IT Facility Management Services Not Taxable as Maintenance: CESTAT Quashes ₹4.5 Crore Service Tax Demand [Read Order]
CESTAT clarifies service tax classification holding IT facility management distinct from maintenance services and granting major relief to the assessee
![IT Facility Management Services Not Taxable as Maintenance: CESTAT Quashes ₹4.5 Crore Service Tax Demand [Read Order]](https://images.taxscan.in/h-upload/2026/02/28/2127434-it-facility-management-services-taxable-maintenance-cestat-service-tax-demand-taxscan.webp "IT Facility Management Services Not Taxable as Maintenance: CESTAT Quashes ₹4.5 Crore Service Tax Demand [Read Order]")
The Customs, Excise and Service Tax Appellate Tribunal has set aside a demand for service tax of ₹4.5 crore, holding that IT Facility Management Services cannot be classified as “Management, Maintenance or Repair Service” during the relevant period. M/s Network Solutions Pvt. Ltd., a company providing IT facility management services like server management, WAN...
The Customs, Excise and Service Tax Appellate Tribunal has set aside a demand for service tax of ₹4.5 crore, holding that IT Facility Management Services cannot be classified as “Management, Maintenance or Repair Service” during the relevant period.
M/s Network Solutions Pvt. Ltd., a company providing IT facility management services like server management, WAN and LAN management, help desk support, and vendor coordination, had classified its services under Business Auxiliary Service, claiming exemption under Information Technology Services.
After conducting an audit, the Department held that the services were taxable under Management, Maintenance or Repair Service for the period from May 2006 to May 2008, issuing a show cause notice on the basis of extended limitation. The Commissioner confirmed a demand of ₹4,50,15,137 along with interest and penalties.
The assessee claimed that its business was mainly connected with the operation and management of computer systems, which fell squarely within the exclusion of IT services under Business Auxiliary Service during the relevant period. The assessee also disputed the application of extended limitation of time on the ground that there was full disclosure in the ST-3 returns.
Further, the Revenue claimed that the active maintenance of IT infrastructure was maintenance and relied on the CBEC circulars and judicial precedents.
The Tribunal comprising Dr. D.M. Misra (Judicial Member) and R. Bhagya Devi (Technical Member) held that the main business of the assessee was IT facility management, which fell within the definition of Information Technology Service, excluded from service tax during the relevant period.
Applying the principles of classification under Section 65A, the Tribunal held that incidental maintenance could not alter the essential character of the service.On limitation, the Tribunal held that there was no suppression of income, as the matter arose only from the audit assessment.
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