CESTAT Upholds ₹64.61 Lakh Service Tax Demand on Manpower Supply to Government Hospitals, Denies Reverse Charge Benefit

April 2, 2026 : The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Principal Bench, New Delhi, has upheld a service tax demand of ₹64,61,530 against Shri Balaji Enterprises, ruling that manpower supply services provided to Government hospitals are taxable and do not qualify for the reverse charge mechanism under Notification No. 30/2012-ST.

The Bench comprising Dr. Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) dismissed both the appeal and the accompanying miscellaneous application, affirming the Order-in-Original dated 31.08.2016.

Shri Balaji Enterprises, a proprietorship concern, was engaged in supplying nursing staff, orderly personnel, and other manpower to various Central and State Government hospitals and medical institutions. A show cause notice dated 20.04.2015 alleged non-payment of service tax under the category of “Manpower Recruitment or Supply Agency Service” for the period 2013–14.

Before the Tribunal, the appellant argued that the services were essentially cleaning and housekeeping in nature, forming part of public health and sanitation, and thus exempt under Notification No. 25/2012-ST. It was further contended that since services were rendered to Government hospitals, the reverse charge mechanism under Notification No. 30/2012-ST should apply, shifting partial liability to the service recipients.

Rejecting these submissions, the Tribunal held that the classification of services as manpower supply had not been disputed at the adjudication stage and could not be challenged for the first time in appeal. It emphasised that appellate proceedings cannot be used to introduce new grounds without exceptional justification.

On the applicability of reverse charge, the Tribunal analysed Notification No. 30/2012-ST and clarified that the benefit is available only when services are provided to a “business entity registered as a body corporate.” Examining the list of recipients, including institutions such as Aruna Asaf Ali Government Hospital, Deen Dayal Upadhyay Hospital, and GB Pant Hospital, the Tribunal found that these were Government hospitals or charitable organisations and did not qualify as business entities registered as body corporate.

Accordingly, it held that the appellant was not eligible for the reverse charge benefit. The Tribunal also relied on the Supreme Court’s ruling in Commissioner of Customs v. Dilip Kumar & Co., reiterating that exemption notifications must be interpreted strictly and the burden lies on the assessee to establish eligibility.

The Tribunal further refused to admit additional agreements sought to be produced at the appellate stage, noting the absence of sufficient cause for their earlier non-production and relying on settled principles governing admission of additional evidence.

Finding no infirmity in the impugned order, the Tribunal upheld the demand along with interest and penalty and dismissed both the appeal and the miscellaneous application.

Cause Title: Shri Balaji Enterprises v. Commissioner of CGST & Central Excise, Delhi North
Case No.: Service Tax Appeal No. 52586 of 2019
Coram: Dr. Rachna Gupta (Judicial Member), Hemambika R. Priya (Technical Member)