Whether the services provided by the respondent are covered under the definition of "Rent-a-cab scheme operator" provided under Section 65(59) of the Finance Act, 1994?

PJ/Case Laws/2012-13/1232

Case: -DEEPAK TRANSPORT BUS SERVICE V/S COMMISSIONER OF C. EX., PUNE-III

Citation: - 2012(27) S.T.R. 357 (Tri.-Mumbai)

Brief Facts: - The appellant, M’s Deepak Transport Bus Service, Pune are engaged in providing medium and mini type buses to Pimpri Chinchwad Miniciple Transport (PCMT), a public sector transport undertaking to cater to the needs of commuters in and around Pimpri-Chinchwad and Pune city. The Maharashtra Government had accorded its approval for hire of buses on lease from contractors for operation on the routes falling in the PCMT on stage carriage basis vide letter dated MVR0105/557/PK32/Transport-2 dated 16-9-2005 Accordingly, PCMT had entered into lease agreements with the appellant for plying of buses on 17-10-2005. As per the agreement, the appellant had to provide 30 medium buses and 20 mini buses to PCMT and as per the agreement, the appellant was paid a consideration at the rate of Rs. 18.34 per km for medium type buses and Rs. 14.85 per km for mini buses. During the period from June 2007 to March 2008, the appellant received a sum of Rs. 3,89,63,024/- and for the period April to December 2008 the appellant received a sum of Rs. 2,06,38,434 /-. A show-cause notice was issued to the appellant demanding service tax on the services rendered by the appellant to PCMT during the period June 2007 to December 2008 classifying the service rendered under the category of "rent-a-cab service" defined in Section 65(91) of the Finance Act, 1994 and demanding service tax amount of Rs. 38,37,000/-. The appellant contested the demand. The case was adjudicated by the original authority vide order dated 15-1-2010 wherein the service tax demand was confirmed along with interest thereon and a penalty of equivalent amount was imposed on the appellant under Section 78 of the Finance Act, 1994. The appellant preferred an appeal before the Commissioner (Appeals) vide impugned order rejected their appeal. Hence the appellant is before Tribunal.

Appellant’s Contention: - The appellant contended that they had supplied the buses along with driver and was receiving consideration on a kilometer basis from PCMT. They were in control of the vehicle and therefore, it cannot be said that they have rented the buses to PCMT. The counsel also relies on the decision of the Tribunal in R.S. Travels v. CCE - 2008 (12) S.T.R. 27 wherein it was held that a cab operator providing cab with driver for going from one place to another on kilometre basis or on lump sum amount basis is providing transport service and control of the vehicle remains with the cab operator/driver. Therefore the said activity will not come under the purview of "rent-a-cab Operator Scheme, 1989 framed by the Central Government under the Motor Vehicles Act, 1988. He also relies on the judgment of the Tribunal in Shree Sai Krishna Travels [2010 (18) S.T.R. 220 (Tri.)] where a similar view was held. In the light of these submissions, he prays for waiver of pre-deposit.

Respondent’s Contention: - The respondent reiterates the findings of the lower authorities and submits that the activity undertaken by the appellant squarely falls within the definition of rent-a-cab service and therefore, appellant is liable to service tax.

