2024 (2) TMI 567 - AT - Service Tax

Rent-a- Cab Operators service - Abatement of 60% of the assessable value vide Notification No.09/2004 dated 09.07.2004, 01/2006- S.T. dated 01.03.2006 and Notification No.6/2005-S.T. dated 01.03.2005 - HELD THAT - As per the agreement reached between the Appellant and UPSRTC, it would be evident that Appellant attached his bus with UPSRTC on the basis of profit sharing. There is no fixed rent or hire charges. Instead, the profit is variable. Therefore, attaching a bus with the UPSRTC on profit sharing basis would not come under the taxable service under the rent-a-cab operator service of the Act, as the ingredients of the definition are absent. From the perusal of the Explanation B to Notification No. 06/2005-S.T. dated 01.03.2005, it would be evident (i) that the aggregate value for the purpose of this notification would be gross value of taxable services bereft of the value of goods used in providing the service; (ii) that the aggregate value shall be determined after deducting the gross amount exempt from whole of service tax under Notification No. 12/2003-ST dated 20.06.2003 or Notification No. 01/2006-S.T. 01.03.2006 (as amended). On deduction of the amount as envisaged under Notification No. 01/2006 ST dated 01.03.2006, aggregate taxable value each year would be much below the exemption limit as envisaged in the Notification No. 06/2005 ST dated (01.03.2005). That Notification No. 06/2005-ST dated 01.03.2005 (as amended) seeks to exempt taxable service of aggregate value upto to Rs. Ten lakhs in any financial year in the case of rent-a- cab service, the value under Section 67 of the Finance Act, 1994 would be 40% of the gross amount as per notification No. 01/2006-ST dated 01.03.2006. The rest 60% of value is attributable to value of goods which is exempt under Notification No. 01/2006-ST dated 01.03.2006. According to explanation No. (B) of clause-3 of notification number 06/2005-ST dated 01.03.2005, the gross amount which is exempt from payment of service tax would not constitute in the aggregate value of taxable service - in this case, the taxable value in every financial year is far less than the exempted limit. As such, no service tax is payable by the Appellant. The impugned order to the extent of confirmation of the demand and imposition of penalty are set aside - Appeal allowed.

Summary

Issues involved: Appeal against Order-In-Appeal No.17-ST/APPL-ALLD/LKO/2017 dated 10.01.2017 passed by the Commissioner (Appeals) Central Excise & Service Tax, Lucknow.

Issue 1: Interpretation of Notification No.6/2005-S.T. dated 01.03.2005
The Appellant provided vehicles to M/s Uttar Pradesh State Road Transport Corporation (UPSRTC), and the Revenue claimed Service Tax on the consideration received. The Appellant argued for abatement under various notifications, stating that after transit exemption, no service tax was due. The Order-In-Original confirmed the demand, and the Commissioner (Appeals) partly allowed the appeal. The Tribunal found that the agreement was based on profit-sharing, not fixed rent, making it not taxable under 'rent-a-cab operator service.'

Issue 2: Application of Judicial Precedents
The Commissioner (Appeals) relied on the Gujarat High Court judgment in Commissioner Service Tax Vs. Vijay Travels, which dealt with renting vehicles. The Tribunal distinguished this case from the current one, emphasizing the profit-sharing nature of the agreement with UPSRTC. Additionally, the Commissioner (Appeals) referred to a Lucknow High Court judgment involving UPSRTC, which was later upheld by the Supreme Court. The Tribunal noted that the Supreme Court's decision was based on locus standi, not the merit of the case.

Issue 3: Analysis of Notification No. 01/2006-ST dated 01.03.2006
The Tribunal analyzed Notification No. 06/2005-ST dated 01.03.2005, which exempts taxable service up to Rs. Ten lakhs in any financial year for rent-a-cab services. By deducting exempt amounts, the taxable value was below the exemption limit each year, indicating no service tax liability. Consequently, the Tribunal set aside the demand and penalties imposed, allowing the appeal with appropriate relief.

In conclusion, the Tribunal ruled in favor of the Appellant, highlighting the profit-sharing nature of the agreement with UPSRTC, the distinction from previous judicial precedents, and the exemption limits under relevant notifications. The demand for service tax and associated penalties were set aside based on the analysis of applicable notifications and the nature of the agreement between the parties.