Custom, Excise & Service Tax Tribunal
M/S. Om Sakthi Travels vs Commissioner Of Service Tax, Chennai on 18 September, 2017
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
ST/472/2009
(Arising out of Order-in-Original No. 22/2009 dated 24.6.2009 passed by the Commissioner of Service Tax, Chennai)
M/s. Om Sakthi Travels Appellant
Vs.
Commissioner of Service Tax, Chennai Respondent
Appearance Shri S. Ramachandran, Consultant for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent CORAM Honble Ms. Sulekha Beevi C.S., Member (Judicial) Honble Shri Madhu Mohan Damodhar, Member (Technical) Date of Hearing / Decision: 18.09.2017 Final Order No. 42127 / 2017 Per Bench Facts of the case are that the appellants are engaged in providing various types of vehicles including vehicles having capacity of more than 12 seaters to various customers. The department sought to recover demand of service tax liability from the appellant on the allegation that they are engaged in renting of motor vehicles to various corporate companies. Accordingly, show cause notice was issued to the appellant proposing to recover differential service tax liability of Rs.1,06,69,008/- for the period October 2003 to March 2008 under rent-a-cab service. In adjudication, vide impugned order dated 24.6.2009, the Commissioner of Service Tax confirmed the proposal to demand the said amount along with interest and also imposed penalty of Rs.1.50 crores under section 78 and Rs.1,000/- under Section 77 of the Finance Act, 1994. Hence the appellants are before this forum.
3. Today, when the matter came up for hearing, ld. consultant Shri S. Ramachandran submits that the issue is no longer res integra and has been settled in favour of the assessee by a catena of decisions. He relied on the following decisions:-
(a) Commissioner of Central Excise Vs. Sachin Malhotra 2015 (37) STR 684 (Uttarakhand)
(b) Commissioner of Central Excise, Meerut Vs. R.S. Travels 2015 (38) STR 3 (Uttarakhand)
(c) R.S. Travels Vs. Commissioner of Central Excise, Meerut 2008 (12) STR 27 (Tri. Del.)
(d) Rahul Travels Vs. Commissioner of Central Excise 2017 (47) STR 332
(e) Commissioner of Central Excise Vs. P.B. Bobde 2015 (40) STR 953.
4. On the other hand, ld. AR Shri B. Balamurugan supports the adjudication. He also contends that the appellant had collected the tax amount from their customers. Accordingly, the provisions of section 73A (equivalent to Section 11D of Central Excise Act, 1944) would apply.
5. Heard both sides and perused the records.
6. The ld. Consultant is correct in his contention that the matter has been settled in the assessees favour. The Honble High Court of Uttarakhand in the case of Sachin Malhotra (supra), relied upon by the consultant has examined the issue in detail. In the landmark judgment, reported in 2015 (37) STR 684, the Honble High Court has clearly laid down that in the case of rent a cab scheme, there is a requirement that the hirer should have freedom to use the vehicle as he pleases which undoubtedly implies that he must have possession and control over the vehicle, which is not the case in the services provided by the appellant therein. The relevant portion of the judgment is reproduced below:-
18.?A perusal of Clause 10 would re-enforce us in the view that we are taking that, under the rent-a-cab scheme, the hirer is endowed with the freedom to take the vehicle, wherever he wishes, and he is only obliged to keep the holder of the licence informed of his movements from time to time. When a person chooses to hire a car, which is offered on the strength of a permit issued by the Motor Vehicles Department, then the owner of the vehicle, who may or may not be the driver, will offer his service while retaining the control and possession of the vehicle with himself. The customer is merely enabled to make use of the vehicle by travelling in the vehicle. In the case of a passenger, he is expected to pay the metered charges, which is usually collected on the basis of the number of kilometers travelled. These are all matters, which are regulated by the Government. Unlike the said scenario, in the case of a rent-a-cab scheme, as is clear from the very fundamental principle underlying the scheme, it is to give the hirer the freedom to use the vehicle as he pleases, which, undoubtedly, implies that he must have possession and control over the vehicle. This is the fundamental distinction between rent-a-cab and a pure case of hiring. No doubt, the learned counsel for the appellant may be correct in saying that, in the case of rent-a-cab also, there is hiring in the general sense. As we have already noted, the word hire is used even in the rent-a-cab scheme. But, what is of fundamental importance and constitutes the distinguishing feature between rent-a-cab and hiring is that, in the case of hiring, undoubtedly, the owner of the vehicle retains control and possession; he either drives the vehicle himself or employs somebody else to drive the vehicle; and the customer merely makes use of the vehicle by travelling in the vehicle on the basis of a contract that he will pay the requisite hire charges for the period he uses the vehicle. Unlike the same, in the case of rent-a-cab, as is provided in the Motor Vehicles Act, the person is enabled to take the vehicle with him wherever he pleases, subject, no doubt, to the terms of the contract between the parties and he uses the vehicle as his own subject to his paying the rent. Though both, rent and hire, may, in a different context, have the same connotation; in the context of rent-a-cab scheme and hiring, we are of the view that they signify two different transactions. What the lawgiver has chosen fit to tax by way of imposition of Service Tax is only transaction relating to business of renting of cabs. It is also pertinent to bear in mind that, in the case of hiring, the hirer may refuse to provide the service to the prospective customer. We cannot accept the argument of the learned counsel for the appellant that the Court must ignore the provisions of Section 75 of the Motor Vehicles Act. We are of the view that, when the lawgiver introduced this new source of taxation, it must be treated as having been aware of the distinct concept of renting a cab for which there is provision in the Central Legislation, namely, Section 75 of the Motor Vehicles Act and also a scheme stood framed as early as in 1989. We are, therefore, of the view that, unless there is control, which is passed to the hirer under the rent-a-cab scheme, there cannot be a taxable transaction under Section 65(105)(o), read with Section 65(91) of the Service Tax Act.
7. We find that the issue in the present appeal is covered in all fours with the above judgment. We find that the show cause notice has not made any reference to Section 73A. Sachin Malhotra judgment cited (supra) including by Uttarakhand High Court themselves in R.S.Travels (supra) and by other Tribunal decisions cited by the ld. consultant are all in favour of the appellant. Following the ratio of these judgments, we find that the issue is no longer res integra. The impugned order is set aside and the appeal is allowed with consequential relief if any.
(Dictated and pronounced in open court)
(Madhu Mohan Damodhar) (Sulekha Beevi C.S.)
Member (Technical) Member (Judicial)
Rex
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