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TMI Blog2015 (1) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... les on rent with exclusive control of the customer only would be charged. The scope of amended provision, which is as per Section 65(38), has been widened by deleting the requirement of holding a licence under Rent-a-cab Scheme, 1989. Under the amended provision any person engaged in business of renting of cabs becomes a rent-a-cab scheme operator. - if the petitioners are plying the motor cabs or maxi cabs and the services are provided by them to any person in relation to the renting of the cabs, such service becomes a “taxable service” and therefore, comes within the ambit of Section 66(3) of the Finance Act. In view of these provisions, it is not at all necessary to rely exclusively on Section 65(50), (51) and (52) which deal with 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”. In the case of Kuldeep Singh Gill [2010 (4) TMI 283 - PUNJAB & HARYANA HIGH COURT], it was held that transportation or vehicle hire service is different than the service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Operator Service is made taxable under Section 65 of the Finance Act, 1994 which is amended from time to time. The respondent was also found not to have filed ST-3 returns. The said service provider though engaged in the business of rent-a-cab service from the year 1997, had not discharged the liabilities of service tax. 1.2 It was noted that the service provider had entered into an agreement with Gujarat Secondary Education Board (for short, hereinafter referred to as GSEB ) for supply of vehicles. The said contract was entered into by the service provider with GSEB for the purpose of transportation of papers/answer sheets, examiners, staff, etc. The service provider also used its own cars and had taken vehicles on rent from other persons as well. It was noticed that service tax registration though was obtained by the respondent under the category of cab service since March 2004, for the period from April 2004-March 2005, April 2005-March 2006 and April 2006-March 2007, the service tax had not been paid. 1.3 The statement of proprietor of service provider had been recorded under Section 14 of the Act on 18-10-2007 who inter alia stated that the firm is engaged in provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is not a rent-a-cab service. The Tribunal also confirmed the plea of limitation in favour of the respondent by holding that the levy since was introduced in the year 2000, the issue was not clear. No mala fide could be attributed to the appellant for non-payment. 1.7 Aggrieved by the said decision of the Tribunal, the present Tax Appeals are preferred by the department proposing following identical substantial questions of law in both the matters for our consideration : (i) Whether the Hon ble CESTAT is correct in holding that Rent-a-cab scheme operator does not cover all manner of transport when the vehicles rented by M/s. Vijay Travels, squarely falls within the definition of Cab as per Section 65(20) of the Finance Act, 1994? (ii) Whether the Hon ble CESTAT is correct in holding that there was no renting out of cabs as the vehicles continued to be with the operator and was paid per trip/kms and vehicles were given on hire basis, when the Rent-a-cab scheme operator services under the Finance Act, 1944 does not require ownership of vehicle or provides payment of service tax only if the vehicles are given on rent ? (iii) Whether the Hon ble CESTAT, WZB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cab, with or without the driver, for a certain period on some consideration. He further urged that in post 16-10-1998 period, for the registration under Section 75 of the Motor Vehicles Act, requirement of holding license under the scheme and requirement of holding particular number of vehicles have been dispensed with. Learned counsel urged that while interpreting the Statute, Court may not add anything which was never contemplated by the legislature. Reliance is placed on some of the authorities to quash and set aside the order impugned of the Tribunal. He fervently urged that extended period of limitation would apply in case of the respondent who chose not to pay service tax for all these years. 3. Per contra, learned senior counsel Mr. Deven Parikh appearing for the respondent strenuously and vehemently argued that rent-a-cab operator is required to have license under the Rent-a-Cab Scheme, 1989 and unless it is shown that there is actual renting of a cab, no taxable service could said to have been performed. He further urged that it is a settled principle of interpretation that a taxing statute must be strictly construed. There is no question of any intendment or equity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of tax net, but, to iron out creases gathered on account of earlier definition. He further urged that at the time of the presenting the budget, the Finance Minister proposed service tax on new services which also would indicate that there was no intent to tax the persons who carry passengers for a fare and provide transportation services. Learned counsel had also argued that there is difference between lease and license . In lease , insurable interest exists whereas, in the license , there is no insurable interest. Under Section 75, when question of renting arises, it necessarily means exclusive possession of the property and in absence of intendment on the part of the legislature, there should be no imposition of tax by stretching the interpretation of the taxing Statute. It is also further urged that the purpose of amendment is not to bring under the net of the service tax the vehicles given on hire, but, to tax only those vehicles which are rented. 