Reasoning of Judgment: - The CESTAT held that as per the agreement entered into between the appellant and PCMT, the appellant should supply medium buses having 46 sitting capacity of 30 numbers and mini buses having 32 sitting capacity of 20 numbers, and these buses should comply with the specifications prescribed. The tenure of agreement is for a period of 5 years from the date of permission to ply the buses on PCMT permit granted by RTO, Pune. The hired buses will be registered with the RTO Pune in the name of PCMT as lessee and will operate as stage carriage within the operational area of PCMT. Each medium bus will operate 6000 km per month and each mini bus will operate 5000 km per month subject to reasonable daily operation. The PCMT shall have the right to collect the fare charges and the appellant contractor shall not have any right to claim over the cash collection for any reason, either on the fare charges or on the luggage charges collected from the passengers. The appellant has to provide along with the bus, a driver possessing valid driving licence and medically fit. The PCMT, in consideration for the service rendered, will pay hire charges for the actual effective kilometre @ Rs. 18.34/km for medium buses and @ Rs. 14.85/km for mini buses. Fortnightly payment for hire charge shall be prepared by the contractor to PCMT on every 20th day of the current month and bills for the second fortnight have to be submitted by 5th of succeeding month. PCMT will make payment against the bills within 10 days. From this agreement, it is clear that the appellant is renting or hiring buses to PCMT who undertakes the transport to passengers, on stage carriage basis. For the renting/leasing of buses, the appellant receives a consideration on a per km basis for the distance actually run. As per the definition under Section 65(91) of the Finance Act, 1994 a "Rent-a-cab scheme operator" means any person engaged in the business of renting of cabs and "Cab" has been defined as (i) a motorcab, or (ii) a maxicab, or (iii) any motor vehicle constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward under Section 65(20) ibid. From the terms of the agreement entered into, it is clear that the activity undertaken by the appellant is nothing but renting or hiring of medium and mini buses to PCMT. Merely because the appellant has also provided a driver in terms of the contract, who drives the vehicle, it does not mean that the contract is not for renting of cabs. Further, the consideration is received as per the agreement as hiring or renting charges on per kilometer basis. Therefore, the activity undertaken by the appellant squarely falls within the definition of a 'rent-a-cab service'. The appellant has relied on a few decisions of the Tribunal pertaining to 2008-10. But in the later decisions given by this Tribunal, namely, Gopalsingh Chundawat - 2012 (25) S.T.R. 86 a similar activity undertaken has been held to be 'rent-a-cab service'. In the said case the appellant therein had entered into a contract with BSNL for providing a cab on rent on monthly basis along with driver and the Tribunal held that the activity will come under the category of rent a cab service. The Tribunal relied on the judgment of the Hon'ble High Court of Punjab and Haryana in the case of CCE v. Kuldeep Singh - 2010 (18) S.T.R. 708. In the said case the facts involved were that that the firm M/s. Kuldeep Singh was dealing in transport business and it provided the transport service to Indian Oil Corpn. Jalandhar for a consideration. The department demanded service tax under the rent-a-cab scheme. The demand was contested but the same was confirmed by the lower appellate authority. The appeal filed by M/s. Kuldeep Singh was accepted by the CESTAT vide order dated 12-5-2005 [reported in 2006 (3) S.T.R 689 (Tri.) = 2005 (186) E.L.T. 373 (Tri.)].
The revenue filed an appeal before the Hon'ble High Court of Punjab & Haryana. The Hon'ble High Court of Punjab & Haryana held that the service provided by the respondent firm to IOC was a taxable service under the category of 'rent-a-cab service'. While coming to such conclusion, the Hon'ble High Court relied on the judgment of the Hon'ble High Court of Madras in Secy. Federation of Bus Operators Assn. of T.N. v. UOI reported in 2001 (134) E.L.T 618 (Mad.) = 2006 (2) S.T.R. 411 (Mad.) wherein a similar question arose and the Hon'ble High Court held that the activity of renting of buses comes within the purview of 'rent-a-cab service'. These decisions of the Hon'ble High Court of Punjab & Haryana and the Hon'ble High Court of Madras prevail over the decision of the Tribunal in RS Travels and Sri Sai Krishna Travels. In view of the above, they were of the considered view that the appellant has not made out a prima facie case for complete waiver of pre-deposit of the dues adjudged. Accordingly, we direct the appellant to make a pre-deposit of 50% of the service tax adjudged in the instant case within a period of eight weeks and report compliance on 17-7-2012. On such compliance, pre-deposit of the balance of service tax, interest thereon and penalty shall stand waived and recovery thereof stayed during the pendency of the appeal.

Decision: - Stay partly granted.

Comment:- This decision related to service of “Rent-a-cab” service. The tribunal has given decision that when the cab is given on hire on per kilometer basis then the service tax is not payable on the same. Normally the cars are provided on these terms and conditions only. The driver is of the company only and the amount is charged on per kilometer only. But in the instant case, the tribunal has held that the charging of per kilometer or giving own driver does no mean that it is not rent-a-cab service.

Comments

PJ/Case Laws/2012-13/1232

Post a Comment

Query