2013 (7) TMI 427 - AT - Service Tax

Rent a cab service scheduled rate contract - department contended that the vehicle was given to National Fertilizer Limited (NFL) thus tax liability does not diminish held that - there is no condition of providing of vehicles on term basis to NFL but was on call basis i.e. one hour from booking time for local duties and with suitable notice time for outside journey. - there was only a permanent arrangement of providing transport service without renting the vehicles - there is no condition of providing of vehicles on term basis to NFL but was on call basis - Without running or without any call or demand no service was available to NFL decide against the department.

Summary

Issues:
Interpretation of service tax liability for providing vehicles to National Fertilizer Limited (NFL) under a contract.

Analysis:
The Revenue contended that providing a vehicle to NFL constituted Rent-a-Cab service, leading to tax liability even when the vehicle was given to NFL. The Commissioner (Appeals) erred in allowing the respondent's appeal.

On behalf of the respondent, it was argued that the vehicles were not rented out but provided as a taxi service under specific contract clauses. The contract required vehicles to report within a specific time, have valid permits, and be diesel-driven. The respondent maintained that since the contract was for on-demand service, they were not liable as a Rent-a-Cab service provider.

The Revenue cited a judgment from the Hon'ble High Court of Punjab & Haryana to support their contention.

After hearing both sides and examining the records, it was found that the service was provided under a scheduled rate contract without the hirer having exclusive control over the vehicles. The judgment referred to a case where vehicles were hired and provided to another entity, leading to tax liability. However, in the present case, the vehicles were provided on a call basis without exclusive rental arrangements, making it a transport service rather than a Rent-a-Cab service. The contract specified payment terms based on service usage, indicating a service-oriented arrangement rather than a rental agreement. As there was no rental agreement and the service was provided on a call basis, the respondent was not liable under the Finance Act, 1994. Consequently, the Revenue's appeal was dismissed.