2017 (7) TMI 1476 - AT - Service Tax

Waiver of pre deposit - rent-a-cab operating services for use by an educational body - SEZ - benefit of Notification would not be available under Notification No.4/2004-ST dated 31.03.2004 which was superseded by Notification No.9/2009-ST dated 03.03.2009 and further superseded by Notification No.17/2011-ST dated 13.03.2011 - Held that - Rent a cab service is an approved service for the unit located in SEZ. Accordingly it appears that such service is wholly exempted being provided to the SEZ unit premises. So far the services provided to Educational Institute is concerned though a part of it is provided to another transporter similarly situated under the agreement to share mutual spare capacity it appears that as the services are admittedly provided for transport of staff and student of the schools the same appears to be permitted exemption/not taxable under the definition in Clause 65 (20) of the Finance Act 1994. In view of the said proviso provided under rent-a-cab operating services for use by an educational body imparting skill or knowledge or lesson on any subject or field other than a commercial training or coaching centre are not includible in the meaning of cab and hence not taxable in the rent-a-cab operator service . Thus we find that the appellants have made out a prima-facie case for grant of stay. Accordingly we grant the stay for demand of duty and tax interest and penalty till disposal of appeal - Stay granted.

Summary

Issues:
1. Service tax liability on renting buses under the "Rent a Cab Scheme Operator Services" to SEZ units and educational institutions.
2. Dispute over service tax exemption for services provided to SEZ units and educational institutions.
3. Applicability of penalty under Section 76 & 78 of the Finance Act, 1994.

Analysis:

Issue 1: Service Tax Liability on Renting Buses
The Appellant, a transporter, was issued a show-cause notice for non-payment of service tax amounting to ?7,07,439 for renting buses to various entities. The Revenue contended that services provided to SEZ units were not fully consumed within the SEZ, thus not eligible for tax exemption under relevant notifications. The Order-in-Original confirmed the tax liability, interest, and imposed a penalty under Section 78 of the Finance Act, 1994. The Appellant's appeal before the Commissioner (Appeals) was dismissed, leading to the Tribunal review.

Issue 2: Dispute Over Service Tax Exemption
The Appellant argued that services provided to SEZ units were fully consumed within the SEZ, citing precedents where similar services were deemed exempt. They relied on the interpretation of relevant notifications and the SEZ Act to support their claim for exemption. Additionally, the Appellant contested the tax demand related to services provided to educational institutions, highlighting an agreement with another transporter for shared capacity. The Tribunal, considering the contentions and relevant provisions, granted a stay on the demand for duty, tax, interest, and penalty till the appeal's disposal, indicating a prima facie case for exemption.

Issue 3: Applicability of Penalties
The imposition of penalties under Section 76 & 78 of the Finance Act, 1994 was a significant concern. However, the Tribunal's decision to grant a stay on the demand pending appeal suggests a favorable view towards the Appellant's arguments regarding tax liability and exemptions. The Tribunal's reference to earlier decisions and the specific provisions of the Finance Act in relation to the services provided to SEZ units and educational institutions played a crucial role in the stay granted.

In conclusion, the Tribunal's detailed analysis and consideration of legal precedents and statutory provisions led to the decision to grant a stay on the demand for duty, tax, interest, and penalty. The Appellant's arguments regarding the service tax liability on renting buses to SEZ units and educational institutions were found to have merit, warranting further review and a hearing scheduled for a later date.