2012 (12) TMI 765 - AT - Service Tax

Rent-a-cab service - Waiver of pre deposit and stay of recovery - Held that From the terms and conditions of the agreements, it appears that the buses did not fit in the definition of cab under Section 65(20) and the transactions between the Corporation on the one hand and the appellants on the other are not to be considered as squarely falling within the ambit of rent-a-cab service. Certain factors emerging from the nature of transactions appear to be incompatible with the features of the rent-a-cab scheme - Waiver of predeposit and stay of recovery in respect of the adjudged dues in all these appeals is granted.

Summary

Issues:
1. Whether demands of service tax with education cess on 'rent-a-cab' service are valid.
2. Whether buses operated under stage carriage permits fall under the scope of levy of service tax.
3. Interpretation of definitions of "cab" and "rent-a-cab scheme operator" in relation to the agreements.
4. Determining the exact nature of the activity undertaken by the appellants.
5. Granting waiver of predeposit and stay of recovery in respect of the adjudged dues.

Analysis:

Issue 1:
The appellants contested demands of service tax with education cess on 'rent-a-cab' service. The demands were based on hire charges paid by the Andhra Pradesh State Road Transport Corporation (APSRTC) to the appellants for providing buses under agreements. The Tribunal examined the agreements and found that the activities undertaken by the appellants might not fall within the definition of "rent-a-cab" service. The Tribunal noted that the buses were operated as stage carriages under stage carriage permits, indicating a public transport system. The Tribunal concluded that the demands may not be valid under the circumstances.

Issue 2:
The main ground of challenge was whether buses operated under stage carriage permits were within the scope of the levy of service tax. The appellants argued that once a motor vehicle is covered by a stage carriage permit, it falls outside the levy of service tax. The Tribunal analyzed the terms and conditions of the agreements and found that the buses did not fit the definition of "cab" under the relevant provisions. The Tribunal considered various factors, including routes, fares, and control over operations, to determine that the activities were more than mere hiring of buses, possibly exempting them from the definition of "rent-a-cab" service.

Issue 3:
The Tribunal examined the definitions of "cab" and "rent-a-cab scheme operator" in relation to the agreements. The Additional Commissioner argued that the vehicles in question fit the definition of "cab" and thus fell under the ambit of "rent-a-cab" service. However, the Tribunal found that the nature of transactions and the operational details indicated that the activities might not squarely align with the features of a rent-a-cab scheme.

Issue 4:
To determine the exact nature of the activity undertaken by the appellants, the Tribunal analyzed a specimen agreement between APSRTC and one of the appellants. The terms of the agreement highlighted various responsibilities of the owner, including maintenance, insurance, driver provision, and compliance with statutory provisions. The Tribunal found that the buses operated under similar agreements did not fit the definition of "cab" and the activities undertaken were more complex than mere hiring, possibly exempting them from the rent-a-cab service definition.

Issue 5:
Considering the above analysis, the Tribunal granted waiver of predeposit and stay of recovery in respect of the adjudged dues in all appeals, indicating a favorable decision for the appellants based on the nature of their activities and the agreements in question.