No liability to pay service tax on rent a cab service provided to other operator if evidence given of tax paid by other operator.

PJ/Case Laws/2012-13/1446

Case:M/S DARSHAN TOURS V/S COMMISSIONER OF CENTRAL EXCISE, AHMEDABAD

Citation: 2013-TIOL-270-CESTAT-AHM

Brief Facts: - The appellant is engaged in providing Rent-a-Cab services. On the ground that appellant did not pay service tax in respect of few transactions during the years 2004-05 and 2005-06, proceedings were initiated which has culminated in confirmation of demand for service tax of Rs.87,027/- with interest and penalty under various sections of the Finance Act, 1994.

Appellant’s Contention: - The appellant contended that confirmation of demand for service tax is mainly in respect of two issues. Each issue is taken separately and considered. In the first issue the demand has been confirmed on the ground that they are liable to pay service tax when they have provided cabs to other rent-a-cab service operators. They submit that they are liable to pay service tax only when service is directly provided by them to the customer and not to another rent-a-cab operator. For this purpose, they relies upon the letter issued by the Assistant Commissioner, Service Tax Head Quarters, Office of the Commissioner of Service Tax, vide F.No.STC/04-06/CIF/TECH/2010 dated 02/08/2010. According to them, in this letter it has been clarified that rent-a-cab operator need not pay tax when the cab is hired by another rent-a-cab operator from them. It was submitted that the lower authorities have taken the view that it was their duty to show that the rent-a-cab operators to whom he had given cabs have paid service tax, which is not correct. The other issue was that whether service tax liability could be fastened on the assessee merely because vehicle registration number was not mentioned and only capacity of the vehicle was mentioned. In this respect, the appellant contended that liability under rent-a-cab service arise only when capacity is less than 12 persons and the capacity was mentioned by them so there is no service tax liability on their part.

Reasoning of Judgment: - The Hon’ble CESTAT held that the Assistant commissioner of service taxhas cited the clarification issued by the Board in paragraph 3.5 in F.No.B-43/7/97-TRU dated 11/07/1997 which is as follows:-
"However, service tax will not be payable in cases where a bill has been raised on a Rent a Cab Scheme operator, by another rent-a-cab scheme operator who has sub-let the motor cab to the latter operator provided who pays service tax on the amount billed to his client for renting out the motor cab so obtained by him".
Thus, the letter is very clear.According to the definition of rent-a-cab service, tax liability arises when a cab is rented to another operator. There is nothing conclude to that such a client cannot be a rent-a cab operator himself. In such a situation, the liability to service tax would arise when a cab is rented out to another operator and bill is raised. However, if the other rent-a-cab operator is also registered and pays the tax, then it would result in a situation where two operators would be paying tax on the same service. To prevent such a situation, this clarification has been issued. There is no dispute and there cannot be any dispute that liability would be on the operator who has rented out the cab to the other operator also, but he need not pay tax if other operator who hired the cab paid the tax. Therefore, lower authorities were right in asking the appellant to submit proof that the other operator who had hired the cab from the appellant has paid service tax.
Further as the appellant has submitted that the matter may be remanded to enable him to produce evidence that other operators have paid tax. Since the appellant always felt that it has not his responsibility to produce proof, they would consider that this is a fair request and accordingly the matter is required to be remanded to enable the appellant to provide proof of payment of service tax by other operators, failing which liability will be fastened on the appellant. Another issuebefore them is whether the appellant is liable to pay service tax on vehicles which had the capacity to carry more than 12 persons under rent-a-cab service. Both sides agree that the liability would arise only if the capacity is less than 12 persons. The lower authorities have confirmed the demand on the ground that the appellant did not mention the registration number of the vehicle which was rented out, but only mentioned the capacity of the vehicle. Before the adjudicating authority and the appellate authority, the appellant produced the registration numbers of the vehicles which had been rented out, but it was found that the vehicles belonged to other persons and not of the appellant except one vehicle which was in the name of the appellant and not in the name of the firm. The question that arises is whether the registration number of the vehicle was required to be given in this case and because of such failure, the liability can be fastened on the appellant. The respondent could not show any circular or statutory provisions making it obligatory for an assessee to indicate the registration number of the vehicle rented out, when he provided rent a cab services. In the absence of such provision, indicating capacity of the vehicle rented out on the invoice would be sufficient evidence to show whether the services was liable to tax under the Rent-a-Cab category or not. In such a situation, it was for the department to show that the vehicle actually rented was covered by rent-a-cab service. Therefore, demand of tax cannot be sustained.

Decision: - The appeal was remanded.

Comment:-The substance of this case is that compliance of a particular detail to be given cannot be demanded when there is no provision for the same in law and the assessee can sufficiently prove his stand so as to ascertain the fact that there is no liability to pay tax on his part.

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PJ/Case Laws/2012-13/1446

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