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2015 (11) TMI 834 - CESTAT MUMBAI

2015 (11) TMI 834 - CESTAT MUMBAI - 2016 (41) S.T.R. 444 (Tri. - Mumbai) - Demand of service tax - Supply of Tangible Goods for use - model of business is appellant owns the permit for operating Fleet Taxis under an agreement with various drivers, the said taxis are given for plying the passenger in the city - Held that:- Tangible goods in form of radio taxi are given to the driver and there is no transfer of the possession of the vehicle but physical transfer has taken place, but the effective .....

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d to take passengers on instructions and directions from the appellant only. Passenger or a customer contacts appellant for booking the radio taxi for the journey and if there is any deficiency of services, the appellant is hauled before the courts and not the driver as also for any misdemeanor of the driver.

The entire findings of the adjudicating authority has been misdirected to hold that the driver keeps bulk of the amount of the journey and deposits only small portion of the amo .....

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erein as recorded by us herein before; the entire action of booking of the radio taxi till the collection of the fare from the customer/passenger is on behalf of the appellant. It is also noted from the records that appellant is providing training to the driver and drivers are compensated adequately for the driving undertaken on behalf of the appellant; which will lead to a conclusion that appellant is providing services to the individual passengers and not the driver.

We have gone th .....

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ngible goods. - Impugned order is set aside - Decided in favour of assessee. - Application No. ST/S/96629/2014 in Appeal No. ST/88480/2014 - Final Order No. A/3567/2015-WZB/STB and Stay Order No. S/470/2015-WZB/STB, - Dated:- 30-10-2015 - M V Ravindran, Member (J) And P S Purthi, Member (T) For the Appellant : Shri L Badrinarayanan, Adv For the Respondent : Shri V K Singh, Sp Counsel ORDER Per M V Ravindran This appeal is directed against Order-in-Original no. 50, 51, 52/ST/RN/CMR-MII/13-14 date .....

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g the passenger in the city. The agreement entered by the appellant-company with individual drivers is referred to as a subscriber agreement wherein driver is termed as a subscriber. Investigation was carried by the officers of DGCEI, as to whether services rendered by the appellant would be falling under the category of supply of tangible goods for use from 16.05.2008. After recording the statements of various responsible personnel of appellant, the officers of DGCEI concluded that by giving ta .....

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nd of service tax along with interest be not confirmed, and penalties be not imposed on them. Appellant contested the show cause notice's on merits as well as on limitation in respect of the show cause notice dt. 20.10.2010. Adjudicating authority after following due process of law, did not agree with the contention raised by the appellant and confirmed demand raised with interest, as also imposed penalties. 3. Ld. Counsel appearing on behalf of the appellant submits that the impugned order .....

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on that appellant is registered with the authorities as a radio taxi operator/fleet taxi operator after fulfilling the conditions as required under law. He would submit that appellant entered into individual agreement with the drivers which is termed as subscriber agreement. He would submit that the vehicles were handed over to driver for ferrying the passengers. He would submit that the entire Fleet Taxi Scheme of the appellant, operates on the Call Centre basis i.e individual passengers call t .....

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iding STGU service to the drivers, the only service provided by the appellant is transporting service directly to the customers/passengers as the license for operating the taxis under the regulations framed by the State government is granted to appellants and not the individual drivers, permits are in the name of the appellant and appellant negotiated the fares to be charged from the customers with the State Transport Authorities. It is his submission that the contract for transportation is betw .....

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is for collection of the charges is on behalf of the appellant. He would submit that as per agreement, every driver has to pay appellant a fixed amount on day to day basis, which is nothing but collection of the fare on behalf of the appellant. Explaining this, he submits that instead of asking the passengers to deposit the fare directly with the appellant, appellant authorizes the driver to collect the fees from individual passengers and hold it with him till end of day and at the end of the d .....

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g flow of consideration to appellant; from driver as amounting to services rendered by appellant, and appellant provides transportation services to passenger for which payment/fare is collected by the driver being the point of contact between appellant and passenger; entire fare is the property of appellant and required to be deposited by driver with appellant. In return, driver is to be compensated for his services. It is his submission that the flow of consideration engaged in this case is fro .....

