TMI Blog2015 (1) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants did not show any clause where APSRTC is required to make any payment for absence of the conductor. Therefore whatever be the situation, the appellants get only the payment agreed upon per kilometer and nothing more. The nature of agreement here is very very clear that this is not a joint operation. In fact the agreement is one sided. Para 11 (i) provides that in case of any dispute or disagreement between the owner and the officers of the Corporation with regard to the interpretation of the terms and conditions of this agreement, penalties or fines, amounts due, the decision of the Regional Manager of the Corporation shall be final. Here the person who is taking the vehicle determines the dispute between the two parties also. We are unable to understand how this can be considered as joint operation. In this case if the contract between APSRTC and the appellants was illegal and contrary to law, it was for the authorities who enforce Motor Vehicles Act 1988 to take action and ensure that the stage carriage permit issued to the appellants is withdrawn and appellants are visited with penalty, if any, imposable under the law. Apparently State Transport Authorities have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lone motor vehicles equivalent of omnibuses. - Decided against the assessee. Decision of High Court of Uttarakhand in the case of Sachin Malhotra and others [2014 (10) TMI 816 - UTTARAKHAND HIGH COURT] - Held that:- Hon’ble High Court was considering the issue for the period prior to 1/6/2007. As mentioned earlier, the definition was amended to include motor vehicles which can carry more than 12 passengers and which cannot be called as motor cab and maxi cab after 1/6/2007. - Therefore it would not be correct to apply the decision of the Hon’ble High Court to the present case. - Decided against the assessee. Demand of service tax confirmed for the period 1/6/2007 onwards - levy of penalty waived - Matter remanded back for quantification - Decided partly in favor of assessee. - ST/2895/2011 to ST/2902/2011, ST/2920/2011 to ST/2935/2011, ST/2964/2011, ST/2965/2011, ST/3032/2011 to ST/3034/2011, ST/3037/2011 to ST/3041/2011, ST/561/2012, ST/757/2012, ST/1000/2012, ST/1023/2012, ST/1232/2012, ST/1260/2012, ST/1349/2011 - FINAL ORDER Nos. 22119 to 22317 / 2014 - Dated:- 5-12-2014 - ST/2895/2011 to ST/2902/2011, ST/2920/2011 to ST/2935/2011, ST/2964/2011, ST/2965/2011, ST/303 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision was taken to list all these appeals together for hearing and accordingly the learned advocates appearing for all the appellants have been heard and this order is being passed. 2. The brief facts are as under: a) Andhra Pradesh State Road Transport Corporation (APSRTC) called for applications from private entrepreneurs for supply of buses under hire scheme for operation on the identified intra and inter-state route. b) The conditions between the parties inter-se was also provided in the tender document which was formalized in the form of a contract/agreement on the contract being awarded to the appellants. c) Para 36 of the tender document states that the entrepreneur has to operate the bus on the route allotted. d) The entrepreneur is also barred from operation of the vehicle illegally on the notified routes which would invite termination of the agreement. 3. Learned advocates appearing for all the parties agreed that all agreements have similar clauses and facts involved are also same. 4. After receiving applications from various entrepreneurs, with selected buyers, agreements were entered into and the relevant details of the agreements entered into by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g names while discussing points. 5.1. Joint operation: 5.1.1. It was submitted that the activity involved as per the agreement does not amount to renting of cabs by the appellants at all. The fact that appellants during the period in dispute held a stage carriage permit in their name and as per the contract appellants are required to undertake stage carriage operations which they are required to do as per the Motor Vehicles Act 1988 would show that the cab is not rented out for another person to avail the services of transportation of persons. It was submitted that the agreement is in the nature of parties jointly providing stage carriage service to individual commuters and the service of transportation is not provided to the hirer of the vehicle (APSRTC) by the owner. 5.1.2. It was submitted that this is a fact which distinguishes these cases from all the other cases decided by the Courts on the issue. As per the Motor Vehicles Act 1988, a contract carriage permit holder can provide the vehicle on hire but a person who holds a stage carriage permit cannot provide the vehicle on hire to any other person and such hire would tantamount to transfer of permit and the route ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilarly even if the bus runs with double the capacity of passengers and APSRTC makes huge profit, the appellants do not get any benefit whatsoever. In fact the agreement provides that even in case the conductor is not provided by the APSRTC, the driver is required to collect the fare from the passengers but the learned counsel for the appellants did not show any clause where APSRTC is required to make any payment for absence of the conductor. Therefore whatever be the situation, the appellants get only the payment agreed upon per kilometer and nothing more. This agreement is similar to an agreement for renting of shops, hotels etc to the customers. In case of renting also, even if the hotel makes huge profit, the owner of the premises does not get any share in the profit. He only gets the amount of rent. Similarly in the case of shops also if the shop is hired by a person, he pays only the rent and nothing more. Therefore the nature of agreement here is very very clear that this is not a joint operation. In fact the agreement is one sided. Para 11 (i) provides that in case of any dispute or disagreement between the owner and the officers of the Corporation with regard to the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not know the legal provision. It is for the parties concerned or for the law enforcing authority to take proper action. In this case if the contract between APSRTC and the appellants was illegal and contrary to law, it was for the authorities who enforce Motor Vehicles Act 1988 to take action and ensure that the stage carriage permit issued to the appellants is withdrawn and appellants are visited with penalty, if