2023 (11) TMI 475 - AT - Service Tax

Classification of service - Rent a Cab Service or Transfer of right to use of Tangible Goods? - hiring of vehicles/buses by appellants to Andhra Pradesh State Road Transport Corporation (APSRTC) - HELD THAT - On going through the judgements placed by both the parties along with various circulars, Memo, Circular issued by Commercial Taxes of Andhra Pradesh and APSRTC in relation to hiring of Vehicles - going through the terms of agreement / tender which clearly demonstrate that during the course of agreement effective control over vehicle is with APSRTC, it is found that in the light of clarification issued by Central Government in D.O.F No 344/1/2008 TRU dated 29-02- 2008, has clarified that Supply of tangible goods for use and leviable to VAT / Sales Tax as deemed Sales of Goods, is not covered under the scope of the Service and hence the present activity of Hiring of Vehicles to APSRTC cannot be covered under Rent a Cab Service , but is covered under Transfer of Right to Use , which is deemed sale and liable to Sales Tax. The activity in question provided by the Appellant, is in the nature of Transfer of Right to Use and not Rent a Cab - the impugned order set aside - appeal allowed.

Summary

Issues involved:
The issue involved in this appeal is whether the hiring of vehicles/buses by the appellant to Andhra Pradesh State Road Transport Corporation (APSRTC) falls under "Rent a Cab" service and thus chargeable to service tax.

Details of the Judgment:

Issue 1 - Interpretation of service tax applicability on hiring of vehicles:
The appellant owned buses hired to APSRTC under a hire bus system introduced to meet transportation demand. The RTC only provided a conductor, while the appellant was responsible for the driver, maintenance, and expenses. The appellant purchased a new vehicle as per RTC specifications, which RTC registered and reimbursed various expenses. The Finance Act 2007 expanded the definition of "Cab" and "Rent-a-cab scheme operator." The Department issued a show cause notice for service tax, ignoring a stay granted by the High Court and relying on a previous Tribunal ruling.

Issue 2 - Applicability of "Transfer of Right to Use" vs. "Rent a Cab" service:
The appellant argued that their activity falls under "Transfer of Right to Use," deemed a sale of goods under the Constitution. They presented a writ petition and circulars supporting this argument. The AR relied on a High Court judgment and APSRTC tender clauses. The DR supported the adjudicating officer's orders and cited previous Tribunal and High Court judgments.

Judgment:
After reviewing the arguments, circulars, and agreements, the Tribunal found that the activity of hiring vehicles to APSRTC constitutes "Transfer of Right to Use" and not "Rent a Cab" service. Citing a clarification by the Central Government, the Tribunal held that the activity is a deemed sale of goods liable to sales tax, not service tax. The appeals were allowed, and the impugned order was set aside, granting the appellants consequential benefits.

(Order Pronounced in open court on 09.11.2023)