Whether service tax is liable on rent a cab services if provided by one rent a cab operator to other rent a cab operator who has sub-let motor cab to the latter operator?

PJ/Case Law/2019-2020/3613

SUN NATIONAL TRANSPORT CO. Versus COMMR. OF C. EX., CUS. & S.T., NOIDA
Issue-Whether service tax is liable on rent a cab services if provided by one rent a cab operator to other rent a cab operator who has sub-let motor cab to the latter operator?
Brief Facts:-Appellant is registered with the Service Tax Department under the category of “Rent-a-Cab Service” and engaged in providing vehicles to the other “Rent-a-Cab” service provider on a monthly leasing rent. Such vehicles were further being used by the other Rent-a-Cab registered operator and he was also discharging his service tax liability on the services provided by him.
A SCN was issued on 21^st March, 2013 that the activity of providing vehicles to another person on monthly leasing rent also amounts to providing ‘Rent-a-Cab Service’ and as such demands were raised against the appellant for the period 2008-09 and 2011-12. The SCN confirms the ST liability amounting to Rs 3.03 crores along with identical amount of penalty as per section 78 and Rs 10000 penalty as per Section 77. Further interest as per section 75 of Finance Act 1994 also confirmed.
Assesess’s Contention: -The appellant has drawn attention to the Board’s clarification issued vide F. No. B-43/7/97-TRU, dated 11-7-1997. Wherein it was observed that 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 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. As such, he submits that the issue is covered by the said Circular of the Board clarifying that no service tax is payable on cab which is being rented out by A to B, both the registered Rent-a-Cab Service operator.
Department’s Contention: - The Revenue draws attention to the Tribunal decision in the case of Carzonrent (India) Pvt. Ltd. v. Commissioner of Service Tax, Delhi-I - 2017 (50) S.T.R. 172 (Tri. - Del.) wherein, in identical circumstances the Tribunal held, while examining an identical situation of leasing of motor vehicle by one Rent-a-Cab Service provider to another Rent-a-Cab Service provider, that such services are liable to service tax under the category of ‘Rent-a-Cab’ Service. As such, they submit that legal issue having been decided by the Tribunal, which is required to be followed in contradiction to the clarification issued by the Board.
CESTAT Ruling: -As regards the Board Circular, referred by the Learned Advocate, we find that the same is to following effect:-
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 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.”
Reading of the above Circular, in our views does not make the legal issue very clear. There is no reference to the terms “who”, “his” and “him”. The clarification does not make it clear as to how and who has paid the service tax on which amount billed by whom. In any case, the legal issue having been decided by the Tribunal against the assessee in the above referred decision of Carzonrent (India) Pvt. Ltd. is required to be followed in terms of the judicial discipline. As such, we hold that the appellant’s providing motor vehicles to the other ‘Rent-a-Cab’ operator on leasing basis is also covered by the services falling under the category of ‘Rent-a-Cab’ and tax liability would arise against him.
We, further note that the appellant has assailed impugned demand on the point of limitation inasmuch as the show cause notice stand issued by invoking longer period of limitation. In the same decision of the Tribunal in the case of Carzonrent (India) Pvt. Ltd. referred supra the benefit of limitation as also penalty was extended to the appellant. Inasmuch as the issue is complicated issue of legal interpretation of provisions of law and there is no direct evidence on record to reflect upon any mala fide of the assessee, we are of the view that longer period would not be available to the Revenue. Accordingly, we restrict the demand within the normal period of limitation, which would be requantified by the Original Adjudicating Authority and set aside the penalty in toto.
Conclusion: -In this case CESTAT ruled that the applicant is liable to pay Service Tax on Rent-a-cab services provided to another Rent-a-cab operator but also ruled that the there is no fraudulent or malicious intention of assessee to not paid these liability and there extended period of limitation can not be invoked and refer back the case to original authority to quantify the liability on the basis of normal period of limitation.
Prepared by- CA Tarun Rankawat

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PJ/Case Law/2019-2020/3613

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