any, imposable under the law. Apparently State Transport Authorities have not taken any such action. It is not for us to examine this aspect. Our examination has to be limited to examine the facts of case and agreement to arrive at the nature of transaction between the parties to see whether the transaction is covered by the definition of service or not. In fact the agreement itself provides that APSRTC emblem would be embossed on the vehicle. If the appellants arguments are accepted, this itself is wrong and contrary to the legal provisions. Taking the fact that we ourselves are considering more than 250 agreements, it cannot be said that the State Transport Authorities were totally ignorant and allowed such illegal transaction to take place. If we see the agreement, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) that the vehicles shall be used only in a specified area, or on a specified route or routes; (ii) that the operation of the stage carriage shall be commenced with effect from a specified date; (iii) the minimum and maximum number of daily trips to be provided in relation to any route or area generally or on specified days and occasions; (iv) that copies of the time-table of the stage carriage approved by the Regional Transport Authority shall be exhibited on the vehicles and at specified stands and halts on the route or within the area; (v) that the stage carriage shall be operated within such margins of deviation from the approved time-table as the Regional Transport Authority may from time to time specify; (vi) that within municipal limits and such other areas and places as may be prescribed, passengers or goods shall not be taken up or set down except at specified points; (vii) the maximum number of passengers and the maximum weight of luggage that may be carried on the stage carriage, either generally or on specified occasions or at specified times and seasons; (viii) the weight and nature of passengers luggage that shall be carried free of charge, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h to the permit further conditions: Provided that the conditions specified in pursuance of clause (i) shall not be varied so as to alter the distance covered by the original route by more than 24 kilometers, and any variation within such limits shall be made only after the Regional Transport Authority is satisfied that such variation will serve the convenience of the public and that it is not expedient to grant a separate permit in respect of the original route as so varied or any part thereof; (xxiii) that the holder of a permit shall furnish to the Regional Transport Authority such periodical returns, statistics and other information as the State Government may from time to time prescribe; (xxiv) any other conditions which may be prescribed. 5.2.4. In the stage carriage permits also the samples of which have been attached and produced before us, we did not find any specific condition barring the stage carriage permit holder to provide the vehicle on hire. In fact in one of the permits issued to Shri. Varuna Malla Reddy Varu, son of Hanumantha Reddy for Vehicle Registration No. AP15X9333, in the bottom in the capital letters HIRE WITH RTC has been indicated. It is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate to confer on any person to whom a vehicle covered by the permit is transferred any right to use that vehicle in the manner authorized by the permit. It can be seen that a permit can be transferred from one person to another with the permission of transport authorities. In these cases the permit is not transferred. The terms of the agreement would show that all claims that may arise due to statutory violations out of the operations would be responsibility of the owner. This shows that owner remains responsible for the liability that arises. Further it is also provided in the agreement that the corporation shall pay fines, compounding fees etc imposed by a Court, RTA or STA against the permit holder under Section 86 of the MV Act for contravention of any provision of law provided that such contravention or violation has occurred when the vehicle has allotted for the Corporation. This shows that the operation of the vehicle is in the name of the stage carriage permit holder only so if the provisions of MV Act are violated, APSRTC reimburses the compounding fee, fines etc. This shows that the agreement has been drafted carefully to ensure that conditions of Motor Vehicles Act are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the business of renting of cabs. 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. After 2007, the definition of cab reads as under: Section 65(20) of Finance Act, 1994 : A cab means (i) a motor cab or iii) a maxi cab, or (iii) any motor vehicle constructed or adapted to carry more than 12 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 centre, shall not be included within the meaning of cab. According to Section 65(91) of Finance Act, 1994, rent a cab operator means any person engaged in the business of renting of cabs. According to definition of taxable service, any service provided or to be provided to any person by a rent a cab operator in relation to the renting of a cab. 5.6.3. Since we are going to discuss the above services and the definitions in Motor Ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to rent-a-cab scheme under Motor Vehicles Act and subsequently when it was implemented, the reference to rent-a-cab scheme under Motor Vehicles Act was omitted even prior to 2007. It has to be noted that the rent-a-cab scheme under Section 75 of Motor Vehicle Act is applicable only to motor cabs and motor cycles and maxi cabs are not included. This could be one of the reasons why the reference to Motor Vehicles Act was omitted since the rent-a-cab scheme as envisaged in Motor Vehicles Act was applicable only to motor cab. If the intention of the law makers was to apply the rent-a-cab scheme as envisaged in Motor Vehicles Act for the purpose of levy of service tax, necessarily they had to provide a clause that for the purpose of this clause, motor cabs and maxi cabs have to be considered as covered under rent-a-cab scheme envisaged in Motor Vehicles Act. In the absence of such a provision, prima facie, on an analysis of the definitions, a laymans conclusion would be (without knowing the law laid down by judiciary) would be that the definition in service tax has to be read independently of the rent-a-cab scheme envisaged in Motor Vehicles Act. 5.6.5. After 2007, the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les Act also does not differentiate between renting and hiring. This is because maxi cab and motor cab have been defined as the motor vehicles for hire or reward. It has to be noted that in the case of an omnibus the words hire or reward are missing. In the scheme for rent-a-cab, the scheme is applicable only to motor cabs which would show that the scheme is applicable only to motor cabs, the meaning of which itself according to Motor Vehicles Act is a motor vehicle for hire or reward. There is a clear distinction in the Motor Vehicle Act between vehicles which are exclusively meant for renting or for hiring for reward and motor vehicles which can be used personally as well as for other purpose. Where a definition is exclusively meant for motor vehicles which can be hired or rented, the definition itself provides for it. Therefore when words like maxi cab and motor cab are used it means it is applicable only to vehicles which are meant for hire or reward. 