UPSRTC's Yatri Plaza Scheme Fees Not Taxable as Declared Service: CESTAT Allahabad

Background and Overview

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, recently delivered a significant ruling in favour of the Uttar Pradesh State Road Transport Corporation (UPSRTC), setting aside a service tax demand along with associated interest and penalties. The case arose from amounts collected by UPSRTC from designated roadside eateries and outlets operating under the "Yatri Plaza Yojna" scheme, which the Department had sought to tax as a declared service under Section 66E(e) of the Finance Act, 1994.

The Tribunal's ruling clarifies an important boundary between public welfare administration and commercial service transactions — a distinction that carries significant implications for government undertakings and public sector entities operating passenger transport services across India.

Parties and Procedural History

Case: Regional Manager Uttar Pradesh State Road Transport Corporation Vs Commissioner CGST & Central Excise (CESTAT Allahabad)

UPSRTC, a public sector undertaking of the Government of Uttar Pradesh, holds Service Tax Registration and is engaged in providing 'Rent-a-Cab Scheme Operator Service' and 'Renting of Immovable Property Service'. The Regional Manager, UPSRTC, Ayodhya, was the appellant before the Tribunal.

The sequence of proceedings was as follows:

  1. The Department issued summons and initiated inquiry into amounts collected from dhaba owners under the Yatri Plaza Yojna.
  2. A reply dated 28.07.2017 was filed by UPSRTC.
  3. The statement of Shri Rajesh Verma, General Manager (Commercial), UPSRTC, was recorded on 10.01.2018.
  4. The statement of Shri Milap Singh Yadav, Senior Accountant, UPSRTC Regional Unit, Ayodhya, was recorded on 15.10.2020.
  5. A Show Cause Notice (SCN) dated 30.12.2020 was issued demanding service tax of Rs.3,85,403/- along with applicable interest and penalties.
  6. The Order-in-Original dated 06.09.2023 confirmed the demand, imposed an equal penalty under Section 78, and levied a further penalty of Rs.2,000/- under Section 77(1) of the Finance Act, 1994.
  7. The Commissioner (Appeals), CGST & Central Excise, Allahabad, upheld the adjudication order vide Order-In-Appeal No. 227-ST-ALLD-2024, dated 05.04.2024.
  8. UPSRTC then approached CESTAT Allahabad, which allowed the appeal.

The Yatri Plaza Yojna: What Was the Arrangement?

Genesis of the Scheme

UPSRTC observed that bus drivers and conductors were halting their vehicles at arbitrary locations along routes, without any consideration for cleanliness, hygiene, food quality, or passenger safety. To address this systemic problem and ensure a minimum standard of amenities for passengers, UPSRTC entered into Memoranda of Understanding (MOUs) with dhaba owners and outlets along national highways under the "Yatri Plaza Yojna."

Obligations Imposed on Dhaba Owners

Under the scheme, approved dhabas were required to meet the following infrastructure and service standards:

  • Maintain approximately 4,000 sq. ft. of space for the dhaba premises
  • Provide a dining area with furniture capable of seating at least 40 persons
  • Supply free purified drinking water to passengers
  • Maintain 2 toilets for ladies and 4 toilets for gents
  • Provide 8 ceiling fans, washbasins, towels, soap, and related amenities
  • Maintain a generator facility of 16 KVA

In addition to the above infrastructure requirements, dhaba owners were also obligated to: