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TMI Blog2014 (10) TMI 816X X X X Extracts X X X X X X X X Extracts X X X X ..... Under the rent-a-cab scheme, the hirer is endowed with the freedom to take the vehicle, wherever he wishes, and he is only obliged to keep the holder of the licence informed of his movements from time to time. When a person chooses to hire a car, which is offered on the strength of a permit issued by the Motor Vehicles Department, then the owner of the vehicle, who may or may not be the driver, will offer his service while retaining the control and possession of the vehicle with himself. The customer is merely enabled to make use of the vehicle by travelling in the vehicle. In the case of a passenger, he is expected to pay the metered charges, which is usually collected on the basis of the number of kilometers travelled. These are all matters, which are regulated by the Government. Unlike the said scenario, in the case of a rent-a-cab scheme, as is clear from the very fundamental principle underlying the scheme, it is to give the hirer the freedom to use the vehicle as he pleases, which, undoubtedly, implies that he must have possession and control over the vehicle. This is the fundamental distinction between rent-a-cab and a pure case of hiring Though both, rent and hire, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der is passed by the Customs, Excise and Service Tax Appellate Tribunal (hereinafter referred to as the Tribunal ). By the same, the Tribunal has taken the view that, for imposing service tax within the meaning of Section 65(105)(o) of the Service Tax Act, the hirer must have possession of the vehicle in question. It has also found that, as far as the respondents / assessees are concerned, they had intimated the Department about their activities in the year 2000, itself, and it is noted further that the show-cause notices were issued beyond the normal period of limitation. The matter has been remitted to be re-done on the basis of the observations / principles, which were laid down and subject to the proceedings being found within limitation. 4. Section 65(105) defines taxable service as any service provided or to be provided: (o) to any person, by a rent-a-cab scheme operator in relation to the renting of a cab. 5. Section 65(91) defines rent-a-cab scheme operator as meaning a person engaged in the business of renting of cabs. The proceedings were taken under the Finance Act against the respondents / assessees on the basis that they were operating rent-a-cab schemes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hiring. It was in the said factual and legal context that the Court, inter alia, held as follows: 1. The Revenue contends that when the owner of the lorry leases it to another for an agreed rental for a specific period, the owner cannot claim the higher rate of depreciation provided in Appendix 1, entry III(2)(ii), under the sub-heading Machinery and plant , the appendix being the Appendix to the Income-tax Rules. That entry reads as under : Motor buses, motor lorries and motor taxies used in a business of running them on hire. 2. Owners of vehicles who used it for their own purposes are allowed to claim depreciation at the normal rates. Owners of vehicles mentioned in the entry when they allow it to be used for a price are allowed to obtain a higher rate of depreciation. The distinction is based upon the fact that a person who obtains the temporary right to use of the vehicle on payment of a charge price is likely to, by the nature of his user, such user being for the purpose of the hirer and not the owner, depreciate the value of the vehicle faster. 3. All such vehicles, which are so used, are likely to undergo a little more rough use than vehicles owned by and us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the context, in which the Court held so, is clearly provided by what is stated in paragraph 3, i.e. all such vehicles, which are so used, are likely to undergo a little more rough use than the vehicles owned by and used for the personal purposes of the owner. It is in recognition of that fact of depreciation occurring at a faster rate for such vehicles that the law provides for the higher rate of depreciation. We also must bear in mind that the Madras High Court was not called upon to decide the precise issue, which we are called upon to decide, namely, whether there is a distinction between rent-a-cab scheme and a case of sheer hiring of the vehicle and we are of the view, therefore, that the reliance placed by the learned counsel for the revenue on the said judgment is misplaced. He also pointed out that the said judgment has been followed by the Madras High Court in the judgment rendered in the case of CIT vs. South India Viscose Ltd., reported in (2005) 272 ITR 115 (Madras). For the reasons, which we have already given above, we would think that the principles laid down in the said case cannot be applied to the facts of this case. 8. Next, the learned counsel for the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the services offered by the tour operators . That subject is entirely distinct and separate from the subject of the services provided by a rent-a-cab scheme operator though relevant as we have already shown in paragraph 50 while dealing with the petitions of tour operators . We have already pointed out that the only requirement is the user by a person of the tourist vehicles for the tour and being engaged in that business. We have no doubts that a cab-owner who engages in that business for the purposes of renting a cab could also be held