started as a freelance tax reporter in the leading online legal news companies like LiveLaw & Taxscan.
