Custom, Excise & Service Tax Tribunal
M/S. Meru Cab Company Pvt. Ltd vs Commissioner Of Central Excise, ... on 3 July, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.
Application No. ST/S/96629/2014
Appeal No. ST/88480/2014
(Arising out of Order-in-Original No. 50,51 & 52/ST/RN/CMR-MII/13-14 dated 27.03.2014 passed by the Commissioner of Central Excise, Mumbai-II )
For approval and signature:
Honble Mr. M.V. Ravindran, Member (Judicial)
Honble Mr. P.S.Pruthi, Member (Technical)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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M/s. Meru Cab Company Pvt. Ltd.
:
Appellant
VS
Commissioner of Central Excise, Mumbai-II
:
Respondent
Appearance
Shri L. Badrinarayanan Advocate for Appellant
Shri V.K. Singh, Sp. Counsel for respondent
CORAM:
Mr. M.V. Ravindran, Member (Judicial)
Mr. P.S.Pruthi, Member (Technical)
Date of hearing : 3/07/2015
Date of pronouncement : 30/10/2015
ORDER NO.
Per : M.V. Ravindran
This appeal is directed against Order-in-Original No. 50,51 & 52/ST/RN/CMR-MII/13-14 dated 27.03.2014. We take up the appeal for disposal after disposing stay petition.
2. The relevant facts that arise for consideration are appellant herein have registered themselves as Fleet Taxi Operator or Radio Taxi Operator under the specific provisions of the law and are providing services in the city of Mumbai, Delhi, Bangalore and Hyderabad. The model of business is appellant owns the permit for operating Fleet Taxies, under an agreement with various drivers, the said taxis are given for plying the passenger in the city. The agreement entered by the appellant-company with individual drivers is referred to as a subscriber agreement wherein driver is termed as a subscriber. Investigation was carried by the officers of DGCEI, as to whether the services rendered by the appellant would be falling under the category of supply of tangible goods for use from 16.5.2008. After recording the statements of various responsible personnel of appellant, the officers of DGCEI concluded that by giving taxi to an individual driver for use, appellant has rendered the services which fall under Supply of Tangible Goods for use (hereinafter referred to as STGU), show cause notice dt. 20.10.2010 was issued for demand of the service tax for the period 16.5.2008 to 30.9.2010, invoking the extended period by alleging suppression, misstatement of facts, show cause notices dt. 3.10.2011 and 20.10.2012 were issued for the period 1.10.2010 to 31.3.2012, and also directing appellant to show cause why demand of service tax along with interest be not confirmed, and penalties be not imposed on them. Appellant contested the show cause notices on merits as well as on limitation in respect of the show cause notice dt. 20.10.2010. Adjudicating authority after following due process of law, did not agree with the contention raised by the appellant and confirmed demand raised with interest, and also imposed penalties.
3. Ld. Counsel appearing on behalf of the appellant submits that the impugned order is incorrect on facts as well as on law. After apprising of, over all picture of the activity undertaken by the appellant, he would submit that Radio Taxi Scheme is provided under a specific provision of law which grants permission to only those operators, who are either a company or a partnership firm or society and should have minimum 500 number of radio taxi and operator is required to obtain taxi permits in its name and the fare is fixed between the State and the Operator. It is his submission that appellant is registered with the authorities as a radio taxi operator/fleet taxi operator after fulfilling the conditions as required under law. He would submit that appellant entered into individual agreement with the drivers which is termed as subscriber agreement. He would submit that the vehicles were handed over to driver for ferrying the passengers. He would submit that the entire Fleet Taxi Scheme of the appellant, operates on the Call Centre basis i.e. individual passengers call the appellant for booking taxi, the said call is registered by the appellant, taxi in the vicinity is directed to attend to the passenger, the fare paid by the passenger is to the appellant and not to the driver, any complaint regarding the services, is against the appellant and the invoices/bill which is generated in the taxi is in the name of appellant. He would submit all these goes to prove that the appellant is functioning as a Fleet Taxi Operator. He would submit that appellant are not providing STGU service to the drivers, the only service provided by the appellant is transporting service directly to the customers/passengers as the license for operating the taxis under the regulations framed by the State Government is granted to appellants and not the individual drivers, permits are in the name of the appellant and appellant negotiate the fares to be charged from the customers with the State Transport Authorities. It is his submission that the contract for transportation is between the appellant and customers and the drivers are not privy to such contract. It is his further submission that the customers directly approach the appellant and register their requirement of vehicle and promotional advertisements are issued by the appellants for promotion of their services and entire booking of the taxi for the passenger till the same is utilized by the passenger is monitored by the appellant. It is his further submission that the contract between the appellant and the driver is for collection of the charges is on behalf of the appellant. He would submit that as per agreement, every driver has to pay appellant a fixed amount on day to day basis, which is nothing but collection of the fare on behalf of the appellant. Explaining this, he submits that instead of asking the passengers to deposit the fare directly with the appellant, appellant authorizes the driver to collect the fees from individual passengers and hold it with him till end of day and at the end of the day in terms agreement, driver deposits an amount into the account of the appellant. It is his submission that this contract has been misread by the adjudicating authority to hold that the appellant is providing STGU in form of handing over the taxi the