Accident Surcharge Not Insurance Service: CESTAT Sets aside Rs 2.2 Crore Service Tax Demand on Rajasthan SRTC [Read Order]

The Principal Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, held that the accident compensation surcharge collected by RSRTC was not taxable as general insurance service wherein, passenger transportation being the core service falls under the negative list, with compensation merely bundled to it. Thus, ₹2.20 crore service tax demand for the period of April-June 2017 was set aside.

The Appellant, M/s Rajasthan State Road Transportation Corporation, challenged the impugned order dated 24.03.2021 which was passed by the Principal Commissioner, CGST & Central Excise, Jaipur, confirmed a service tax demand of Rs. 2,20,12,526/- with interest and penalty for the period from April 2017 to June 2017.

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The Appellant, a Rajasthan State Government corporation, provides passenger transportation services and issues tickets. The Appellant also collected an 'accidental compensation surcharge' with each ticket to compensate accident victims.

The Counsel for the Appellant, Sameer Sood, Jatin Mandovaria and Jiten Yadav, stated that it was only providing passenger transport service and not rendering any insurance service. On the other hand, Authorized Representative for the Respondent, S.K. Meena, argued that the appellant was rendering General Insurance Service to passengers for consideration and was thus liable to pay service tax on the accidental compensation surcharge collected.

The Tribunal consisted of Judicial Member, Binu Tamta and Technical Member, P.V Subba Rao, heard and reviewed the matter challenged by the appellant.

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The Tribunal, after considering the submissions made, observed that both parties agreed the issue was covered by its earlier decision in the appellant's own case for a previous period M/s. Rajasthan State Road Transport Corporation versus Commissioner of Central Goods and Service Tax, Central Tax, Jaipur (2024 (7) TMI 1458).

That decision held that for the pre-2012 period, the appellant was not rendering general insurance service and no service tax was payable. For the post-2012 period, passenger transportation fell under the negative list and was thus exempted.

Further, the Tribunal stated that even if accident compensation was considered an additional service, it was bundled with transportation which gave the service its essential character, thus attracting no service tax. Following the precedent, the Tribunal held the impugned order unsustainable and set it aside.

Accordingly, the Tribunal set aside the impugned order and allowed the appeal with consequential relief to the appellant. The Order was pronounced in open court on 18/12/2025.

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