2015 (11) TMI 834 - AT - Service Tax

Demand of service tax - Supply of Tangible Goods for use - model of business is appellant owns the permit for operating Fleet Taxis under an agreement with various drivers, the said taxis are given for plying the passenger in the city - Held that - Tangible goods in form of radio taxi are given to the driver and there is no transfer of the possession of the vehicle but physical transfer has taken place, but the effective control of such taxi still is in the hands of the appellant. This view of ours is based upon the fact that majority of the time, the taxi is booked by a call from customer to appellant s Call Centre. On the basis of the direction of the appellant, the driver of taxi in the vicinity of the passenger ferries him to his desired destination. It is also to be noted that the driver of radio taxi is not a permit holder and he does not have independent authorization for plying the vehicles and is allowed to take passengers on instructions and directions from the appellant only. Passenger or a customer contacts appellant for booking the radio taxi for the journey and if there is any deficiency of services, the appellant is hauled before the courts and not the driver as also for any misdemeanor of the driver. The entire findings of the adjudicating authority has been misdirected to hold that the driver keeps bulk of the amount of the journey and deposits only small portion of the amount as agreed between the appellant and the driver, which indicates the radio taxi is given for use and covered under STGU. The confusion has arisen due to the reason that the driver depositing the money is considered service recipient for use of such road taxi or supply of tangible goods. In the entire exercise the adjudicating authority has lost the sight of the fact that the supply of tangible goods in the case in hand is not for the use of the driver, but it is for the use of the appellant herein as recorded by us herein before; the entire action of booking of the radio taxi till the collection of the fare from the customer/passenger is on behalf of the appellant. It is also noted from the records that appellant is providing training to the driver and drivers are compensated adequately for the driving undertaken on behalf of the appellant; which will lead to a conclusion that appellant is providing services to the individual passengers and not the driver. We have gone through the entire agreement and find that the said agreement is an agreement which indicates that though the driver is in possession of the vehicle, he has to function under the authority and directions of the appellant, who would book the passengers and pass on the booking to drivers. The said agreement does not any where indicate that the driver are having the possession of the vehicles for their use, which is the most important aspect to be covered under category of services under supply of tangible goods. - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the services provided by the appellant fall under the category of "Supply of Tangible Goods for use" (STGU).
2. Whether the appellant suppressed facts to invoke the extended period for demand of service tax.
3. Whether the appellant's agreement with drivers constituted a transfer of right to use the taxis.

Issue-Wise Detailed Analysis:

1. Whether the services provided by the appellant fall under the category of "Supply of Tangible Goods for use" (STGU):
The appellant operates as a Fleet Taxi Operator or Radio Taxi Operator in multiple cities. The primary contention is whether the services provided by the appellant fall under STGU as per section 65(105)(zzzzj) of the Finance Act. The appellant argued that they are not providing STGU services to the drivers but rather transportation services directly to the customers/passengers. The appellant retains control over the taxis, handles bookings, and collects fares, indicating that the use of taxis is by the appellant and not the drivers. The adjudicating authority, however, based its findings on the agreement between the appellant and the drivers, concluding that the taxis were given for use, thereby falling under STGU. The Tribunal found that the effective control of the taxis remained with the appellant, as drivers operated under the appellant's instructions and the fare invoices were issued in the appellant's name. Therefore, the Tribunal concluded that the appellant's services do not fall under STGU.

2. Whether the appellant suppressed facts to invoke the extended period for demand of service tax:
The appellant contended that they had sought clarification from the CBEC in 2009 regarding the applicability of service tax on their activities and had challenged the constitutional validity of the services in the High Court, indicating a bona fide belief that service tax liability may not arise. The Revenue argued that the appellant had suppressed the nature of their activities, justifying the invocation of the extended period for demand. The Tribunal did not find sufficient grounds to support the claim of suppression, given the appellant's proactive steps in seeking clarification and challenging the service tax applicability.

3. Whether the appellant's agreement with drivers constituted a transfer of right to use the taxis:
The agreement between the appellant and the drivers was scrutinized to determine if it constituted a transfer of right to use the taxis. The Revenue argued that the agreement allowed drivers to use the taxis, thus falling under STGU. However, the Tribunal found that the agreement did not transfer the right of possession and effective control to the drivers. The drivers operated the taxis under the appellant's control, and the appellant handled bookings, fare collection, and customer complaints. The Tribunal concluded that the agreement did not constitute a transfer of right to use the taxis, and the services provided by the appellant did not fall under STGU.

Conclusion:
The Tribunal held that the appellant's services are not covered under the category of "Supply of Tangible Goods for use" and set aside the impugned order, allowing the appeal with consequential relief. The stay petition was disposed of as the appeal itself was resolved.