1. The appeal is against order dated 20.02.2013 of Commissioner (Appeals), Indore. The appellants are engaged in providing vehicles to the clients on hire basis. The dispute in the present case relates to their service tax liability under the category of rent a cab service during the period October 2006 to July 2011. The Revenue proceeded against the appellant for non-payment of service tax during the said period by the appellant. The original authority adjudicated the case and confirmed the service tax demand of Rs. 1,89,295/-. He also imposed penalty of equivalent amount under Section 78 and further penalty of Rs. 5000 under Section 77 of the Finance Act, 1994. On appeal, vide the impugned order, the Commissioner (Appeals) upheld the original order.
2. The Ld. Counsel for the appellant submitted that the appellants are not engaged in providing taxable service as a rent-a-cab operator. They are providing vehicle to the client which continues to be in their control and the charges are collected on per kilometer basis. She relied on the decision of Hon'ble Uttarakhand High Court in Sachin Malholtra : 2015 (37) STR 684, to submit that there is distinction between 'hiring' and 'renting' of vehicles. In the present case, the appellant is only hiring out their vehicle and not renting it, as they continue to have control on the vehicle.
3. The Ld. Counsel also submitted that the lower authorities did not consider the abatement available to the appellant in terms of Notification 1/2006 dated 01.03.2006 and also did not examine the threshold turnover limit for small scale service provider upto 8 lakhs/10 lakhs as applicable during the relevant time.
4. We have heard both the sides and perused the appeal records.
5. There is no written agreement available to examine the scope of transaction carried out by the appellant with the clients. Rent a cab service is liable to service tax in terms of Section 65 (105)(o) of the Finance Act, 1994 read with Section 65 (91) of the Act. It is provided that any person engaged in the course of rent a cab is liable to service tax on the consideration received. We have considered the submission regarding the distinction between 'hiring' and 'renting' a vehicle as held by the Hon'ble Uttarakhand High Court in Sachin Malhotra (supra). In this connection we have also perused the decisions of Hon'ble High Courts of Gujarat and Madras on the very same issue. In Vijay Travels : 2014 (36) STR 513 Guj., the Hon'ble Gujarat High Court had occasion to examine the scope of tax liability under the tax entry of rent a cab service. The relevant paragraph of the decision of the High Court is as below.
"14.4 From the aforesaid discussion, it can be said that the petitioner cannot escape tax liability on the ground that the hiring is different from renting as the intention of the Government is to tax service provider of a service which involves both hiring and renting of a cab for a longer duration and distinction as sought to be carved out by the petitioner is not finding favour with this Court.
Despite there being Section 74 of Motor Vehicles Act, when Section 75 of the said Act is brought on statutory book, that does not also allow us to hail the submissions of the petitioner that those who give vehicle without exclusive control cannot be taxed. The Tribunal ignored the legal position. There is nothing to read into the taxing statute that only those persons who own the vehicles and give their vehicles on rent with exclusive control of the customer only would be charged.
15. The Tribunal in case of R.S. Travels v. Commissioner of Central Excise, Meerut, reported in : 2008 (12) S.T.R. 27 has made out distinction between providing rent-a-cab service or giving vehicle on lease or hire, to hold that ordinary meaning of the words "to rent" is allowing the use of something one owns in exchange for payment. Therefore, the test for ascertaining whether an activity is covered by the entry "rent-a-cab operator service" is as to whether it involves giving the cab, with or without the driver, to a client for a certain period of time for some consideration. However, when a cab operator provides his cab with a driver to his client on demand for going from one place to another and charges him on per kilometer basis or a lump sum amount on distance, as fixed with the client and control of the vehicle always remains with the cab operator/driver, he is providing transport service and this activity would be outside the purview of the entry - 'rent-a-cab operator's service'.
