2012 (9) TMI 53 - AT - Service Tax

Rent-a-cab scheme operator in relation to the renting of a cab - appellants were engaged in the business of renting out low-floor buses to Rajasthan State Road Transport Corporation (RSTRC) on contract basis - Revenue was of the view that the appellants should have paid tax on the consideration received from RSRTC under the head for rent-a-cab scheme operator as as covered by defininton in entry at section 65 (20) of Finance Act - Held that - Abatement under Notification 1/2006-ST and abatement of cum-duty price can be extended to the appellant - applicants directed to deposit

Summary

Issues: Liability to pay service tax on renting out low-floor buses to Rajasthan State Road Transport Corporation (RSTRC) under the Rent-a-Cab scheme operator definition and applicability of abatement under Notification 1/2006-ST.

Analysis:

1. Liability for Service Tax: The appellants rented out low-floor buses to RSTRC for use as stage carriers, and the Revenue contended that this activity fell under the Rent-a-Cab scheme operator definition, making it taxable under entry 65(105)(o) of the Finance Act, 1994. The appellants argued that they were merely renting out their assets and not providing transportation services, thus not falling under the Rent-a-Cab scheme. They further contended that any tax liability would only arise after 16-05-2008 when a new entry was introduced. The Tribunal noted that the activity did fall under the statutory definitions, and the challenge to the validity of the entry was beyond its jurisdiction.

2. Abatement under Notification 1/2006-ST: The appellants claimed that if liable to pay service tax, they should be granted abatement under Notification 1/2006-ST, which would reduce the taxable value to 40% of the gross amount charged by them. The Revenue argued that the appellants did not claim this benefit before lower authorities, thus not satisfying the conditions for availing the abatement. The Tribunal found the Revenue's argument unconvincing and questioned why the abatement could not be extended to the appellants.

3. Decision and Order: The Tribunal found that the appellants' activity fell within the Rent-a-Cab scheme operator definition, thus making them liable for service tax. However, regarding the abatement issue, the Tribunal was not convinced by the Revenue's argument. As a result, the Tribunal ordered the appellants to deposit Rs. 5 lakhs within four weeks for admission of the appeal, with a waiver for pre-deposit of the balance dues and a stay on the collection of such dues. Compliance was to be reported by a specified date.

In conclusion, the judgment upheld the liability of the appellants to pay service tax under the Rent-a-Cab scheme operator definition but questioned the denial of abatement under Notification 1/2006-ST. The Tribunal issued a specific order for pre-deposit and compliance reporting, balancing the interests of both parties involved in the appeal.