Custom, Excise & Service Tax Tribunal
Carzonrent India Pvt Ltd vs Commissioner, Service Tax-Delhi I on 23 February, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH-COURT NO. I
SERVICE TAX APPEAL NO. ST/52145/2016
[Arising out of Order-in-Original No. DLI/SVTAX/001/COM/03/1/15/16 dated
04.04.2016 passed by the Commissioner, Service Tax, Delhi ]
CARZONRENT (INDIA) PVT LTD APPELLANT
9th Floor, Videocon Tower, E-1 Block
Jhandewalan Extension, New Delhi -110055.
VS.
COMMISSIONER, SERVICE TAX,
DELHI I RESPONDENT
APPEARANCE:
Shri Akashdeep , Advocate for the appellant Shri Harshvardhan, Authorized Representative of the Department CORAM:
HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MS. HEMAMBIKA R PRIYA, MEMBER (TECHNICAL) DATE OF HEARING : 23 February, 2023 DATE OF DECISION: 23 February, 2023 FINAL ORDER No. 50514 /2023 PER HEMAMBIKA R PRIYA The current appeal has been filed to assail the Order-in- Original No. 03/1/15/16 dated 04.04.2016 wherein the Adjudicating Authority confirmed the demand of Service tax of Rs. 4,08,28,837/- under section 73(1) of Finance Act, 1994 along with interest and penalty. A penalty of Rs. 40,00,000/- under section 76 was imposed.
2. M/s Carzonrent (India) Pvt. Ltd. (hereinafter referred to as 'Appellant') having its registered office situated at 9th Floor, Videocon Tower, Block E-1, Jhandewalan Extn. New Delhi-110055, is a private limited company, and is centrally registered with the Service Tax ST/52145/2016 Commissionerate, Delhi vide Service Tax Registration No. AABCC5486CST007 dated 02.12.2005 under the following category of services:
a. Rent-a-Cab Service, b. Business Auxiliary Service, c. Advertising Services, d. Franchise Service, e. Business Support Services, f. Information Technologies, g. Legal Consultancy Services, h. Manpower Services, i. Work Contract Services, j. Transport of Goods by Road and k. Other than 119 lists 2.1 The department conducted the audit of the records of the appellant, and sought information/documents from the appellant. This enquiry culminated in issuance of the first show cause notice invoking the extended period from 1.10.2005 to 30.09.2010, and thereafter periodical notices were issued. Vide letter dated 23.05.2014, the appellant was asked to furnish issue-wise details for the period 01.10.2012 to 30.09.2013 of the amount on which no service tax had been paid by them for issuance of the periodical show cause notice. In response, the appellant vide letter dated 23.06.2014 submitted that with effect from 01.07.2012, they had begun paying tax on fleet management charges. Further, the appellant also furnished the details of Lease rental and fleet management services, as required by the department.
2.2 The Department alleged that leasing of vehicles is taxable service and appellant was liable to pay service tax on the same. Consequently, 2 ST/52145/2016 Show Cause Notice C. No. DL-1/ST/R-VIII/IAR/Carzonrent/60/ 2011/117 dated 24.10.2014 was issued for the period 01.10.2012 to 30.09.2013 proposing service tax demand of Rs. 4,58,75,282/-. The Commissioner passed the impugned order-in-original dated 04.04.2016 wherein the demand of Rs. 4,08,28,837/- (after extending cum-tax benefit) was confirmed along with the imposition of interest and penalties. Aggrieved by the impugned order, the appellant has filed the present appeal.
3. Learned counsel for the appellant submitted that during the relevant period, the appellant had entered into identical contracts for leasing of vehicles and thereafter for providing fleet management service in respect of such vehicles, with all its clients. He submitted that with regard to the activity of leasing of vehicles, the appellant charges lease rent from client as consideration which is payable in advance for each calendar month. As per these lease agreements, he submitted that it is clearly evident that by executing the agreement, the appellant had transferred all substantial rights to use the vehicle for consideration payable in cash. Consequently, the said activity would be subject to VAT as per article 366 (29 (A)(d)) of the Constitution of India, section 2(zc) of the DVAT Act, 2004 and other State VAT Acts such as Maharashtra Vehicle Act, 2005, Haryana Vehicle Act 2003 etc.