3.2 Even the explanatory notes to Clause 119 of the budget, according to the learned counsel, in the context of rent-a-cab scheme operator, does not state that service provided by persons providing transportation servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The practice of the department in assessing the poles to duty (except in cases where they were exempt as the conditions in the exemption notifications were fulfilled) and the issue of notifications from time to time (the first of which was almost contemporaneous with the insertion of item 26AA) are being relied upon on the doctrine of contemporanea expositio to remove any possible ambiguity in the understanding of the language of the relevant statutory instrument : See Varghese v. ITO, 1982-1 SCR 629 = AIR 1981 SC 1922, State of Tamil Nadu v. Mahi Traders - 1989-1 SCR 445, CCE v. Andhra Sugar Ltd. - 1989 (Supp) 1 SCC 144 and Collector of Central Excise v. Parle Exports P. Ltd. - 1989-1 SCC 345 = AIR 1989 SC 644, Applying the principle of these decisions, that a contemporaneous exposition by the administrative authorities is a very useful and relevant guide to the interpretation of the expressions used in a statutory instrument, we think the assessee s contention that this products fall within the purview of Item 26AA should be upheld. In case of All Gujarat Federation of Tax Consultants (supra), this Court was deciding, in group of petitions, the validity of the circular issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in western countries but also in India, that the interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible. 3.4 According to the respondent, consistently over the years, the Tribunal has taken a view that if the transportation service is provided for transporting passengers on kilometer basis, keeping full control and possession of the vehicle through the driver, the same cannot fall within the concept of renting of a cab. The department has not carried in appeal such matters of other assessees, then it cannot pick and choose and carry in appeal for only some assessees as per its whims as is held in the judgments of the Apex Court rendered in cases of C.C.E., Navi Mumbai v. Amar Bitumen Allied Products Pvt. Ltd., reported in 2006 (202) E.L.T. 213 and Boving Fouress Ltd. v. Commissioner of Central Excise, Chennai, reported in 2006 (202) E.L.T. 389. In case of Boving Fouress Ltd. (supra), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 99% vehicles supplied to Gujarat Secondary Education Board were owned by other car owners and respondents acted only as conduits. The Commissioner held that the ownership of the vehicle has no relevance. When the contract with the GSEB and the assessee-respondent is for providing the vehicles along with driver and when such vehicles have been provided by the assessee by taking from their respective owners, that would not relieve the assessee-respondent from paying the service tax. The actual usage of the vehicle is also not held relevant by the Commissioner for deciding whether it is renting of a cab service or not. The contention of the assessee that this service is only amounting to transport service and not a rent-a-cab service inasmuch as the nature of rout were fixed/scheduled with other conditions and employment of vehicles had not been accepted by the Commissioner. 5.1 It would be relevant to reproduce contractual terms entered into by and between the respondent and GSEB as under : (1) To provide/supply the vehicles of Ambassador/Passenger Matador/Swaraj Mazda/Luxury 56 seated vehicles to Board office, whenever it is required at what time and provide ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestions papers and answer sheets from one place to another, but also to provide the vehicles to GSEB as specified by them. On the basis of entire discussion, the Commissioner concluded that the service provided contravenes the provisions of Finance Act, 1994 read with Service Tax Rules, 1994 and respondent are also held to have suppressed the vital facts with an intention to evade the payment of service tax. 6. The Tribunal on the basis of these details, when the order was challenged, held that the vehicle was not given to GSEB for operating under its management. The GSEB was not making payment of any stipulated number of vehicles but for operating the trips to various places where the management of the vehicles continued with the respondent-assessee and payments were made on kilometer basis, no service tax can be levied. Relying on the decision of Kuldip Singh Gill (supra) [2006 (3) S.T.R. 689 (Tri.-Del.) = 2005 (286) E.L.T. 373 (Tri.-Del.)], it held that the assessee did not provide any rent-a-cab service under the Rent-a-Cab Scheme and therefore, it cannot be held liable to pay service tax. It also relied on the decision in case of R.S. Travels (supra) [2008 (12) S.T.