2015 (1) TMI 809 - HC - Service Tax

Rent-a-cab service - transportation services - transportation of papers/answer sheets, examiners agreement terms indicating vehicle itself not given for operation under ownership and management of client - payments made for operating trips to various places. - Non filing of ST-3 returns - levy of penalty. Held that - petitioner cannot escape tax liability on the ground that the hiring is different from renting as the intention of the Government is to tax service provider of a service which involves both hiring and renting of a cab for a longer duration and distinction as sought to be carved out by the petitioner is not finding favour with this Court. - Despite there being Section 74 of Motor Vehicles Act, when Section 75 of the said Act is brought on statutory book, that does not also allow us to hail the submissions of the petitioner that those who give vehicle without exclusive control cannot be taxed. The Tribunal ignored the legal position. There is nothing to read into the taxing statute that only those persons who own the vehicles and give their vehicles on rent with exclusive control of the customer only would be charged. The scope of amended provision, which is as per Section 65(38), has been widened by deleting the requirement of holding a licence under Rent-a-cab Scheme, 1989. Under the amended provision any person engaged in business of renting of cabs becomes a rent-a-cab scheme operator. - if the petitioners are plying the motor cabs or maxi cabs and the services are provided by them to any person in relation to the renting of the cabs, such service becomes a taxable service and therefore, comes within the ambit of Section 66(3) of the Finance Act. In view of these provisions, it is not at all necessary to rely exclusively on Section 65(50), (51) and (52) which deal with the services offered by the tour operators. That subject is entirely distinct and separate from the subject of the services provided by a rent-a-cab scheme operator though relevant as we have already shown in paragraph 50 while dealing with the petitions of tour operators . In the case of Kuldeep Singh Gill 2010 (4) TMI 283 - PUNJAB & HARYANA HIGH COURT , it was held that transportation or vehicle hire service is different than the service being provided by rent-a-cab scheme operator and the same cannot be held to be covered under the said service category - The decision in the case of Kuldeep Singh Gill distinguished. Decision in the case of Federation of Bus-operators Assn T.N. v. UOI 2001 (4) TMI 7 - HIGH COURT MADRAS followed by observing that applied all vital observations of Madras High Court mutatis mutandis to the case before the High Court. - Decided against the assessee. Extended period of limitation - Held that - Merely because the petitioner got himself registered on 23-3-2004 and by way of abundant caution incorporated and accepted its liability in one of the terms of agreement, as and when arises, that ipso facto cannot be adjudged as his deliberate act of non-payment of tax alleging suppression and mala fide intention. It is a matter of record that the petitioner has been operating in the field from the year 1997. Every year by virtue of tender published by GSEB on the basis of yearly contract, it provides vehicles to the Board for the purpose of examining squad, for transfer of papers and for other requirements during the SSC and HSC examinations. Considering a serious legal debate as to who can be said to be renting of a cab, petitioner if has not paid service tax on such services, the Tribunal correctly appreciated that such, by no stretch of imagination, be held as mis-statement or deliberate act of suppression or mala fide intent. - Decided partly in favour of Revenue.

Issues Involved:
1. Whether the services provided by the respondent fall under the category of "Rent-a-Cab Scheme Operator" as per Section 65(20) of the Finance Act, 1994.
2. Whether the distinction between "renting" and "hiring" of cabs is relevant for service tax purposes.
3. Whether the Tribunal violated judicial discipline or issued orders contrary to the statute.
4. Whether the show cause notice was barred by limitation.
5. Whether the Tribunal erred in deleting the penalty imposed on the assessee.

Issue-wise Detailed Analysis:

1. Whether the services provided by the respondent fall under the category of "Rent-a-Cab Scheme Operator" as per Section 65(20) of the Finance Act, 1994:
The respondent, engaged in providing rent-a-cab services, entered into an agreement with the Gujarat Secondary Education Board (GSEB) for the supply of vehicles. The vehicles were provided along with drivers, and payments were made on a per-kilometer basis. The Commissioner held that the ownership of vehicles is irrelevant, and the service provided contravenes the Finance Act, 1994. The Tribunal, however, held that the services provided were not rent-a-cab services but transportation services. The High Court concluded that the services provided fall under the rent-a-cab category, thereby making the respondent liable for service tax.

2. Whether the distinction between "renting" and "hiring" of cabs is relevant for service tax purposes:
The Tribunal had distinguished between "renting" and "hiring," stating that the services provided were on a per-kilometer basis and thus constituted transportation services. However, the High Court noted that the Finance Act does not distinguish between renting and hiring for service tax purposes. The intention of the statute is to tax services involving both renting and hiring of cabs. Therefore, the distinction made by the Tribunal was not upheld, and the services were deemed taxable under the rent-a-cab category.

3. Whether the Tribunal violated judicial discipline or issued orders contrary to the statute:
The Tribunal's decision was challenged on the grounds that it did not follow judicial discipline and issued orders contrary to the statute. The High Court found that the Tribunal had misinterpreted the provisions of the Finance Act by distinguishing between renting and hiring. The Tribunal's decision was thus set aside, and it was held that the services provided by the respondent fall under the taxable category of rent-a-cab services.

4. Whether the show cause notice was barred by limitation:
The Commissioner invoked the extended period of five years for levying service tax, citing suppression of facts by the respondent. The Tribunal held that there was no intentional suppression or mala fide intent, as the service tax on rent-a-cab services was a relatively new and ambiguous area. The High Court agreed with the Tribunal, concluding that the extended period could not be invoked in this case, and the show cause notices were barred by limitation.

5. Whether the Tribunal erred in deleting the penalty imposed on the assessee:
The Commissioner had imposed penalties under Sections 75, 76, 77, and 78 of the Finance Act. The Tribunal deleted the penalties, citing the ambiguity and recent introduction of the service tax on rent-a-cab services. The High Court upheld the Tribunal's decision, agreeing that there was no deliberate act of suppression or mala fide intent by the respondent. Therefore, the penalties were rightly deleted.

Conclusion:
The High Court concluded that the services provided by the respondent fall under the category of rent-a-cab services, making them liable for service tax. However, the extended period for issuing show cause notices was not applicable due to the lack of deliberate suppression or mala fide intent. The penalties imposed were also rightly deleted by the Tribunal. The substantial questions of law were answered in favor of the revenue for the tax liability but in favor of the assessee for the limitation and penalty issues.

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