2024 (9) TMI 179 - AT - Service Tax

Classification of service - rent-a-cab service or not - hiring of two numbers of 45-seater buses to M/s. Oil and Natural Gas Corporation Limited (ONGC) for carrying out their operations in different parts of Cachar, Karimganj, Hailakandi District and all other parts of North Eastern Region - HELD THAT - In the present case, the Appellant has rented out two 45-seater buses to M/s. ONGC for transportation of people in the State of Assam and parts of North-Eastern Region. The vehicles were required to be given for 24/12 hour duty and payments were made on the basis of kilometre, duration as well as mileage. It is observed that the ownership of the vehicles remained with the Appellant during the period of the contract. The appellant has submitted that in rent-a-cab service, the ownership and possession of the vehicle is temporarily dispossessed from the owner and given to the person who is hiring the said vehicle; however, in this case, the ownership remained with the Appellant themselves and thus the service rendered by them is not rent-a-cab service . The Appellant is the owner of the said vehicles and they have not given the possession of the vehicles to ONGC. In renting, the ownership and possession of the vehicle is given to the service recipient, which is not the case here. Thus, it is observed that the service rendered by the appellant in this case is only transportation and not renting. Accordingly, the service rendered by the Appellant is not liable to Service Tax under the category of rent-a-cab service . This view has been held by the Tribunal in the case of SHREE GAYATRI TOURIST BUS SERVICE VERSUS CCE VADODARA 2012 (5) TMI 126 - CESTAT, AHMEDABAD LB where it was held that 'Tribunal in the case of Shree Sai Krishna Travels (2009 (9) TMI 515 - CESTAT, BANGALORE) was considering an identical issue and has held that in this kind of situation, the services rendered by the assessee cannot fall under the category of Rent-a-Cab services, as per the definition enshrined at Section 65 (91) of the Finance Act, 1994.' The demand of service tax confirmed in the impugned order under the category of rent-a-cab service is not sustainable. Since, the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise - appeal allowed.

Summary

Issues Involved:
1. Classification of service provided by the Appellant.
2. Liability to pay Service Tax under 'rent-a-cab service'.
3. Validity of interest and penalty imposed.

Issue-wise Detailed Analysis:

1. Classification of Service Provided by the Appellant:

The Appellant contended that the service they provided was not 'rent-a-cab service' but rather a transportation service. The Appellant provided two 45-seater buses to ONGC for transportation purposes. The ownership and possession of the vehicles remained with the Appellant during the contract period. The Appellant argued that in a 'rent-a-cab service', the ownership and possession of the vehicle are temporarily transferred to the hirer, which was not the case here. The Tribunal observed that the Appellant retained ownership and possession of the vehicles, and the service provided was transportation and not renting.

2. Liability to Pay Service Tax under 'rent-a-cab service':

The Department alleged that the Appellant had rendered 'rent-a-cab service' and had not discharged Service Tax. A Show Cause Notice was issued demanding Service Tax of Rs. 1,14,806/-. The adjudicating authority confirmed the demands, which were upheld by the Commissioner (Appeals). The Tribunal, however, noted that the agreement between the Appellant and ONGC did not involve the transfer of possession of the vehicles to ONGC. The Tribunal cited clauses from the contract which indicated that the Appellant was responsible for the operation and maintenance of the vehicles. The Tribunal concluded that the service provided was transportation, not 'rent-a-cab service', and thus not liable to Service Tax under the specified category.

3. Validity of Interest and Penalty Imposed:

Since the Tribunal held that the service rendered by the Appellant was not 'rent-a-cab service' and thus not liable to Service Tax, the demands for interest and penalty were also deemed unsustainable. The Tribunal set aside the demands of Service Tax along with interest and penalty confirmed in the impugned order.

Conclusion:

The Tribunal allowed the appeal filed by the Appellant, setting aside the demands of Service Tax, interest, and penalty. The Tribunal determined that the service provided by the Appellant was transportation and not 'rent-a-cab service', thereby not attracting Service Tax under the disputed category. The decision in the case of Shree Gayatri Tourist Bus Service v. Commissioner of Central Excise, Vadodra was relied upon to support this conclusion.