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s service. It is further contended that in renting of the vehicle, such vehicle would be at a disposal and under the control of client and the same can be used to the maximum extent permissible. However here when the cab operator is providing cab with a driver on demand and such vehicles are being plied on fixed rate from one place to another, charging fare per kilometer and when the control of the vehicle continues to remain with the cab operator, issue raised is that this essentially is a transport service which would be outside the purview of service of rent-a-cab operator service. 8. In light of the said factual matrix, before adverting to other factual contentions some of the rival provisions need discussion at this stage. Section 74 of the Motor Vehicles Act provides for grant of contract carriage permit. On application made to the Regional Transport Authority, he can grant a contract carriage permit subject to certain conditions specified in the said provisions itself. Section 75 of the Motor Vehicles Act provides for scheme for renting of motor cabs. It is for the Central Government by notification in the Official Gazette to make a scheme for regulating the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et for the purpose of levying service tax for rendering such service. In a wide definition made under Section 35(38) of the Finance Act, Rent-a-cab Scheme Operator suggests that those who operate in renting of cabs are covered. Cab is also defined under Section 65(9) of the Finance Act which means maxi cab or motor cab and both maxi cab and motor cab are defined under Sections 2(25) and 2(22) of the Motor Vehicles Act respectively. 9. In plain terms, it can be said that a rent-a-cab scheme operator is made liable to pay service tax. Prior to amendment by Finance (No. 2) Act of 1998, under Section 65(32), the definition of Rent-a-Cab Scheme Operator was as follow : rent-a-cab scheme operator means a person who is the holder of a licence under the Rent a Cab Scheme, 1988 framed by the Central Government under the Motor Vehicles Act, 1988 (59 of 1988). After the amendment Rent-a-Cab Scheme Operator is defined under Section 65(76) as follow : rent-a-cab scheme operator means any person engaged in the business of renting of cabs. 9.1 The revised definition has made much larger the scope of the earlier definition where a person holding licence with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elve passengers excluding the driver for hire or reward; Provided that the maxi cab referred to in sub-clause (ii) or motor vehicle referred to in sub-clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field other than a commercial training or coaching center shall not be included within the meaning of cab. Motor vehicle under Section 2(28) of the Motor Vehicles Act is defined as follow : motor vehicle or vehicle means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding [twenty-five cubic centimeters]. 11.2 In the amended provisions thus, no change has been made as far as motor cab is concerned which in all cases when rented out, such renting would be liable as a taxable service. Any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles and also having licence under the law also was done away with by subsequent amendment. Legislature has not made any distinction between hiring of vehicle or renting of vehicle for the purpose of levying service tax. Such assertion of ours is demonstrated on the basis of discussion held herein above as also from the following paragraphs. 14.1 It would amount to artificial requirement of statute if only those persons are taxed who give away their vehicles without retaining any control either personally or through driver. The concept of lease and licence is sought to be brought into picture by contending that lease would have insurable interest which is absent in licence. It is a well settled principle of interpretation of statute that taxing statute must be read and interpreted giving meaning to the plain language. The principle of strict construction applicable to taxing statute would not mean where the same falls formally within the ambit of law, the court can avoid the tax by putting restricted construction on some supposed hardship. The Supreme Court in case of Commissioner of Wealth-tax v. Smt. Hashmatunnisa Begum, reported in AIR 1989 SC 1024, has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the labor and industry, either of himself or his servant, during a certain time, for a stipulated compensation, or where one contracts for the labor or services of another about a thing bailed to him for a specified purpose. 14.3 Renting means a usually fixed periodical return, especially, an agreed sum paid at fixed intervals by a person for any use of the property or car. It is also the amount paid by a hirer to the owner for the use of the property or a car. Hiring is also engaging services or wages or other payment. It also amounts to engaging temporary use. It cannot be disputed that both in renting and licensing , de facto possession of the thing is enjoyed. Difference is well carved out under the law wherein both, de jure possession and control is given, but in renting , it is right-in-rem whereas in licensing , it is right-in-persona. When rent-a-cab scheme operator gives the car on rent, de facto possession is, of course, there but, it is not acceptable to uphold that wherever de jure control and possession of the vehicle stands transferred in law from the owner to the person on renting/hiring the service that the service tax is leviable and this is, of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is nothing to read into the taxing statute that only those persons who own the vehicles and give their vehicles on rent with exclusive control of the customer only would be charged. 