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company to the passenger and received driver services. It is his submission that appellant herein receives independent driver services from an individual and provides transportation services to the passengers. It is his further submission that for a service to qualify as an STGU service, the use of goods must be by the service recipient. After taking us through the definition of STGU, provided under section 65(105)(zzzzj) of the Finance Act, he would submit that the use of taxi is by the appell .....

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ncurred major expenditure towards developing the infrastructure for providing the service of radio taxi, and the appellant cannot be said to have provided STGU services to the drivers since it is the appellants who exercise control over the driver. On limitation, it is his submission that appellant on their own wrote to CBEC in 2009 seeking clarification on the applicability of service tax on the activities carried on by them and that the appellant has challenged constitutional validity of the s .....

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xable service means any service provided or tobe provided to any person in relation to Supply of Tangible Goods including machinery, equipment and appliances for use without transferring right of possession and effective control of such machinery, equipment and appliances. He would submit that the definition of STGU consists of three parts (a) Supply of Tangible Goods (b) For use (c) without transferring the right of possession & effective control. It is his submission that the taxis are use .....

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he Hon'ble High Court of Karnataka in the case of BhartiAirtel Ltd. vs. State of Karnataka 2012 (25) STR 514 (KAR) and judgment of Hon'ble High Court of Rajasthan in the case of Contractor Association (Civil) Rajasthan RajyaVidyutMandal vs. Rajasthan RajyaVidyutPrasaran Nigam Ltd. 2013 (32) STR 396 (Raj.) for the proposition that for deciding the liability of tax, the terms agreement/contract entered into between the parties are of vital importance to decide about the question like who i .....

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are the properties of the appellant. It is his submission that the drivers are not free to permit any third party to operate the taxi and they have to present the taxi for maintenance to the agents authorized by the appellant which would indicate that the appellant is exercising effective control and possession of the taxi is given to the driver. It is his submission the Central Board of Excise & Customs F.No. 334/1/2008 dated 29.02.2008 is relied upon, which clearly holds that this kind of .....

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he services under STGU. It is his submission that the appeal be rejected as devoid of merits. 5. We have considered the detailed submissions made by both sides and perused the records. 6. Both sides have filed written submissions which are taken on record. 7. Before we revert to decide the issue, undisputed facts needs to be stated. Appellant is a Radio Taxi Operator and is functioning under Radio Taxi scheme which is as per the provisions of the law that grants permission for plying radio taxi .....

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ng with the operator. It is also undisputed that the radio taxi operated by the appellant are booked by a Customer through a call placed directly to the appellant-company, though the taxi driver is not prohibited from entertaining customers from the kerb side pick up. On booking of a taxi, by individual customer, appellant decides which taxi will be attending the customer for transporting him to his desired destination; the customer is issued a bill /print out of the fare bill by the taxi driver .....

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llant. 8. On this factual matrix, it is to be seen, whether the Radio Taxi Scheme operated by the appellant by giving the same to a driver for plying the passenger to fall under the Service Tax net under supply of tangible goods or otherwise. 9. It is the finding of the adjudicating authority that the radio taxi operated by the driver for the appellant would get covered under supply of tangible goods. The entire finding of the adjudicating authority is based on the agreement entered by the appel .....

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ment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances" It can be seen from the above reproduced definition, there has to be a supply of tangible goods or appliances for use, without transferring right of possession and effective control of such tangible goods. In the case in hand, undoubtedly, the tangible goods in form of radio taxi are given to the driver and there is no transfer of the possession of the veh .....

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ve independent authorization for plying the vehicles and is allowed to take passengers on instructions and directions from the appellant only. Passenger or a customer contacts appellant for booking the radio taxi for the journey and if there is any deficiency of services, the appellant is hauled before the courts and not the driver as also for any misdemeanor of the driver. It can inferred be safely presumed after perusing the clauses of the agreement between the appellant and the driver, the dr .....

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e reason that the driver depositing the money is considered service recipient for use of such road taxi or supply of tangible goods. In the entire exercise the adjudicating authority has lost the sight of the fact that the supply of tangible goods in the case in hand is not for the use of the driver, but it is for the use of the appellant herein as recorded by us herein before; the entire action of booking of the radio taxi till the collection of the fare from the customer/passenger is on behalf .....

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