individual drivers. It is his further submission that agreement is for engagement of independent services of driver, and it was drafted keeping in mind various Labour Law Regulations. He would submit that department is in error for construing flow of consideration to appellant; from driver as amounting to services rendered by appellant, and appellant provides transportation services to passenger for which payment/fare is collected by the driver being the point of contact between appellant and passenger; entire fare is the property appellant and required to be deposited by driver with appellant. In return, driver is be compensated for his services. It is his submission that the flow of consideration engaged in this case is from the appellant to the driver and not from driver to appellant though the driver deposits the amount in the account of appellant. It is his submission that similar controversy arose in United Kingdom wherein the House of Lords recognized the principle that a Customers Customer is not your customer in the case of Commissioner of Customs & Excise Vs. Plantiflor Limited (2002) UKHL 33 and in the case of Hamiltax (LON/91/1420X), UK VAT Tribunal held that the services were provided by the Cab Company to the passenger and received driver services. It is his submission that appellant herein receives independent driver services from an individual and provides transportation services to the passengers. It is his further submission that for a service to qualify as an STGU service, the use of goods must be by the service recipient. After taking us through the definition of STGU provided under Section 65(105) (zzzzj) of the Finance Act, he would submit that the use of taxi is by the appellant as they are obligated to provide transportation services to the customer of the appellant and not the driver. It is his further submission that in case of STGU services, the obligation of service providers ends with the supply of the goods e.g. Time charter of a vessel, but in the present case, appellant undertakes a number of activities for operating the radio taxi business. E.g. providing training to the drivers, drivers are compensated adequately for the driving services provided, they have incurred major expenditure towards developing the infrastructure for providing the service of radio taxi, and the appellant cannot be said to have provided STGU services to the drivers since it is the appellants who exercise control over the driver. On limitation, it is his submission that appellant on their own wrote to CBEC in 2009 seeking clarification on the applicability of service tax on the activities carried on by them and that the appellant has challenged to constitutional validity of the services in the High Court . Hence, they were under bona fide impression that service tax liability may not arise. He would refer to the judgment of the Supreme Court in the case of Sough Gujarat Roofing Tiles Manufacturers Vs. The State of Gujarat and Another (1976) 4 SCC 601 for the meaning of the expression includes. He submits their appeal be allowed.
4. The Ld. Spl. Counsel Shri V.K. Singh appearing on behalf of the Revenue would submit that as per Section 65(105)(zzzzj) of the Finance Act, taxable service means any service provided or to be provided to any person in relation to Supply of Tangible Goods including machinery, equipment and appliances for use without transferring right of possession and effective control of such machinery, equipment and appliances. He would submit that the definition of STGU consist of three parts (a) Supply of Tangible Goods, (b) For use (c) Without transferring the right of possession & effective control. It is his submission that the taxis are used by the driver for running services and hence it cannot be said that STGU is not attracted when the use of the taxi is not in disputed. He would then take us through the agreement entered by the appellant with individual drivers and read relevant paragraphs from them and submit that as per the agreement, it clearly comes out that appellant has allowed the subscriber (read as driver) use of the particular taxi for operating as a Meru Cab. He would submit that reliance is placed on the decision of Honble High Court of Karnataka in the case of Bharti Airtel Ltd. Vs. State of Karnataka 2012 (25) STR 514 (Kar.) and judgement of Honble High Court of Rajasthan in the case of Contractor Association (Civil) Rajasthan Rajya Vidyut Mandal Vs. Rajasthan Rajya Vidyut Prasaran Nigam Ltd. 2013 (32) STR 396 (Raj.) for the proposition that for deciding the liability of tax, the terms agreement/contract entered into between the parties are of vital importance to decide about the question like who is provider of service and recipient of service. It is his submission that there is no dispute that the appellant is giving the taxi for use of the drivers. He would further submit that the taxis are given to individual drivers for operating the same without transferring the right of possession and effective control, which is ascertained from the fact that taxi as well as permit are the name of the appellant and the agreement between the appellant and individual driver specifically states that taxis are the properties of the appellant. It is his submission that the drivers are not free to permit any third party to operate the taxi and they have to present the taxi for maintenance to the agents authorized by the appellant which would indicate that the appellant is exercising effective control and possession of the taxi is given to the driver. It is his submission the Central Board of Excise & Customs F. No. 334/1/2008, dated 29.02.2008 is relied upon, which clearly holds that this kind of transaction will be covered under STGU with transfer of right to use means transfer of both possession and control of the goods to the user of the goods. It is his further submission that on limitation, appellants submission are totally incorrect as after a gap of one year from the date when STGU services were brought into statute, they had informed the department of some of their activities and did not give complete details. It would mean that the appellant had suppressed the activity of the services under STGU. It is his submission that the appeal be rejected as devoid of merits.