15. The Tribunal in case of R.S. Travels v. Commissioner of Central Excise, Meerut, reported in 2008 (12) S.T.R. 27 has made out distinction between providing rent-a-cab service or giving vehicle on lease or hire, to hold that ordinary meaning of the words to rent is allowing the use of something one owns in exchange for payment. Therefore, the test for ascertaining whether an activity is covered by the entry rent-a-cab operator service is as to whether it involves giving the cab, with or without the driver, to a client for a certain period of time for some consideration. However, when a cab operator provides his cab with a driver to his client on demand for going from one place to another and charges him on per kilometer basis or a lump sum amount on distance, as fixed with the client and control of the vehicle always remains with the cab operator/driver, he is providing transport service and this activity would be outside the purview of the entry - rent-a-cab operator s service . 16. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... renting since the Government s intention was to tax the service providers of a service, which involved hiring/renting of a cab formally for a long duration, unlike the Yellow Black cabs which were only engaged by a person for short time. 18. The Delhi Tribunal in the case of Ghansyam Gupta v. CCE, reported in (2007) 11 STT 130, found that the assessee had rented out a vehicle to a hirer where vehicle was to be stationed at the premises of hirer and was under his exclusive control. This was held as a clear case of rent-a-cab service. The person, thus, who is engaged in the business of engaging taxis for customers and giving them service without even owning or plying vehicle also can be held liable for paying service tax under the category of Rent-a-cab Scheme Operator . 19. The Madras High Court in the case of Secretary, Federation of Bus-operators Assn T.N. v. UOI (supra), examined the issue of service tax applicable to the tour operators under Section 65(52) of the Finance Act and Rent-a-Cab Scheme Operator under Section 65(38) of the Finance Act and dealt with each category separately. Under the heading maxi car or motor car , it discussed various aspects/legal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Motor Vehicles Act provides motor cab means any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward. (48) There can be no doubt that such motor cabs or maxi cabs are plied as contract carriages and/or under Section 88(9) of the Motor Vehicles Act read with Rules 82 to 85 of the Motor Vehicles Act. It would, therefore, be clear that the moment a vehicle which carries the permit as a motor cab or maxi cab is rented by a person, who is engaged in the business of renting cabs, such person who is so engaged in the business of renting cabs would be in the tax dragnet of service tax. (49) The main argument by some of the learned Counsel was that a person who owns a motor cab or maxi cab is not a tour operator within the meaning of Section 65(52) of the Finance Act as the permit granted to ply the motor cab or maxi cab is not necessarily a tourist permit nor could such vehicles be called tourist vehicles . The learned Counsel addressed us in relation to Section 65(50), (51) and (52) of the Finance Act. (50) We have already shown that every motor cab or maxi cab is a contract carriage and would certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rators . 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 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. 20. The Punjab Haryana High Court was also considering the question as to whether transport service provided by the respondent-firm to the Indian Oil Corporation was liable to service tax or not? The Court, after considering various provisions as also decision of the High Court of Judicature at Madras in the case of Secretary, Federation of Bus-operators Assn T.N. v. UOI (supra), applied all vital observations of Madras High Court mutatis mutandis to the case before the High Court. Accordingly, it held that transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amendments in the law were brought. 25.3 Merely because the petitioner got himself registered on 23-3-2004 and by way of abundant caution incorporated and accepted its liability in one of the terms of agreement, as and when arises, that ipso facto cannot be adjudged as his deliberate act of non-payment of tax alleging suppression and mala fide intention. It is a matter of record that the petitioner has been operating in the field from the year 1997. Every year by virtue of tender published by GSEB on the basis of yearly contract, it provides vehicles to the Board for the purpose of examining squad, for transfer of papers and for other requirements during the SSC and HSC examinations. Considering a serious legal debate as to who can be said to be renting of a cab, petitioner if has not paid service tax on such services, the Tribunal correctly appreciated that such, by no stretch of imagination, be held as mis-statement or deliberate act of suppression or mala fide intent. 26. Both the notices being 31-8-2006 and 19-10-2007 since are given beyond the stipulated period invoking large period of limitation, we answer these issues in favour of the assessee holding that the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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