Supreme Court Refuses To Interfere With Relief To RSRTC In ₹16 Crore Service Tax Dispute

The Supreme Court has refused to interfere with a tribunal ruling that granted major relief to Rajasthan State Road Transport Corporation (RSRTC) in a long-running service tax dispute involving demands exceeding ₹16 crore over allegations that it operated as a “tour operator” and failed to pay tax on certain other services.

A bench of Justice Dipankar Datta and Justice Satish Chandra Sharma dismissed an appeal filed by the Principal Commissioner of CGST and Central Excise, Jaipur, against a January 6 order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

“This civil appeal challenges the order dated 06th January, 2026 of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi. We have heard Ms. Bagchi, learned senior counsel for the appellant and considered the materials on record. We find no reason to entertain this civil appeal which is, accordingly, dismissed,” the Supreme Court ruled.

The dispute stemmed from four show cause notices issued between 2005 and 2011 alleging that RSRTC had failed to pay service tax on tour operator services and certain other taxable activities.

The tax department had argued that RSRTC, while operating buses between Jaipur and Delhi, Jaipur and Agra, as well as tourist routes within Rajasthan under an arrangement with Rajasthan Tourism Development Corporation (RTDC), qualified as a “tour operator” under the Finance Act and was liable to pay service tax.

Rejecting this, CESTAT held that merely transporting passengers between destinations on payment of individual fares did not amount to conducting organised tours.

“If a vehicle merely transports passengers from one place to another without a common contract and charges each passenger a fare it is more akin to transportation of passengers than a tour operation,” the tribunal ruled.

The tribunal accordingly set aside service tax demands on the alleged tour operator service, licence fee for transport of goods, and bus stand fee, while also ruling that the department could not invoke the extended limitation period by alleging suppression of facts after having already issued earlier notices on the same issues.

However, RSRTC did not secure a complete victory before the tribunal. CESTAT upheld certain tax demands within the normal limitation period, including wrongful availment of CENVAT credit on bus insurance, as well as some service tax demands that the corporation chose not to contest, and remanded the matter for recomputation of dues.