2012 (5) TMI 126 - AT - Service Tax

Demand of duty, interest and penalty - tour operator service or rent-a-cab service Period of limitation - held that - the charges that has to be paid to the assessee appellant has to be based basic distance and any express travelled will upon pro-rata kilometres traversed. - the appellant is responsible for maintenance of the vehicles and he is suppose to fill the fuel and make the vehicle available along with the driver and substitute the vehicle in the case of any break down of vehicle. - the appellant herein is in possession of vehicles and is only hiring out the vehicles to ONGC for a stipulated period or as per the agreement. - Whether the hiring out of vehicle is for a day or a month does not mean anything, as the said vehicle is still in the possession of the appellant assessee or his driver during the entire period. - Tribunal in the case of Shree Sai Krishna Travels (2009 (9) TMI 515 - CESTAT, BANGALORE) was considering an identical issue and has held that in this kind of situation, the services rendered by the assessee cannot fall under the category of Rent-a-Cab services, as per the definition enshrined at Section 65 (91) of the Finance Act, 1994. - Decided in favour of the assessee. As regards the question of limitation, Held that the issue involved was really in dispute and various Benches have been holding that the activities being conducted by the appellant herein would not fall under the category of Rent-a-Cab Services and hence the bonafide impression carried by the appellant could not be faulted with.

Issues Involved:
1. Liability to pay service tax on "tour operator service."
2. Liability to pay service tax on "rent-a-cab service."
3. Applicability of the extended period of limitation.
4. Imposition of penalties.

Issue-wise Detailed Analysis:

1. Liability to Pay Service Tax on "Tour Operator Service":
The appellant argued that the buses used for transporting ONGC personnel were not tourist vehicles as defined under Section 2(43) of the Motor Vehicles Act, 1988, and hence, they should not be liable for service tax under the category of "tour operator service." The Tribunal found considerable force in this argument, noting that the definition of a tour operator during the relevant period required the use of a tourist vehicle covered by a permit under the Motor Vehicles Act. The Tribunal relied on the decision of the Hon'ble High Court of Madras in the case of Federation of Bus Operators' Association of Tamilnadu, which was upheld by the Supreme Court, stating that if a vehicle does not meet the definition of a tourist vehicle, the person operating it would not be required to register as a tour operator. Consequently, the Tribunal concluded that the appellant was not liable to pay service tax under the "tour operator service" category.

2. Liability to Pay Service Tax on "Rent-a-Cab Service":
There was a difference of opinion between the members of the Tribunal regarding the nature of the service provided by the appellant to ONGC. The appellant contended that they were merely hiring out vehicles to ONGC, not renting them, and thus should not be liable under the "rent-a-cab service" category. The Tribunal examined the contract clauses extensively. Member (Technical) held that the service provided amounted to "rent-a-cab service" as the vehicles were rented out on a monthly basis with fixed charges and additional charges for extra kilometers. Member (Judicial) disagreed, stating that the contract indicated hiring rather than renting, as the possession and control of the vehicles remained with the appellant, who was responsible for maintenance, fueling, and providing substitute vehicles in case of breakdowns. The third member, resolving the difference of opinion, concurred with Member (Judicial), concluding that the appellant was not providing "rent-a-cab service" and thus was not liable for service tax under this category.

3. Applicability of the Extended Period of Limitation:
The Tribunal noted that the appellant had obtained service tax registration in 2002 but did not pay service tax or file returns. The appellant claimed a bona fide belief, based on advice from a tax consultant, that their services were not taxable. The Tribunal found this claim unsupported by evidence and noted that the appellant was aware of their potential liability as early as 2002 but failed to take appropriate steps. Therefore, Member (Technical) upheld the invocation of the extended period due to suppression of facts. However, Member (Judicial) and the third member found that there was enough material to entertain a bona fide belief about non-liability, given the confusion and conflicting decisions in the field. They concluded that the demand was barred by limitation, as the extended period could not be invoked without evidence of intent to evade tax.

4. Imposition of Penalties:
Given the conclusions on the liability for service tax and the applicability of the extended period of limitation, the penalties imposed on the appellant were also set aside. The Tribunal's majority order set aside the confirmation of demand and penalties on both merits and limitation grounds.

Conclusion:
In summary, the Tribunal concluded that the appellant was not liable to pay service tax under the "tour operator service" and "rent-a-cab service" categories. The demand was also barred by limitation, and the penalties imposed were set aside. The matter was remanded to the original adjudicating authority for fresh quantification of liability, if any, under the "rent-a-cab service" category, considering the Tribunal's observations.

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