5. We have considered the detailed submissions made by both sides and perused the records.
6. Both sides have filed written submissions which are taken on record.
7. Before we revert to decide the issue, undisputed facts needs to be stated. Appellant is a Radio Taxi Operator and is functioning under Radio Taxi scheme which is as per the provisions of the law that grants permission for plying radio taxi in a particular area. It is also undisputed that in order to get a radio taxi/fleet taxi license, the operator is per-se required to be a company or a partnership firm or a society and definitely not an individual; operator must have minimum number of 500 radio taxi to put into operations; operator is required to obtain taxi permits from the concerned state authorities in their name and the fare to be charged by such radio taxi operator is fixed by the State Government based on deliberations along with the operator. It is also undisputed that the radio taxi operated by the appellant are booked by a Customer through a call placed directly to the appellant-company, though the taxi driver is not prohibited from entertaining customers from the kerb side pick up. On booking of a taxi, by individual customer, appellant decides which taxi will be attending the customer for transporting him to his desired destination; the customer is issued a bill/print out of the fare bill by the taxi driver on completion of the journey and the said fare bill is issued in the name of the appellant herein. It is also undisputed that the appellant enters into individual agreement or contract with the drivers contracting them to use the vehicle for ferrying the passengers booked by the appellant. It is also undisputed that the fare from the passenger is collected by the driver and after retaining his amount as per the agreement/contract, the driver deposits an amount in the designated bank of the appellant.
8. On this factual matrix, it is to be seen, whether the Radio Taxi Scheme operated by the appellant by giving the same to a driver for plying the passenger to fall under the Service Tax net under supply of tangible goods or otherwise.
9. It is the finding of the adjudicating authority that the radio taxi operated by the driver for the appellant would get covered under supply of tangible goods. The entire finding of the adjudicating authority is based on the agreement entered by the appellant with individual driver. The adjudicating authoritys finding is based on the clauses of the agreement which indicates that the drivers are allowed to use the taxies for ferrying the passengers, is covered under STGU.
10. In order to appreciate the claim of both sides, it is required to consider the definition of supply of tangible goods as per Section 65 (105) (zzzzj) which reads as:
to any person, by any other person in relation to supply of tangible goods including machinery, equipment and appliances for use, without transferring right of possession and effective control of such machinery, equipment and appliances It can be seen from the above reproduced definition, there has to be a supply of tangible goods or appliances for use, without transferring right of possession and effective control of such tangible goods. In the case in hand, undoubtedly, the tangible goods in form of radio taxi are given to the driver and there is no transfer of the possession of vehicle but physical transfer has taken place, but the effective control of such taxi steel is in the hands of the appellant. This view of ours is based upon the fact that majority of the time, the taxi is booked by a call from customer to appellants Call Centre. On the basis of the direction of the appellant, the driver of taxi in the vicinity of the passenger ferries him to his desired destination. It is also to be noted that the driver of radio taxi is not a permit holder and he does not have independent authorization for plying the vehicles and is allowed to take passengers on instructions and directions from the appellant only. Passenger or a customer contacts appellant for booking the radio taxi for the journey and if there is any deficiency of services, the appellant is hauled before the courts and not the driver as also for any misdemeanor of the driver. It can inferred be safely presumed after perusing the clauses of the agreement between the appellant and the driver, the driver is collecting the fare amount from the customer on behalf of the appellant, as fare invoice for the journey is created and issued in the name of the appellant. The entire findings of the adjudicating authority has been misdirected to hold that the driver keeps bulk of the amount of the journey and deposits only small portion of the amount as agreed between the appellant and the driver, which indicates the radio taxi is given for use and covered under STGU. The confusion has arisen due to the reason that the driver depositing the money is considered service recipient for use of such road taxi or supply of tangible goods. In the entire exercise the adjudicating authority has lost the sight of the fact that the supply of tangible goods in the case in hand is not for the use of driver, but it is for the use of the appellant herein as recorded by us herein before; the entire action of booking of the radio taxi till the collection of the fare from the customer/passenger is on behalf of the appellant. It is also noted from the records that appellant is providing training to the driver and drivers are compensated adequately for the driving undertaken on behalf of the appellant; which will lead to a conclusion that appellant is providing services to the individual passengers and not the driver. The privity of contract of supply of taxi for undertaking the journey is between the appellant and the passenger and not the appellant and driver.
11. The adjudicating authority has based his entire findings hold against the appellant by relying upon the various clauses of the agreement/contract entered by the appellant and individual driver and more specifically on the terms of the phrases for use. We have gone through the entire agreement and find that the said agreement is an agreement which indicates that though the driver is in possession of the vehicle, he has to function under the authority and directions of the appellant, who would book the passengers and pass on the booking to drivers. The said agreement does not any where indicate that the driver are having the possession of the vehicle for their use, which is the most important aspect to be covered under category of services under supply of tangible goods.
12. Accordingly, in view of the foregoing, in the peculiar facts and circumstances of this case we hold that the appellant is not covered under the entry supply of tangible goods. In view of that, we set aside the impugned order and allow the appeal with consequential relief if any. As we have disposed of the appeal itself stay petition stands disposed of.
(Pronounced in court on 30/10/2015) (P.S.Pruthi) Member (Technical) (M.V. Ravindran) Member (Judicial) Sm 2 Application No. ST/S/96629/2014 Appeal No. ST/88480/2014