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2019 (4) TMI 1824

..... ab” service specified in Section 17 (5) (b)(iii) as applicable to input tax credit - time limitation - challenge to AAR decision. What is rent-a-cab? - HELD THAT:- The contentions of the applicant that hiring of buses which can carry large number of passengers would not qualify under “rent-a-cab” is found to be untenable and the activity of the contractor in the instant case, providing buses or cars on hire to the applicant, is specifically covered under the meaning of “rent-a-cab” which makes the impugned supply as ineligible for ITC in terms of Section 17 (5) of the CGST/HGST Act, 2017 - further, the appellant had not challenged that the cars and buses hired by them do not fall under the definition of cab. Whether renting of vehicle is different from hiring? - HELD THAT:- It is seen that the taxing statute, do not make any distinction between renting or hiring. Further, irrespective of possession and control of the vehicle, the service so rendered falls within the taxable service. Thus the contention of appellant that hiring of vehicle is different from renting is untenable. Whether input tax credit on GST charged by the contractors for hiring of bus .....

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..... part from the employees manufacturing final products, various managerial service employees also carry out their day to day affairs from the said factories. The said factories of the M/s YKK are situated at remote location in Haryana where public transport is very minimal which hinders transportation of employees to reach the factories. 4. In order to carry out its business of supply of its final product and for efficient functioning of its business as a whole, M/s YKK has engaged various contractual service providers who provide transportation services and ensure that employees of YKK are able to reach the factories in time for doing their day to day work as scheduled. It is for this purpose that M/s YKK enters into contracts with the said suppliers for hiring buses as well as cars. M/s YKK submitted a copy of the contract with M/s Deep Travels (Deep), as a sample contract in support of its argument. Since this contract is with specific Contractor, namely, Deep, this contract may be considered as the prototype of all contracts made with various contractors and all discussions regarding the Agreement are to be taken as relevant to and applicable for all the contracts entered into by .....

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..... he applicant, as under: The dealer is entitled to take credit of GST charged by the contractor on hiring of buses and cars to the Applicant which are used for transportation of its employees to the factories. It is submitted that the dealer is registered person engaged in the business of supply of final products which are taxable under the Act. Further, for the purpose of supply of the said final products, the dealer has employed various employees who work in various shifts at the said factories and it is for transportation of the said employees that the Applicant has contracted with the contractors for supply of buses. Thus the dealer is eligible to take credit of GST paid to the said contractors firm whom the buses are hired for transportation of employees. However, he submitted that Section 17 (5) is a non obstante clause to the enabling provisions of granting inputs tax credit specified in Section 16(1) of the Act. Thus, reading of non obstante clause in Section 17 discloses that an exception has beenmade to the provisions of granting of input tax credit by specifying situations where such credit shall not be available to the registered person under Section 16 of the Act. Thus, .....

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..... T BOMBAY wherein it was held that: It is necessary to reiterate that the quasi-judicial authorities exercising powers under the Act should remember that not only justice should be done but the parties who are affected by the adverse order should have a feeling that justice has been done to them. It is not enough for any authority to assert that justice is done without there being a show of justice. The rules of natural justice are not empty formalities but must be observed to remove any feeling in the mind of the party adversely affected that his cause was not considered. The manner in which the respondent No. 1 has proceeded to pass the impugned order leaves an apprehension in the mind that the whole process was pre-determined. Such a feeling would destroy the confidence not only of the citizens but also of the Courts in quasi-judicial authorities. (c) Advance Ruling Authority ought to have discussed or at least referred to the submissions made by the appellant and the categorical admission of the Departments representative that the input tax credit on transportation services received by the Appellant is available. During the course of hearing, the Departments representative upon .....

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..... tes, dealers meet business promotion activities, vehicles launch, conferences, etc. is a an expenditure in relation to business being incurred by the respondent in order to promote the sales and for efficient running of the business for which they are entitled to avail Cenvat credit. Thus, the Ld. Advance Ruling Authority having failed to appreciate that the Appellant is entitled to take credit of GST charged by the Contractor on hiring of buses and cars to the Appellant which are used for transportation of its employees to the Factories under Section 16 of the CGST Act and the same is liable to be set aside. (f) The Ld. Advance Ruling Authority ought to have considered that a bare reading of the provisions of Section 17 (5) of the Act, discloses that only restriction which may be applied to a case of input tax credit relating to transportation using buses or cars etc. can be one of Rent a Cab provided that the said supply of transportation services fall within the meaning of Rent a Cab . The term Rent a cab is not defined either in Section 17(5) or under the Act. Accordingly, reference ought to be made to the meaning ascribed to the said term under the Motor Vehicle Act, which is .....

