2014 (3) TMI 946 - AT - Service Tax

Demand of service tax - Rent a cab service - Held that - Though the service tax on rent-a-cab has been introduced since 16.07.1997 and the period of dispute in this case is 2002-2003, it is seen that the contract of the BSNL with the respondent is silent about service tax and as such, it is not in dispute that BSNL were not paying service tax to the respondent along with the vehicle hire charges. Moreover, during the period of dispute, there was confusion on the point as to whether service tax under the Heading Rent-a-Cab Scheme Operator s Service under Section 65(105)(o) read with Section 65(91) and 65(20) & 65 (71) would be attracted when vehicles are supplied along with drivers and the charges are on the basis of distance travelled by the vehicle, as the Tribunal in the case of Kuldeep Singh Gill reported in 2005 (5) TMI 353 - CESTAT, NEW DELHI has held that in such a case, when the vehicle supplier is paid on the basis of distance as per rate sheet, service tax under rent-a-cab operator s service would not attracted. When there was lack of clarity about the scope of the rent-a-cab operator s service covered by Section 65(105)(o) and the respondent in this case is an individual who in terms of his contract with BSNL was supplying vehicles and charging for the same on kilometer basis and when the respondent s contract with BSNL did not mention any service tax, and this is not case a case where the Appellant as service provider while collecting the service tax from the BSNL did not pay the same to the Government, it cannot be said that the respondent was aware of the service tax liability and had deliberately evaded the payment of tax. Therefore, we do not find any infirmity in the impugned order waiving the penalty on the respondent under Section 80 of the Finance Act, 1994 - Decided against Revenue.

Summary

Issues:
1. Whether the activity of providing vehicles to BSNL for transportation of employees constitutes a taxable service of rent-a-cab.
2. Whether the penalties imposed on the respondent under various sections of the Finance Act, 1994 are justified.
3. Whether the waiver of penalties by the Commissioner (Appeals) under Section 80 of the Finance Act, 1994 was correct.

Analysis:
1. The respondent provided vehicles to BSNL under an agreement, charging minimum fees for a certain distance and additional charges thereafter. The department alleged this activity fell under the taxable service of rent-a-cab and issued a show cause notice for service tax demand, interest, and penalties. The Asstt. Commissioner confirmed the service tax demand and imposed penalties. On appeal, the Commissioner (Appeals) upheld the service tax demand but waived penalties under various sections, citing the absence of clarity in the agreement regarding service tax payment. The Tribunal noted the confusion regarding the applicability of service tax under rent-a-cab operator's service during the disputed period and found that the respondent, being unaware of the service tax liability due to lack of clarity in the law, did not deliberately evade tax payment. Therefore, the waiver of penalties under Section 80 was deemed appropriate, and the Revenue's appeal was dismissed.

2. The Revenue contended that the respondent's ignorance of the law regarding service tax on rent-a-cab service was not a valid defense, as the law had been in effect since July 1997. However, the Tribunal considered the specific circumstances of the case, where the contract with BSNL did not mention service tax, and there was ambiguity regarding the applicability of service tax to the respondent's activity. Given the lack of clarity and the absence of willful tax evasion, the Tribunal upheld the waiver of penalties by the Commissioner (Appeals) under Section 80 of the Finance Act, 1994.

3. The Tribunal emphasized that the respondent's agreement with BSNL did not address service tax, and there was no evidence of the respondent collecting service tax from BSNL but not remitting it to the Government. The Tribunal also referenced a previous case where service tax was not attracted when charges were based on distance traveled by the vehicle. Considering these factors, the Tribunal found no fault in the Commissioner (Appeals) decision to waive penalties under Section 80, as the respondent's lack of awareness about the service tax liability was deemed reasonable under the circumstances. Thus, the appeal by the Revenue was dismissed, affirming the waiver of penalties on the respondent.