TMI Blog2019 (4) TMI 1824X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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? - HELD 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 - the appellant are fulfilling the conditions as prescribed under Section 16 of CGST Act, 2017 and HSGST Act, 2017. We further find that after amendment, benefit of Input Tax Credit has been extended to the motor vehicles having approved seating capacity of more than thirteen persons when they are used for making taxable supplies of transportation of passengers. Therefore, the appellant is eligible to input tax credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the appellant with various contractors for provision of Transportation Services to its employees. The terms of the contract is summarized as under: (a) The Contractor shall provide transport services to employees of the appellant from factories to Kakarwali, Rewari by way of buses. (b) The Contractor shall deploy trained personnel viz. driver and helper buses to provide transportation services to employees of YKK from factories to Kakarwali, Rewari. The said driver and helper shall be employees of the Contractor and remain under supervision and control of the contractor. (c) M/s. YKK shall inter alia pay a monthly fee of ₹ 1,48,000/- and applicable tax to the contractor for provision of Input Service. (d) The Contractor shall provide point to point Transportation Services to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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, the dealer is not eligible to claim Input Tax Credit in respect of Rent a Cab as per provisions of Section 17(5)(b)(iii) of the Act. Decision of Advance Ruling Authority 8. Advance Ruling under Section 98 of the CGST/ HGST Act, 2017 was pronounced as under: 8.1 The applicant is not eligible to take input tax credit on: (a) GST charged by the Contractor for hiring of buses for transportation of employees? (b) GST charged by the Contractor for hiring of cars for transportation of employees? 8.2 The restriction on Rent a Cab service specified in Section 17(5)(b)(iii) is applicable to input tax credit on: (a) GST charged by the Contractor for hiring of buses for transportation of employees? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eaves 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 considering the submissions made by the Appellant conceded to the fact that input tax credit of tax paid on transportation services is available in the present case. (d) The Advance ruling authority being a quasi-judicial authority is expected to act in a fair and reasonable manner and without a premeditated mind. It is submitted that in the present case, the Ld. Advance Ruling Authority has relied upon extraneous material to determine the questions raised by the Appellant in its application dated16.04.2018 before the Advance ruling Authority, however, such material was neither discussed during the course of the hearing on 10.07.2018 with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 the specific law dealing with motor vehicles which ply on the roads. Where specific meaning is provided under the MV Act, any other generic meaning which is not in conformity with the specialised legislation regulating motor vehicles, ought not to be resorted to. In this regard, reliance is place on the decision of Parle Agro (P) Ltd vs. CCT, 2017 (352) ELT 113 (S.C.) = 2017 (5) TMI 592 - SUPREME COURT . (g) The Ld. Advance Ruling Authority failed to consider that in the present case, the Contractors are not engaged in renting of the cars or the buses to the Appellant, inasmuch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out 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 Section 17(5) of the Act. (k) The Ld. Advance Ruling Authority failed to consider that the MV Act envisages different permits for hire a cab service and rent a cab service. In this regard, reference is made to Section 2 (28) and Section 74 of the MV Act, which is extracted below: Section 2(27). Contract carriage-- Contract carriage means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract, whether express or implied, for the use of such vehicle as a who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 distinguish between hiring of buses and cars and has held that the transportation services are provided by the Contractor to the Appellant on rental basis fall within the meaning of cab and thus, the credit which relates to both hiring of buses and cabs is excluded by applying the provisions of Section 17 (5) of the Act. In this regard, it is submitted that the MV Act clearly identifies the difference between cabs and buses, inasmuch as, bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly 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 Act, 1994, i.e. service tax statue. Therefore, the definitions relating to rent-a-cab as occurring in the Finance Act, 1994, shall also have bearing on what is meant by rent-a-cab in common commercial parlance when it comes to understanding the same for the purpose of taxing statues . It is submitted that given the above findings, the Ld. Advance ruling Authority ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational 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 the definition of rent or cab must not be expanded beyond what is contemplated, also that it is a settled law that in case there are two interpretation, one in favour of the assessee should be preferred. In this regard, reference can be made to ACIT v. Hindustan Milk Foods (1975) 98 ITR 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Mot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended 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 implies that it includes renting of motor cars, motor cabs, maxi cabs, minibuses, buses and all other motor vehicles which are designed to carry passengers, irrespective of their capaci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext 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 of Customs Central Excise vs Sachin Malhotra reported as 2015 (37) S.T.R.684 (Uttarakhand) = 2014 (10) TMI 816 - UTTARAKHAND HIGH COURT . Hon ble Allahabad High Court has held as under: 16. A plain and simple reading of the relevant provisions would reveal that what is sought to be taxed under the Act is the service provided by a person under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 movement of goods, either by way of transfer of documents of title to goods or otherwise; (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded 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: . (5) Notwithstanding anything contained in sub-section (1) of section 16 and sub section (1) of section 18, input tax credit shall not be available in respect of the following, namely:- (a) motor vehicles and other conveyances except when they are used- (i) for making the following taxable supplies, namely:- (A) further supply of such vehicles or conveyances ; or (B) transportation of passengers; or (C) imparting training on driving, flying, navigating such vehicles or conveyances; (ii) for transportation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, 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 of the above statutory provisions, we find that the appellant are fulfilling the conditions as prescribed under Section 16 of CGST Act, 2017 and HSGST Act, 2017. We further find that after amendment, benefit of Input Tax Credit has been extended to the motor vehicles having approved seating capacity of more than thirteen persons when they are used for making taxable supplies of transportation of passengers. Therefore, the appellant is eligible to input tax credit of the GST charged by the Contractor for hiring of buses only having approved s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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