Deployment of Staff for Rake Movement Falls Under Manpower Supply: CESTAT Quashes ₹7.79 Lakh Service Tax Demand [Read Order]
It stressed that demands cannot be confirmed merely on differences in Form 26AS and ST‑3 returns without proper investigation into exemptions and liability
![Deployment of Staff for Rake Movement Falls Under Manpower Supply: CESTAT Quashes ₹7.79 Lakh Service Tax Demand [Read Order]](https://images.taxscan.in/h-upload/2026/03/24/2130042-tax-demandjpg.webp "Deployment of Staff for Rake Movement Falls Under Manpower Supply: CESTAT Quashes ₹7.79 Lakh Service Tax Demand [Read Order]")
In a recent ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad Bench, has set aside a ₹7.79 lakh service tax demand and clarified that services involving deployment of staff for rake movement constitute manpower supply, where liability rests with the recipient under the Reverse Charge Mechanism (RCM), and not with the contractor. The dispute arose...
In a recent ruling, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Allahabad Bench, has set aside a ₹7.79 lakh service tax demand and clarified that services involving deployment of staff for rake movement constitute manpower supply, where liability rests with the recipient under the Reverse Charge Mechanism (RCM), and not with the contractor.
The dispute arose after the tax department, relying on discrepancies between Form 26AS and ST-3 service tax returns, alleged short payment of service tax for 2014–17. A show-cause notice was issued in December 2020, and the adjudicating authority confirmed the demand in January 2022, classifying the services as cargo handling. The Commissioner (Appeals) upheld this view in November 2022.
The appellant, R S And Brothers, argued that the contract with Utility Powertech Ltd. (a Reliance–NTPC joint venture) was for the deployment of ex-railway staff for rake movement at NTPC Tanda, which squarely fell under manpower supply services. Under Notification 30/2012-ST, service tax liability in such cases rests with the recipient company under the Reverse Charge Mechanism (RCM).
On the other hand, the respondent stated that appellant had a broader contract involving materials and compliance, not just manpower supply, and therefore remained liable to pay service tax under the cargo handling category.
After examining the award letter and scope of work, the Tribunal agreed that the contract was essentially for manpower supply, not cargo handling. It noted that cargo handling services apply to specialised agencies like Container Corporation or Airport Authority, not small manpower contractors.
The bench also observed that the department wrongly relied on pre-2012 provisions, ignoring the shift to the negative list regime and Section 66B.
The bench, Justice P.K. Choudhary noted that “There is no ambiguity in the work order and the instructions are very very crisp and clear and there is no scope for classifying the services under any other category. “
Accordingly, the tribunal held that the impugned order was unsustainable, the Tribunal set aside the demand and allowed the appeal.
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