2018 (2) TMI 1862 - AT - Service Tax

Classification of service - Rent-a-cab service or not - scope of person to be considered as rent a cab operator - penalty - Held that - The evidence from the records indicates that the appellant did provide the motor vehicles to their sister concern and received considered based on usage. As such we find no reason to vary the impugned order - however the case of waiver of penalty under Section 80 can be considered favourably. Admittedly the appellants are mainly engaged in goods transport service and incidentally they have provided three passenger motor vehicle to the sister concern for transport of officers and staff. It would appear that appellant had reasonable cause to consider themselves as not rent a cab operator. While upholding the tax liability it is proper that Section 80 have been invoked for setting aside the penalty under Section 78 - appeal allowed in part.

Summary

Issues:
1. Tax liability of the appellant as a rent a cab operator.
2. Applicability of penalties under Section 76, 77, and 78 of the Finance Act, 1994.
3. Consideration of waiver of penalty under Section 80.

Analysis:
1. The appellant, engaged in goods transport service, rented out motor vehicles to their sister concern for use by officers and staff, leading to a demand for service tax as a rent a cab operator. The appellant argued before the Commissioner (Appeals) that the vehicles cannot be considered cabs, but before the Tribunal, they contended that they are not in the rent a cab business. The Tribunal found that providing motor vehicles for staff transport to the sister concern does not exempt them from being considered a rent a cab operator. The Tribunal observed that there is no specific restriction on who can be considered a rent a cab operator. As evidence showed the appellant provided vehicles and received consideration based on usage, the Tribunal upheld the tax liability.

2. The lower authority confirmed the service tax liability against the appellant and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994. However, the Tribunal considered the appellant's argument that they had reasonable cause to believe they were not rent a cab operators due to their main engagement in goods transport service. Therefore, the Tribunal decided to invoke Section 80 for setting aside the penalty under Section 78. While upholding the tax liability, the Tribunal partially allowed the appeal by waiving the penalty under Section 78.

3. The Tribunal, after thorough consideration of the facts and submissions, found that the appellant's case warranted the waiver of penalty under Section 80. Despite upholding the tax liability, the Tribunal acknowledged the appellant's reasonable cause for not considering themselves as rent a cab operators due to their primary engagement in goods transport service. Consequently, the Tribunal deemed it appropriate to invoke Section 80 to set aside the penalty under Section 78, thereby partially allowing the appeal.