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..... rol is held by the contractor. Thus, where the Ld. Advance Ruling Authority failed to appreciate the said distinction, the ruling is liable to be set aside. (j) In the present case, a bare perusal of the sample contracts disclose that the possession as well as control of the buses and cars remain with Contractor, who engages driver and conductor to supply transportation service to the Appellant. It is thus, clear that the Appellant merely uses the buses and cars for giving conveyance to its employees to the Factories without retaining any control or possession of the buses and cars and pays hire charges on the basis of usage i.e. payment on the basis of distance travelled or time of usage to the Contractor. Thus the transportation services received by the Appellant are akin to hire and not rent and therefore the restriction on input tax credit in respect of Rent a Cab is not applicable on supply of transportation service to the Appellant. Therefore, it is submitted that the activity undertaken by the Contractors of providing the buses and cars for transportation of the employees are not in the nature of rent but fall under the scope of hire and cannot be held to be covered by Secti .....

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..... Act contemplates renting and hiring of motor car as separate activities and cannot be regarded as same in absence of any deeming fiction to that effect under Finance Act. Thus, the Impugned ruling is liable to be quashed inasmuch as it considers hiring and renting as synonyms. (l) The Ld. Advance Ruling Authority ought to have considered that Section 74 deals with hiring of the motor vehicles whereas Section 75 deals with renting of motor-cabs. Thus, when motor-cab is given on hire or reward under a contract, it is covered under Section 74 whereas when motor-cab is given on rent under a contract, it is covered under Section 75 In the present case, the Contractor is not registered as rent a cab operator but is registered as contract carriage operator under MV Act and therefore, it is clear that the Contractor is not rent a cab operator for the purpose of the Act. Therefore, inasmuch as the Ld Advance Ruling authority concluded that the Contractor falls under the scope of Rent a Cab service and accordingly, the exclusions specified in Section 17 (5) of the Act applies to the Appellant, the Impugned ruling is liable to be quashed. (m) The Ld. Advance Ruling Authority has failed to dis .....

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..... ly, it is clear that bus is not given a license under Section 75 and therefore, it is submitted that bus perhaps cannot operate on rent basis. It is thus submitted that when neither Section 75 nor Rent a Cab Scheme provide for renting of the bus, Section 17(5) cannot be read to include bus for disallowance of input tax credit. (o) It is clear that Section 17 (5) (b) (iii) only contemplates inclusion of renting of cab as a input supply on which input tax credit on input tax paid under the Acts is not available. It is further submitted that there is restriction provided on renting of bus under Section 17 (5) (b)(iii) and therefore, input tax paid on renting of bus under the Acts is available. Hence, it is submitted that in so far as the buses are concerned, there cannot be any doubt that transportation services provided by buses cannot be disallowed under 17 (5) (b)(i) and therefore, Appellant is eligible to claim GST charged by the Contractor for hiring of buses for transportation of employees. (p) The Ld. Advance Ruling Authority in the Impugned Ruling categorically noted that when it comes to goods and services tax, tax on services finds it genesis from chapter V of the Finance Ac .....

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..... it is a settled principle of law laid down in Mangalore Chemicals and Fertilizers Ltd. vs. Deputy Commissioner, 1991 (55) E.L.T. 437 (S.C.) = 1991 (8) TMI 83 - SUPREME COURT, Union of India vs. Wood Papers Ltd. & Anr., 1990 (47) ELT 500 = 1990 (4) TMI 55 - SUPREME COURT and Union of India vs. Suksha International and Nutan Gems, 1989 (39) ELT 503 (SC) = 1989 (1) TMI 316 - SUPREME COURT, that the exceptions to any beneficial provision have to be construed strictly and an interpretation unduly restricting the scope of a beneficial provision is to be avoided so that it may not take away with one hand what the policy gives with the other. Therefore, inasmuch as the Ld. Advance Ruling Authority failed to strictly construe the exception under Section 17(5), the same is liable to be set aside. (s) The Ld. Advance Ruling Authority failed to consider the settled legal principal there are two possible interpretation of a tax provision, the one in favour of the assessee should be preferred. It is a settled principle in taxing statutes that in case there are two interpretation, the one which casts a lesser burden on the subject must be adopted. Accordingly, it is submitted that not only th .....

