2017 (11) TMI 610 - AT - Service Tax

Rent-a-cab service - Held that - in the present case, the appellant is not primarily engaged in the business of rent-a-cab operator. He is only arranging vehicles for their clients from outside agencies for which he is only getting a commission and that amount of commission has been shown in his ledger which is produced on record. Further, the learned Commissioner (Appeals) has mis-construed the definition of rent-a-cab operator service as provided in Section 65(76) of the Act because the appellant is not engaged in the business of rent-a-cab service - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Classification of services provided by the appellant under Service Tax laws.
2. Applicability of Service Tax on rent-a-cab services.
3. Interpretation of the definition of rent-a-cab service operator.
4. Imposition of interest and penalty under Sections 77 and 78 of the Finance Act.

Classification of services provided by the appellant under Service Tax laws:
The appellant, registered as a travel agent, was providing various services including procurement of visa, passport, medical insurance, and rent-a-cab operator services. The audit party observed these services and issued a show cause notice alleging contravention of Sections 66, 67, and 68 of the Finance Act. The Dy. Commissioner confirmed demands under different categories of services. The Commissioner (Appeals) upheld the taxability of certain services under business auxiliary services but disagreed on others. The appellant challenged this decision, leading to the present appeal.

Applicability of Service Tax on rent-a-cab services:
The Commissioner (Appeals) held that Service Tax was applicable on 40% of the gross amount charged for rent-a-cab services from a certain date. The appellant contested this decision, arguing that they were not primarily engaged in the business of rent-a-cab operator but merely arranging vehicles for clients from outside agencies for a commission. The appellate authority agreed with the appellant's argument, finding that the appellant did not fit the definition of a rent-a-cab operator as per Section 65(76) of the Act. Consequently, the impugned order was set aside, and the appeal was allowed.

Interpretation of the definition of rent-a-cab service operator:
The crux of the issue revolved around whether the appellant's activities qualified as those of a rent-a-cab operator under the law. The appellant's counsel contended that the appellant's role was limited to arranging vehicles for clients and receiving a commission, rather than being a rent-a-cab operator as defined by law. This argument was supported by a legal precedent cited during the proceedings. The appellate authority agreed with this interpretation, emphasizing that the appellant's activities did not align with the statutory definition of a rent-a-cab operator, leading to the decision in favor of the appellant.

Imposition of interest and penalty under Sections 77 and 78 of the Finance Act:
The Dy. Commissioner had imposed interest and penalty under Sections 77 and 78 of the Finance Act in the original order. However, in the appeal, the Commissioner (Appeals) upheld the imposition of penalty under these sections but dropped the penalty under Section 76. The appellate authority's decision to set aside the impugned order and allow the appellant's appeal also implied a reversal of the penalties imposed under Sections 77 and 78, providing consequential relief to the appellant.

This detailed analysis of the judgment highlights the key issues addressed, the arguments presented by both parties, the legal interpretations made by the appellate authority, and the final decision rendered in favor of the appellant.