5.6.8. It can be seen that even though the relevant Section provides for Central Government making the Rules for rent-a-cab scheme, words hire or reward have been used everywhere else. Therefore even under Motor Vehicles Act le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrel. But, this cannot detract from our enquiring into as to what is the transaction, which is actually brought to tax. We are constrained to pose this question and answer this question as what is sought to be taxed is the service in relation to the renting of cabs. So, the most important and crucial element, which we 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that we are taking 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 traveling 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. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision relates to the period prior to the amendment of definition of rent-a-cab scheme to include motor vehicles also and exclusion of certain types of rent-a-cab operations for service tax purpose, it is not surprising that Hon ble High Court elaborately discussed the issue relating to renting of cabs. After taking note of the fact that as held by the Tribunal with which the Hon ble High Court agreed, unless the control of the vehicle is made over to the hirer and he is given possession for howsoever short a period, there would be no renting. Hon ble High Court also on the basis of provisions of Section 75 concluded that Section 75 also contemplates the same proposition. After taking note of Clause 10 of the rent-a-cab scheme which provides the duties and responsibilities of hirer of motor cabs, Hon ble High Court in Para 18 came to the conclusion that there is a clear distinction between rent and hire and when a vehicle is rented out, the conditions of Clause 10 are required to be fulfilled. It is on this basis that the learned counsel for the appellants argued that (a) hirer should be free to take a vehicle wherever he wishes and he is only obliged to keep the licence holder info ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other contract carriage vehicles or compete with APSRTC. Even his family members are barred from owning contract carriages. It is also provided in the agreement that owner is bound to permit display of advertisement boards or panels on the bus or in the interior portion of the bus by the Corporation or its authorized agent and the owner has no right to claim the revenue. This again shows that the possession is with the APSRTC only. The restrictions on the owner are as follows: Clause 11(ii) The owner shall not allow operation of any other vehicle owned by his/her or belonging to his/her family members illicitly on the notified routes of APSRTC infringing the monopoly of Corporation. (iii) The owner and his or her family member shall not indulge in operation of their other vehicles as contract carriages or All India Tourist vehicles nor own or operate travel agencies either in their name or in the name of his/her family members. Any violation of the condition entitles the Corporation to terminate the contract by issue of one month notice. 5.7.5. The sum and substance of the provisions of the agreement would show that APSRTC is free to put up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability to pay tax to the Government could come up with writ petition. Honble High Court held that it cannot. Since the writ petition was rejected on the ground that UPSRTC was not the aggrieved party, we also prima facie agree that reliance should not be placed on this decision. 5.8.2. The learned AR also relied upon the clarification issued by the Board on 02.08.2007 under Letter F.No. 137/155/2007-CX.4 dated 02.08.2007 wherein it was clarified as follows: 2. The Himachal Road Transport Corporation (HRTC) hires private buses for their operation. The payment is made on a fixed rate per kilometer of travel. The expenditure towards fuel, maintenance and driver, etc, is borne by the private bus operator. HRTC collects fare from passengers deploying its conductor. Thus the activity of private operators amounts to renting of buses to HRTC. 3. W.e.f. 01.06.2007, the scope of term cab has been expanded to include within its scope the motor vehicle capable of carrying more than 12 passengers for hire . Therefore, w.e.f. 01.06.2007, service tax would be applicable on renting of buses under the category of rent-a-cab service . As regards the earlier period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or action taken by the APSRTC. In view of the above we do not agree that appellants have a case for limiting the demand relating to normal period. 5.12. Request for treatment of consideration as cum tax receipt The next submission was the request for treatment of the consideration as cum tax receipt and requantification of the tax dues. This submission has to be accepted and is accepted. 5.13. Request for abatement Another submission was that the abatement which was admissible has not been provided and as a result the demand has got inflated. Since we are going to remand the matter to work out the demand on the basis of treating the amount received as cum tax amount, we consider that this issue also can be left to the original authority who can quantify after considering the eligibility for abatement. 5.14. Penalty As regards penalty, the very fact that there are more than 200 appellants before us against the decision to demand tax, and also almost all of them are individual bus owners and the transaction was with a public sector undertaking, we consider that appellants had reasonable cause for not paying the service tax during the relevant period. Therefore eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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