2007 (12) TMI 68 - AT - Service Tax

During the relevant period, the number of vehicles given on hire is not relevant for attracting the service tax under the service of rent-a-cab scheme. This criteria of 50 cab was only relevant prior to amendment in 1998 to the definition of rent-a-cab scheme operator - definition of rent-a-cab service has undergone a change, making the number of cars owned by the operator irrelevant - order of the original authority confirming the demand of duty and interest is restored but penalty is reduced

Summary

Issues:
- Service tax liability on vehicle hire under rent-a-cab scheme
- Interpretation of relevant legal provisions and precedents

Analysis:
1. The appeal concerned the imposition of service tax on a vehicle owner who had hired out a vehicle during a specific period. The Original Authority had held the owner liable for service tax, interest, and penalties. However, the Commissioner (Appeals) set aside the order based on a Tribunal decision in another case.

2. The key contention was whether the number of vehicles given on hire was relevant for attracting service tax under the rent-a-cab scheme. The Department argued that the criteria of 50 cabs was no longer applicable post an amendment in 1998 to the scheme's definition. Reference was made to a Tribunal decision in the case of M/s. Ghanshyam Transport to support this argument.

3. The Member (T) analyzed the submissions and records, noting that the Tribunal decision cited by the Commissioner (Appeals) was interim and not a binding precedent. It was also highlighted that the period in the referenced case was unclear. The Member accepted the Department's argument that changes in the rent-a-cab service definition had made the number of cars owned irrelevant for tax liability.

4. Consequently, the Member set aside the Commissioner (Appeals) order that had overturned the Original Authority's decision on duty demand and interest recovery. The duty demand and interest confirmation by the Original Authority were reinstated. However, the penalty imposed was reduced from Rs. 27,557 to Rs. 2,000.

5. Ultimately, the appeal was partly allowed, with the decision favoring the Department's position on the service tax liability issue and the interpretation of relevant legal provisions and precedents.