4. As per the statutory provisions, it is clear that the transfer of right for use of goods is clearly covered under the term "deemed sales" and the appellant was duly discharging VAT on the consideration received as lease rent recovered from its client under the aforementioned agreements and discharging its VAT liability within stipulated period. He 3 ST/52145/2016 also argued that during the relevant period, the appellant was discharging their VAT liability on the major portion of lease rent at the effective rate of 12.5 % or higher rate as applicable and this rate was higher than that of Service Tax effective rate by 0.3%.
5. The learned counsel for the appellant concluded his argument that in view of the decision of the Tribunal Mumbai in the case of M/s.
Arval India Pvt Ltd. vs Principal Commissioner of Service Tax, Mumbai IV1 [on similar issue, which is in favour of the appellants] as against the decision of the Principal Bench, Delhi in the appellant's own case M/s. Carzonent (India) Pvt. Ltd vs Commissioner of Service Tax, (Tri-Delhi)2, it would be appropriate to refer the present case to a Larger Bench to decide the case on merits.
6. The learned Authorised Representative stated that the Tribunal, Delhi vide its final order dated 22.12.2016 (supra) has held that the appellants are liable to service tax. He also stated that the appeal for the previous period (pre-negative list and post negative list) was on identical facts which has been disposed of by the Tribunal. Therefore, the present appeal is liable to be dismissed in the same terms.
7. We have heard the learned counsel for the appellants and the learned authorized representative. We note that the issue on levy of service tax on lease rental charges has been decided by the Principal Bench of this Tribunal in the appellant's own case. The relevant paragraphs of the said decision is reproduced hereinbelow:
1 [2020 (41) GSTL 528 (Tri-Mum)] 2 [2017 (50) STR 172 (Tri-Del)] 4 ST/52145/2016 "10. Admittedly, the appellants are providing motor vehicles to various clients based on the agreements and are receiving considerations for the same. It is also admitted that ownership of the vehicle continued to be with the appellant with registration, insurance and other requirements so that the vehicle is owned by the appellant all throughout. It is the case of the appellant that by entering into a lease agreement for a period of above three years, there is a deemed sale of the vehicles to the client. Such deemed sale, it is argued, can be taxed only by the State Authorities under the provisions of respective VAT Act. We note that the whole dispute rests on this submission. In other words, the exact legal nature of the transaction between the appellant and their client has to be understood before arriving at a decision of service tax liability of the consideration received by the appellant. We note that the impugned order has examined the terms of agreement very elaborately. The main contention of the appellant that there is a "deemed sale" of vehicles, though the appellant remained owners of the said vehicles. We note that the statutory provisions for tax liability in terms of Section 65(105)(o) of the Finance Act, 1994 stipulates that the taxable service means any service provided or to be provided to any person by a rent-a-cab scheme operator in relation to the renting of a cab. The various terms of these definitions have further been explained in Section 65 of the Act itself. As pointed out in the impugned order there is no reference to period of renting in the statutory provisions. The liability to tax arises when a rent-a-cab operator provides a vehicle to nother person on rent and receives consideration. The plain reading of the scope of the tax liability is to this effect only. The nature of arrangement may vary from party to party. In CST v. Vijay Travels [2014(36) S.T.R. 513] it was held that when a person carries on continuous activity of renting of a cab, i.e., letting for the use in case of a maxi cab or motor vehicle, such renting of a vehicle would invite taxable service. The Tribunal in Ghanshyam Gupta [2017(11)STT 130] held that when the assessee rented out a vehicle to a hirer, where the vehicle was stationed at the premises of the hirer and was under his exclusive control, the tax liability under rent-a-
cab service would arise.
