Lecvy of Service Tax on Services provided by one Rent-A-Cab operator to another

PJ/CASE STUDY/2012-13/01

04 July 2012

PJ/Case Study/2012-13/01

CASE STUDY

Prepared By:
CA Pradeep Jain
Sukhvinder Kaur LLB [FYIC]

Introduction:-

In the case under study, the issue involved was that whether the original service provider who had provided his services to other Rent-a-cab service provider who had further provided the Rent-a-cab service to other persons are liable to pay service tax when the intermediate service providers had collected service tax from the ultimate service recipient?

In the case of M/s Choudhary Tours & Travels, Jodhpur
[Order-in-Original No. 1/2012-R(ST) Dated: 3.4.2012]

Brief Facts:-

- Noticee is covered under the category of “Rent-a-Cab” Services. They had filed the refund claim of Service Tax under Section 11B of the Central Excise Act, 1944 which was deposited in excess for the period from April, 2007 to march, 2011.

- Noticee had provided cabs to M/s Seoul Mirdha Hotels and Resorts Pvt Ltd and M/s Pawanputra Travels who had further provided the same cabs to the final customer M/s Cairn Energy Ltd. They have not paid the Service tax on the same as M/s Seoul Mirdha Hotels and Resorts Pvt Ltd and M/s Pawanputra Travels have charged the Service Tax on the same from final customer i.e. M/s Cairn Energy Ltd and the same was deposited to the Govt. Exchequer.

- The services of Rent-A-Cab was only once but the Anti-Evasion Wing, Central Excise Commissionerate, Jaipur-II asked the Noticee i.e. claimant pay the Service Tax. Noticee paid the service tax to avoid conflict.

- Later, the Noticee came to know about the situation that the Service Tax is not to be paid by them but the same has to be paid by M/s Seoul Mirdha Hotels and Resorts Pvt Ltd and M/s Pawanputra Travels i.e. their sub let Rent-a-Cab operators. The said operators had informed the Noticee that the Office of Commissioner, Service Tax, Ahmedabad has clarified that the Service tax is not payable when one cab operator gives his cab to another cab operator. But later on this Notification dated 11.07.1997 was amended vide Circular No. 93/04/2007-ST dated 10.05.2007 issued by the Government of India, Ministry of Finance, Department of Revenue, CBEC. Again the Government had issued Corrigendum in respect of Circular No. 93/04/2007-ST dated 10.05.2007 vide which the original Notification F. No. B.43/7/97-TRU date 11.07.1997 was remained in operation since its inception i.e. 11.07.1997. Hence, the service tax is not payable by the original Rent-A-Cab operator if the cab is sub let by one cab operator to another cab operator.

Reasoning of the Adjudicating Authority:-

- The Adjudication Officer found that the Noticee had paid Service tax inclusive of interest vide Challan dated 13.10.2001 on the direction of Anti-Evasion Wing, Central Excise Commissionerate, Jaipur-II.

- The Adjudication Officer found that the Noticee had sub let his cabs to M/s Seoul Mirdha Hotels and Resorts Pvt Ltd and M/s Pawanputra Travels and both of them were further providing the same cabs to their customer M/s Cairn Energy Ltd. They have charged the Service tax on the same from M/s Cairn Energy Ltd and the service tax so collected was deposited in the Govt. Exchequer as is evident from the undertaking of M/s Seoul Mirdha Hotels and Resorts Pvt Ltd and M/s Pawanputra Travels which is submitted by the claimant along with the instant refund claim.

- The Adjudication Officer found that as per the provisions of Notification F. No. B.43/7/97-TRU dated 11.07.1997 (which was in operation during the period for which the claimant filed the instant claim) issued by the Ministry of Finance, Department of Revenue, tax Research Unit that the Service tax is not payable by the original cab operator, when he gives his cab to another cab operator. Hence, the Adjudication Officer was inclined that the refund of Service tax paid in excess is admissible to the Noticee.

- The Adjudication Officer found that the refund claim have been checked and found in order by the range Officer and he has also intimated that no recoverable amount is pending for recovery against the Noticee.

- The Adjudication Officer found that the aspect of unjust enrichment is not relevant in the instant claim in terms of clause (a) to the first Proviso to sub-section 11B of the Central Excise Act, 1944 being claim for refund of service tax. The Adjudication Officer found that the question of time bar is not applicable in the instant refund claim, as the same has been filed within prescribed time of one year from the date of deposition of amount, as specified under Section 11B(1) read with explanation (B)(a)(i) to Section 11B (5) of the Central Excise Act, 1944. Therefore, the provisions of time bar do not hit the refund claim.

- The Adjudication Officer held that the Noticee is eligible to get the refund of service paid in excess under Section 11-B of the Central Excise Act, 1944 on merits.

Decision of the Adjudicating Authority:-

- The Adjudication Officer sanctioned the refund claim under Section 11-B of the Central Excise Act, 1944.

Conclusion:-

When the service was sub let to other operators but ultimately the service was provided to other person and the service tax was collected from the ultimate service recipient by the middle operators then demanding service tax from the original service provider amounted to double taxation.

The Adjudicating Authorityrightly sanctioned the refund of excess service tax paid by the Noticee who was the original service provider and had sublet his services to other operators who had further provided service to another person.

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PJ/CASE STUDY/2012-13/01
04 July 2012

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