2005 (4) TMI 5 - AT - Service Tax

Service Tax Rent-a-cab operator Appellants contended that the car is actually hired by customer and not rented by them and there is difference between Rent and Hire Govt. intention is to tax the providers of service, which involves hiring/renting of a cab formally for a long duration

Summary

Issues:
Interpretation of 'Rent-a-Cab Scheme' under Section 65(91) of the Finance Act, 1994 for Service Tax liability.

Analysis:
The appellants, providing cab services, were held liable for Service Tax by the lower authority, which was upheld by the Commissioner (Appeals). The appellants argued that they do not rent cabs but provide them on a hire basis, emphasizing the distinction between renting and hiring. They referred to the Rent-a-Cab Scheme, 1989 under the Motor Vehicles Act, stating that renting involves parting with possession, unlike hiring. However, the Department contended that 'renting a cab' includes hiring out a car, as the taxing statute uses the inclusive term 'rent'. The Tribunal noted that the Motor Vehicles Act does not distinguish between rent and hire, and in the absence of evidence showing actual hiring, the distinction between rent and hire is semantic. The Tribunal opined that the intention is to tax providers of services involving formal hiring/renting of cabs for longer durations, thus rejecting the appeal.

In conclusion, the Tribunal held that the distinction between 'Rent' and 'Hire' in the context of cab services is not substantial for Service Tax liability. The interpretation of the 'Rent-a-Cab Scheme' under the Finance Act, 1994 does not exclude hirers of motor cabs from Service Tax obligations. The decision was based on the understanding that the intention of the government is to tax formal providers of cab services for longer durations, irrespective of the semantics between renting and hiring.