11. We note that the decision of the Hon'ble Supreme Court in BSNL case (supra) was elaborately discussed in the impugned order. The Five attributes to constitute a transaction for right to use of goods have been examined along with the Board's clarification dated 15-4-2013 by the Original Authority. The Original Authority found that the ingredients (c) & (d) attributes laid down by the Hon'ble Supreme Court were not fulfilled in the present case. The first one is relating to the transferee's right to use the goods, consequently all legal consequences of such use. The next point is that during the period of transfer, the transferee should have such legal right, it has to be the exclusion to the transferor. These points have been examined with reference to the terms of the agreement relevant to the case (pages 154 to 158 of impugned order). We note that relying on the decision of the Hon'ble Punjab & Haryana High Court in the case of Aditya Cement [2009 (14)S.T.R. P&H] the Original Authority recorded that as the premium for insurance is paid by the appellant, they have effective control of the insured vehicles. Further, the appellants also paid the maintenance and repair charges of the vehicles. Even, workshop in which the vehicle has to be serviced is decided by the appellant. On careful consideration of the terms of the agreement, which were elaborately discussed in the impugned order, we note that the clients were never became owners of the cabs. They can use the cabs as long as they are paying rent to the appellant for such usage. The clients do not possess full effective control of the cabs, which are leased to them by the notices. As recorded by the Original Authority, the appellants do not fulfil the attributes as laid down by the Hon'ble Supreme Court to determine and conclude the transaction to be a "deemed sale". As 5 ST/52145/2016 such, we find that the appellants failed to sustain legally their plea regarding non-applicability of the provisions of Service Tax to the transactions of renting of motor cabs and on such consideration received.
12. In R.S. Travels [2008 12 S.T.R. 27 (Tri-Del)], the Tribunal held that relying on the decision in the case of Express Tours and Travels Pvt. Ltd. [2006 (3) S.T.R. 664 (Tri.)], that a Government's intention is to tax the provider of a service, which involves hire and renting of a cab formally for a long period. It was further held that the test for ascertaining whether an activity is covered by the entry "rent-a-cab operator service" is as to whether it involves giving a cab with or without driver to a client for a certain period of time for some consideration, which can be on per hour or per day or per month basis.
13. Learned Consultant for the appellant referred to certain decided cases mainly involving interpretation of Sales Tax Act. We find the reliance placed on the decision of the Hon'ble Andhra Pradesh High Court in G.S. Lamba and Sons [2015 (324) S.T.R. 513 (A.P)] is not relevant to the present facts. The Hon'ble High Court was dealing with mixtures for readymix concrete. On examination of the clauses of the agreement, the Hon'ble High Court concluded regarding the tax liability on A.P. General Sales Tax Act, 1957. Similarly, the Tribunal in Patronet LNG Ltd.,[2016 (46) S.T.R. 513 (Tri-Del)] was dealing with chartering of tankers for transportation of LNG. The conditions of agreement are apparently different in the said case. Similarly, the Hon'ble Delhi High Court in Delhi Airport Advertising Pvt. Ltd. [2016 (44) S.T.R. 399 (Del)]was dealing with revenue earned from display of advertisements. The Hon'ble High Court held that the service tax and VAT were mutually exclusive and the dominant object of transaction would determine the nature of transaction. We find that applying the said ratio and referring to the terms of the agreement, in the present case, the dominant object of the transaction is one of the renting /hire motor vehicles and not transfer of control or possession or "deemed sale of such vehicle". We note that the similar such decisions relied upon by the appellant were all dealing with specific set of facts in terms of the agreement relevant to the respective cases. We note that the principle laid down by the Hon'ble Supreme Court in BSNL (supra) will guide while determining the actual nature of transaction between the parties. We are satisfied that the impugned order examined the issue in correct perspective to arrive at the conclusion that the appellant are liable to service tax in respect of the services rendered by them under the category of "rent-a-cab services"."
8. It is pertinent to note that the current show cause notice is a periodical one which has been adjudicated by the Commissioner vide the impugned order. There is no change in the factual matrix, and therefore we find no reason to deviate from the decision of this Tribunal (supra) in the Appellant's own case. As regards the request of the appellant for referring this matter before a Larger Bench in view of the contrary decision of the Mumbai bench of the Tribunal in the case of Arval India Pvt Ltd. Vs. Principal Commissioner of Service Tax, 6 ST/52145/2016 Mumbai IV3, we note that the Tribunal has differentiated the decisions based on the facts, as is evident in para 7 of the order.
9. We find no infirmity in the impugned order, and accordingly dismiss the appeal.
(Pronounced in the open court) (JUSTICE DILIP GUPTA) PRESIDENT (HEMAMBIKA R. PRIYA) MEMBER(TECHNICAL) ss 3 2020(41) G.S.T.L. 528(Tri-Mumbai) 7