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..... 04.2019. Advocates Shri Kishore Kunal and ETO, Rewari Shri Adityendra Singh Takshak, attended the hearing on the fixed date and time. 11.1 During the hearing the appellant while reiterating the submissions made in their appeal papers put forth that the basic emphasis of their submissions was that hiring is different from the renting and thus eligible to claim ITC on hiring of buses and cars for transportation of their employees. 11.2 He submitted that the buses given by the contractor to the Applicant do not fall under the definition of cab. Section 17(5)(b)(iii) only contemplates inclusion of renting of cab as a input supply on which input tax credit on input tax paid under the Acts is not available. However, there is no restriction provided on renting of bus under section 17 (5) (b)(iii) and therefore, input tax paid on renting of bus under the Acts is available. 11.3 He further emphasized that Uttarakhand High Court in the case of Commissioner of Customs & Central Excise vs Sachin Malhotra reported as 2015 (37) S.T.R.684 (Uttarakhand) = 2014 (10) TMI 816 - UTTARAKHAND HIGH COURT has held that under the rent-a-cab scheme, the hirer is endowed with the freedom to take the vehi .....

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..... restriction on Rent-a-Cab service specified in section 17 (5) (b)(iii) to input tax credit on GST charged is not applicable and they are eligible for input tax credit. Further the appellant contended that Appellant has fulfilled all eligibility conditions for taking input tax credit specified in Section 16 of the Act. 13.2 The main question for determination in this appeal is (i) what is rent-a-cab. (ii) whether renting of vehicle is different from hiring; and (iii) whether input tax credit on GST charged by the contractors for hiring of buses and cars for transportation of employees is admissible when there is a restriction on admissibility of input tax credit on Rent-a-Cab service as provided in section 17(5)(b)(iii) of CGST Act, 2017 and HSGST Act, 2017. 14. First of all we take up the issue what is Cab. We have observed that the Authority for Advance Ruling, Haryana in its ruling has discussed this issue in detail. We find that where any commercial vehicle is hired for transportation of passengers, it would be squarely covered by the phrase rent-a-cab . In other words, any person who provides motor vehicle designed to carry passengers , on rent, would be included. This also imp .....

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..... f the Finance Act. The relevant provisions of the Finance Act are reproduced herein below :- Definitions. 65. In this Chapter, unless the context otherwise requires. - ………………………….. ………………………….. (105) taxable service means 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; Section 66 of the Act is the charging Section and it at the relevant time provided that there shall be levied tax referred to as service tax at a particular rate of taxable service referred to inter alia in sub-clause (o) of Clause (105) of Section 65 and collected in such manner as may be prescribed. 15.2 On the above issue, we find that in the case of Anil Kumar Agnihotri vs Commissioner Central Excise, Kanpur, 2018 (10) G.S.T.L. 288 (All.) =2018 (1) TMI 171 - ALLAHABAD HIGH COURT, Hon ble Allahabad High Court departed from the judgment .....

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..... given context. Section 16. Eligibility and conditions for taking input credit: (1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person. (2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,- (a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed; (b) he has received the goods or services or both. Explanation.-For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during moveme .....

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..... s or services or both to the registered person; (iv) The person availing input tax credit should have received the goods or services or both; (v) The said supply of goods or services or both are used or intended to be used in the course or furtherance of his business; and (vi) Has furnished the return under section 39. 16.3 In the facts of the present case, there is no dispute that the appellant had not fulfilled the aforesaid conditions. However, we note that Section 17 of the Central Goods and Services Tax Act, 2017 and HSGST, Act, 2017 provides certain restrictions and according to which input tax credit on certain goods or services or both are not admissible. Section 17 of the Acts, ibid reads as under: 16.4 Section 17. Appointment of credit and blocked credits: ………………………………………………………………………………………………………………. …………………………&hell .....

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..... are used- (i) for making the following taxable supplies, namely:- (A) further supply of such vessels or aircraft; or (B) transportation of passengers; or (C) imparting training on navigating such vessels; or (D) imparting training on flying such aircraft; (ii) for transportation of goods; (ab)…….. (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) ………………………….. (iii) ……………………………. 16.6 In view .....

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