to be a tour operator and would be covered under Section 65(50), (51) and (52) of the Finance Act. 54. We have, therefore, no hesitation in holding that if the petitioners are plying the maxi cabs or motor cabs and giving the services in relation to the renting of a motor cab or maxi cab then, they would be in the tax-net and cannot complain that they are not covered by the Finance Act. 55. As it is, majority of the petitioners are having the tourist permits under Section 88(9) of the Motor Vehicles Act read with Rules 82 to 85 of the rules framed thereunder. Such persons can never contend that the Act is not applicable to them bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Smt. L. V. Sankeshwar, Proprietrix, Vijayanand Travels vs. Superintendent of Central Excise, Range-A, reported in (2006) 206 CTR 274. In fact, this is a case, which related to liability to service tax of tour operators, which was sought to be imposed by virtue of the Finance Act, 1997 w.e.f. 1st September, 1997. He drew our attention to the following paragraphs 4 14: 4. Learned Counsel for the petitioners argued that as the petitioners are not providing any service except renting out the vehicle or carrying the passengers in their vehicles to the particular destination, they are not liable to pay service tax on the gross bill raised by them towards the charges for hiring or renting the taxies or towards carrying the passengers. According to them, the gross amount charged by the petitioners on the customers is subjected to service tax without even identifying the service element in it. The entire transaction value is taxed as service even though there is no service element involved in it. In other words, measure of tax is used to determine the nature of tax and there is no machinery provision to identify the exact value of service and charge tax on such aspect of service. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the Court has held as follows: 15. The service aspect in respect of 'tour operators' has clearly distinguishable feature from renting the cab. The Phrase 'in relation to' used in the definition in the taxable service has to be construed widely. The Apex Court in the case of Doypack Systems Pvt. Ltd., v. Union of India and Ors. reported in : 1988(36)ELT201(SC) , while dealing with similar situation has observed thus: The expressions 'pertaining to', 'in relation to' and 'arising out of' used in the deeming provision, are used in the expansive sense. The expression 'arising out of' has been used in the sense that it comprises purchase of shares and lands from income arising out of the Kanpur Undertaking. The words 'Pertaining to' and 'in relation to' have the same wide meaning and have been used interchangeably for among other reasons which may include avoidance of repetition of the same phrase in the same clause or sentence, a method followed in good drafting. The word 'pertain' is synonymous with the word 'relate'. The term 'relate' is also defined as meaning to bring into association or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e must bear in mind, is, whether there is a business of renting of cabs. Unless there is renting of cabs, there is no question of further enquiring as to the services, which may be rendered therein. In other words, any service, which may be rendered and which does not relate to renting of cabs, would be irrelevant for our consideration. When we consider the matter in the said light, we have no doubt in our minds that the Tribunal has, in this case, correctly propounded the principle that, unless the control of the vehicle is made over to the hirer and he is given possession for howsoever short a period, which the contract contemplates, to deal with the vehicle, no doubt subject to the other terms of the contract; there would be no renting. A perusal of Section 75 of the Motor Vehicles Act, 1988 would also fortify us in the view that we have taken. Section 75 reads as follows: 75. Scheme for renting of motor cabs. - (1) the central government may by notification in the official Gazette, make a scheme for the purpose of regulating the business of renting of motor cabs or motor cycles to persons desiring to drive either by themselves or through drivers, motor cabs or motor cycles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vehicles Department, then the owner of the vehicle, who may or may not be the driver, will offer his service while retaining the control and possession of the vehicle with himself. The customer is merely enabled to make use of the vehicle by travelling in the vehicle. In the case of a passenger, he is expected to pay the metered charges, which is usually collected on the basis of the number of kilometers travelled. These are all matters, which are regulated by the Government. Unlike the said scenario, in the case of a rent-a-cab scheme, as is clear from the very fundamental principle underlying the scheme, it is to give the hirer the freedom to use the vehicle as he pleases, which, undoubtedly, implies that he must have possession and control over the vehicle. This is the fundamental distinction between rent-a-cab and a pure case of hiring. No doubt, the learned counsel for the appellant may be correct in saying that, in the case of rent-a-cab also, there is hiring in the general sense. As we have already noted, the word hire is used even in the rent-a-cab scheme. But, what is of fundamental importance and constitutes the distinguishing feature between rent-a-cab and hiring i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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