2013 (7) TMI 816 - AT - Service Tax

Rent a cab service Penalty - whether the assessee would be liable for service tax when providing the services of motor cabs/ maxi cabs - Held that - The assessee had provided the taxable service defined in Section 65(105)(O) r.w Section 65(91) assesses contended that they were operating from a remote area and were ignorant of the relevant provisions - The contention is devoid of force - Ignorance of law cannot be considered a reasonable cause for failure to remit the legislatively mandated tax following the judgement of Secy. Federn of Bus-operators Assn. of T.N. vs. UOI(2001 (4) TMI 7 - HIGH COURT MADRAS ) - wherever a cab is rented by a Rent-a-cab scheme operator to any person a transaction chargeable to service tax occurs and is liable to service tax at the statutorily prescribed rates appeal decided against assesses.

Issues Involved:

1. Failure to register as a service provider under the Finance Act, 1994.
2. Failure to file returns and remit service tax.
3. Classification of service as "rent-a-cab" versus "hiring of motor vehicles."
4. Legitimacy of penalties imposed under Sections 76 to 78 of the Finance Act, 1994.

Issue-wise Detailed Analysis:

1. Failure to register as a service provider under the Finance Act, 1994:
The appellant, a proprietor, was issued a show cause notice alleging failure to register as a service provider under the Finance Act, 1994. The adjudication order confirmed the service tax liability and imposed penalties. The appellant's contention was that the activity of providing vehicles to GAIL did not constitute "rent-a-cab" service, and thus, they were not liable to register. However, the Tribunal concluded that the appellant was indeed providing a taxable service under Section 65(105)(o) read with Section 65(91) of the Act and was liable to register.

2. Failure to file returns and remit service tax:
The appellant failed to file monthly returns and remit service tax despite being sensitized by the Revenue about the liability. The adjudication order imposed penalties for non-compliance. The appellant argued that their service did not fall under the "rent-a-cab" category, hence no liability to file returns or remit tax. The Tribunal, however, upheld the adjudication order, confirming that the appellant's service was taxable and they were required to comply with the statutory obligations.

3. Classification of service as "rent-a-cab" versus "hiring of motor vehicles":
The appellant contended that their service constituted hiring of motor vehicles, not "rent-a-cab" service. They argued that renting implies the recipient has control over the vehicle, whereas hiring means the operator retains control. The Tribunal analyzed several precedents and statutory provisions, concluding that the appellant's service fell under "rent-a-cab" as defined in Section 65(20) and Section 65(91) of the Act. The Tribunal cited judgments from the Madras High Court and Punjab and Haryana High Court, which supported the view that providing motor cabs/maxi cabs for hire constitutes a taxable service under the "rent-a-cab" category.

4. Legitimacy of penalties imposed under Sections 76 to 78 of the Finance Act, 1994:
The appellant argued that penalties under Sections 76 to 78 were unsustainable due to a bona fide belief of non-liability to service tax. The Tribunal rejected this contention, stating that ignorance of law is not an excuse. The Tribunal referred to the principle "Ignorantia Juris non excusat" and emphasized that legislative provisions are effective from the moment they are enacted, irrespective of individual knowledge. The Tribunal also distinguished the present case from the Gujarat High Court's judgment in Ankleshwar Taluka ONGC Land Losers Travellers Co-operative, which provided relief based on specific circumstances not applicable here. Consequently, the Tribunal upheld the penalties, asserting that ignorance of the law does not constitute a reasonable cause for failure to comply with statutory requirements.

Conclusion:
The Tribunal dismissed the appeals, confirming the adjudication order and the Order in Appeal. The appellant's service was classified as "rent-a-cab," and the penalties imposed for non-compliance with registration, filing returns, and remitting tax were upheld. The Tribunal emphasized that ignorance of the law is not a valid defense against penalties.

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