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2017 (11) TMI 773 - CESTAT HYDERABADRent-a-Cab services - scope of the term 'renting' and 'hiring' - Andhra Pradesh State Road Transport Corporation (APSRTC), the appellants herein, are engaged in operation of buses in the State of Andhra Pradesh for travelling public. They were also providing buses for marriage functions, pilgrimage places etc. to private persons on commercial consideration. Held that: - 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, may, in a different context, have the same connotation; in the context of rent-a-cab scheme and hiring, we are of the view that they signify two different transactions. What the lawgiver has chosen fit to tax by way of imposition of Service Tax is only transaction relating to business of renting of cabs. It is also pertinent to bear in mind that, in the case of hiring, the hirer may refuse to provide the service to the prospective customer. We cannot accept the argument of the learned counsel for the appellant that the Court must ignore the provisions of Section 75 of the Motor Vehicles Act. We are of the view that, when the lawgiver introduced this new source of taxation, it must be treated as having been aware of the distinct concept of renting a cab for which there is provision in the Central Legislation, namely, Section 75 of the Motor Vehicles Act and also a scheme stood framed as early as in 1989. We are, therefore, of the view that, unless there is control, which is passed to the hirer under the rent-a-cab scheme, there cannot be a taxable transaction under Section 65(105)(o), read with Section 65(91) of the Service Tax Act. Reliance placed in the case of Commissioner of Customs & Cx Meerut Vs. R.S. Travels, [2014 (10) TMI 817 - UTTARAKHAND HIGH COURT] where the Hon’ble High Court reiterated that when there is only a contract of hire and there is no renting of cab, there is no question of assessee being assessed in respect of services rendered in connection with rent-a-cab service. There cannot be any tax liability on the appellants till 30.06.2012, in respect of hire charges received by them for providing buses for marriage functions/pilgrimages. Accordingly, the relevant portions in these impugned orders, as applicable, where the service tax liability has been upheld in respect of these activities of the appellants till 30.06.2012, will require to be set aside which we hereby do. Coming to the period from 01.07.2012 all services unless specifically mentioned in the negative list or otherwise, specifically exempted are liable to discharge service tax - for a vehicle having “stage carriage” permit like buses owned by the appellants, to operate for private persons/marriage parties under a contract, such buses will then necessarily be required to obtain a contract carriage permit or a special permit as aforesaid. In our view, once such a contract carriage permit or a special permit is obtained, the bus will then no longer have the character of a stage carriage but will instead acquire the colour of a contract carriage/special permit carriage. Viewed in this light, the buses of the appellants having become “contract carriage or a special permit carriage even if for temporary permit to provide them on hire for marriages/pilgrimage etc., they cannot be considered as a stage carriage for that short period and hence cannot then claim to be covered under the negative list of services as a stage carriage for transportation of passengers, or for that matter, covered by the exemptions provided under notification 25/2012, since that exemption will not cover contract carriage on hire - the demand of service tax in all these appeals for the period from 01.07.2012 onwards is justified by law. Penalties - Held that: - considering that the matter is one of interpretation and that the question of taxability on the services was mired in confusion and litigation, the penalties imposed in all these cases are set aside. Appeal allowed in part.
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