2010 (7) TMI 203 - AT - Service Tax

Stay Rent a cab service - appellants were providing services and are not paying Service tax was found after search of premises of the appellant was conducted in the year 2005. It was also found during the search that appellants had collected Service tax from their customers but did not deposit the same. Further, before issue of show cause notice Service tax amount was deposited. Interest not deposited even after five years from search. Held that penalty imposable.

Summary

Issues:
Service tax liability for rent-a-cab services provided by the appellants in the year 2000-2001.
Applicability of Service tax on charges collected per kilometer basis for vehicle hire.
Failure to deposit collected Service tax and subsequent deposit before the issuance of show cause notice.
Prima facie case for waiver of pre-deposit of remaining amount and stay against recovery during the appeal.

Analysis:
The judgment by the Appellate Tribunal CESTAT, Ahmedabad dealt with the Service tax demand on rent-a-cab services provided by the appellants. The demand amounted to Rs. 29,119/- for M/s. Bharat Travels and Rs. 32,450/- for M/s. Bharat Tours & Travels for services rendered in the year 2000-2001. The appellants were found to have collected Service tax from customers but failed to deposit it, leading to the discovery of their non-compliance during a premises search in 2005.

Regarding the nature of services provided, the Chartered Accountant representing the appellants argued that the charges were collected on a per kilometer basis for vehicle hire, not as rent-a-cab services. Citing precedents, the CA contended that hiring vehicles on a per kilometer basis does not amount to rent-a-cab service. Additionally, it was highlighted that not all parties to whom services were provided were charged Service tax, and any collected amounts had been deposited. The Commissioner (Appeals) equated hiring with rent-a-cab service, leading to the assertion that Service tax was not payable for vehicle hires based on per kilometer charges.

The Departmental Representative countered by emphasizing that the demand was based on the amount collected by the appellants as Service tax, indicating their awareness and acknowledgment of the tax liability. The proprietors of the firms admitted to collecting Service tax from all customers but failing to remit it to the authorities.

The Tribunal observed that the appellants believed the services provided were subject to Service tax, as evidenced by the collection from customers, although the tax was not promptly paid. The lack of submitted agreement copies hindered the verification of hiring practices based on per kilometer charges. The Tribunal acknowledged the appellants' legal and moral obligation to deposit the collected Service tax, making them liable for penalties. In the absence of evidence of financial difficulties, the appellants were directed to deposit the demanded Service tax amount within eight weeks, with the remaining amount subject to waiver pending the appeal's resolution.

In conclusion, the judgment required the appellants to fulfill their Service tax liability, emphasizing their obligation to deposit collected amounts and the consequent imposition of penalties. The waiver of pre-deposit for the remaining amount was contingent on compliance with the directive, ensuring a stay against recovery during the appeal process.