2017 (7) TMI 64 - AT - Service Tax

Abatement - rent-a-cab service - Held that - When the scheme of taxation is looked into the taxing entry seeks to levy service tax on the service provider in relation to renting of a cab - It is an admitted fact on record that assessee rented its vehicle to the users thereof for transportation of their employees from one place to another as stated by the ld. Adjudicating authority in para 13 & 14 of the order. There was a consideration followed for such renting of motor vehicle by the appellant. The vehicles rented were under control and possession of the users thereof for their exclusive use under a contract. Whether driver was provided to the user by the license holder of the vehicle is immaterial. No other user other than the recipient of service was allowed to use the vehicle so rented during tenure of the contract. Incidence of the levy having arisen in the present case in relation to renting of motor vehicle services provided by the assessee levy of service tax is confirmed. However quantum of levy may undergo amendment subject to consideration of abetment if permissible which is left to the ld. Adjudicating authority for examination in the light of the law considering the argument of the assessee and also subject to production of evidence if any. Time limitation - Held that - the appellant has collected the taxes but not having paid the same to the treasury it loses all its right to further argue when its conduct of evasion was patent - However considering that there was a confusion between the assessee and Revenue due to varied judgment of different High Courts the levy of penalty is considerable under the section 80 of the Finance Act 1944. Appeal allowed by way of remand.

Issues Involved:

1. Service tax demand for the periods from 18.04.2006 to 31.05.2007 and June 2007 to March 2009.
2. Abatement granted by the adjudicating authority.
3. Dropping of demand for the period from July 2004 to 17.04.2006.
4. Taxation under the "rent a cab" scheme.
5. Time-barred demands.
6. Interest and penalty levied.

Issue-wise Detailed Analysis:

1. Service Tax Demand for the Periods from 18.04.2006 to 31.05.2007 and June 2007 to March 2009:

The assessee was in appeal against the service tax demand of ?21,70,985/- for the period from 18.04.2006 to 31.05.2007 and ?20,68,051/- for the period June 2007 to March 2009, followed by interest and penalty. The revenue contended that the assessee collected tax from service recipients but did not deposit the same into the treasury. The adjudicating authority provided tables showing the gross amounts involved and the taxes collected but not deposited.

2. Abatement Granted by the Adjudicating Authority:

The revenue appealed against the abatement granted to the assessee by the adjudicating authority. The revenue argued that the adjudicating authority granted abatement without examining the facts and circumstances of the case, and thus, the impugned order on that account should be reversed.

3. Dropping of Demand for the Period from July 2004 to 17.04.2006:

The revenue also contested the decision of the adjudicating authority to drop the demand for the period from July 2004 to 17.04.2006. The assessee argued that the receipts pertaining to the period June 2007 to 09.05.2008 were not taxed by the adjudicating authority, which was also a point of contention for the revenue.

4. Taxation under the "Rent a Cab" Scheme:

The assessee argued that the services related to renting a cab were sought to be taxed under section 65(105)(o) of the Finance Act 1994, read with sections 65(91) and 65(20). The assessee cited the judgment of the Hon'ble High Court of Uttarakhand in CCE Vs. Sachin Malhotra, which distinguished between hiring and renting of cabs. The court emphasized that for a transaction to be considered renting, the hirer must have control and possession of the vehicle. The revenue, however, argued that the taxing entry in the Finance Act 1994 aimed to tax services provided under the rent a cab scheme, where the vehicle was under the control and possession of the service recipient.

5. Time-Barred Demands:

The assessee contended that the demands were time-barred due to confusion in the field of taxation. The revenue countered that the plea of confusion was not bona fide since the assessee collected the tax but did not pay it to the Treasury. The adjudicating authority found that the appellant's conduct of evasion was patent, and thus, the time-bar argument was not valid.

6. Interest and Penalty Levied:

The assessee argued for annulling the service tax demand without any interest and penalty, citing the distinction between hiring and renting as per the judgment of the Hon'ble High Court of Uttarakhand. The revenue maintained that the tax should be levied with interest and penalty, as the assessee's liability had arisen, and abatement could only be granted if the tax liability was admitted. The adjudicating authority considered the confusion between the assessee and revenue due to varied judgments from different High Courts and deemed the levy of penalty under section 80 of the Finance Act 1944 as considerable.

Conclusion:

The appeals were remanded to the adjudicating authority for re-examination of the quantum of levy, considering the argument of the assessee and subject to the production of evidence. The adjudicating authority was directed to consider the abatement if permissible and re-adjudicate the matter for the period covered by Table under para 14 of the order. The levy of penalty was also to be reconsidered in light of the confusion due to varied judgments from different High Courts. Both appeals were disposed of accordingly.

← Previous Next →