2005 (5) TMI 353 - AT - Service Tax

Rent-a-cab operator - company not renting out any stipulated number of vehicles but making payment to appellant for operating trips to various places - Vehicle continued to be with operator Service undertaken by operator not in nature of Rent-a-Cab service - Service tax demand not sustainable

Summary

Issues:
1. Whether the service provided by the appellant falls under the category of "Rent-a-cab operator's services" attracting service tax.
2. Whether the contract between the parties indicates a rental arrangement or a payment for transport services based on distance traveled.
3. Whether the service tax demand on the appellant is sustainable, considering the nature of the services provided and the terms of the contract.

Analysis:

1. The case involved a dispute regarding the classification of services provided by the appellant as either "Rent-a-cab operator's services" attracting service tax or as a payment for transport services. The Deputy Commissioner issued a Show-cause Notice contending that the service provided by the appellant fell under the category of "Rent-a-cab operator's services" attracting a duty demand of over &8377; 93,000. This duty demand was confirmed in adjudication and upheld in appeal. The appellant contested this classification, arguing that the service provided was not in the nature of "Rent-a-cab" service.

2. The appellant argued that the service provided was for operating matador services based on a contract that involved providing transport services against payment on a per kilometer basis. The terms of the contract highlighted that the Corporation did not guarantee a minimum turnover or mileage work for each vehicle, and the contractor was paid for operating the buses at specified rates. The contract indicated a payment for transport services based on distance traveled, rather than a rental arrangement for cabs. The appellant's counsel emphasized the distinction between "hire" of a vehicle for operating transport services and "renting" of cabs based on dictionary definitions.

3. The Tribunal analyzed the nature of the services provided under the contract and concluded that the appellant was not engaged in renting out cabs but was providing transport services based on specific trips required by the Corporation. The contract involved payment for operating trips to various places based on distance and time, without leasing out cabs for a specific interval of time. The Tribunal noted that the service tax levy specifically pertained to services provided by a "rent-a-cab scheme operator in relation to renting of a cab," which did not align with the nature of services provided by the appellant. Consequently, the Tribunal held that the service tax demand on the appellant was not sustainable, leading to the setting aside of the impugned order and allowing the appeal with consequential relief, including the failure of interest and penalty demands dependent on the tax.

This detailed analysis of the judgment highlights the key arguments, contractual terms, and legal interpretation that led to the Tribunal's decision in favor of the appellant regarding the classification of services and the sustainability of the service tax demand.