16. The Delhi Tribunal in case of Kuldip Singh Gill v. Commissioner of Central Excise, Jalandhar, reported in : 2006 (3) S.T.R. 689, was examining the issue where the public sector undertaking had appointed the appellant as a contractor for providing transport to its employees as and when required at the fixed places against payment on kilometer basis. The contract was clear that the public sector undertaking was not renting out any particular number of vehicles, but, was making payment for operating trips to various places. The vehicle continued to remain with the appellant only and whenever the trips were required to be made, the appellant was asked to carry out the same and he was paid per trip depending upon distance, time, etc. as per the rate sheet. The Tribunal, on taking note of the fact and taxing provisions of the Act, held that it was providing a transport service and was not amounting to a renting of a cab.
The Punjab & Haryana High Court, later on, reversed such a decision in the case of Commissioner of C. Ex. v. Kuldeep Singh Gill, reported in : (2010) 27 STT 224 : 2010 (18) S.T.R. 708 (P&H), holding thus :
"A conjoint reading of the relevant provisions would reveal that the service provided by a tour operator in relation to a tour or by a rent-a-cab scheme operator in relation to the renting of cabs is liable to service tax under the Act. Since it was not a matter of dispute that the assessee was providing transport service to the IOC on contract basis, it was liable to pay service tax during the relevant period. In the instant case, the Tribunal had ignored the legal position mainly on the ground that the cabs were not leased out by the assessee for any period of time for use by the IOC according to its discretion and service tax was not imposable. Here, the Tribunal had fell in legal error in this regard."
17. The Punjab & Haryana High Court in yet another decision on this subject followed the decision of Madras High Court which is discussed at length hereinafter.
In the case of Express Tours & Travels P. Ltd. v. Commissioner of C. Ex. , reported in : 2006 (3) S.T.R. 664 : 2005 (186) E.L.T. 143 (Tribunal), the Tribunal of Mumbai Bench held that the appellant failed to produce the evidence to indicate that the car was actually hired by customer and not rented. He could not escape the tax liability on the ground that "hiring" was different from "renting" since the Government's intention was to tax the service providers of a service, which involved hiring/renting of a cab formally for a long duration, unlike the "Yellow & Black" cabs which were only engaged by a person for short time.
18. The Delhi Tribunal in the case of Ghansyam Gupta v. CCE, reported in (2007) 11 STT 130, found that the assessee had rented out a vehicle to a hirer where vehicle was to be stationed at the premises of hirer and was under his exclusive control. This was held as a clear case of rent-a-cab service. The person, thus, who is engaged in the business of engaging taxis for customers and giving them service without even owning or plying vehicle also can be held liable for paying service tax under the category of "Rent-a-cab Scheme Operator".
19. The Madras High Court in the case of Secretary, Federation of Bus-operators Assn T.N. v. UOI (supra), examined the issue of service tax applicable to the tour operators under Section 65(52) of the Finance Act and Rent-a-Cab Scheme Operator under Section 65(38) of the Finance Act and dealt with each category separately. Under the heading "maxi car" or "motor car", it discussed various aspects/legal provisions and held thus :
"(45) We will not consider the writ petition in case of the persons or organizations that are "motor cab owners" or "maxi cab operators."
(46) Common arguments were addressed by Mrs. Nalini Chidambaram, learned Senior Counsel, Mrs. Radha Gopalan and Mr. D. Palani, learned Counsel in respect of this category. This permit for plying the motor cab is also covered under Section 74 of the Motor Vehicles Act, which is the provision for grant of "contract carriage permit". The provisions of Sub-sections (v), (vii) and (viii) of Section 74 of the Motor Vehicles Act speak about the "motor cab permits". The term "cab" is already defined vide Section 65(9) of the Finance Act meaning a "motor cab" or a "maxi cab". While the definition of "maxi cab" has been literally lifted from Section 2(22) of the Motor Vehicles Act so also the definition of "motor cab" has been lifted from Section 2(25) of the Motor Vehicles Act.
(47) The most important provision in this behalf is Section 35(38) of the Finance Act which suggests that "rent-a-cab scheme operator" means any person engaged in the business of renting of cabs. This definition is extremely general and wide. Any person who is in the business of renting the cabs, meaning ''motor cab" and "maxi cab" would be deemed to be a "rent-a-cab scheme operator" as per this section. Immediately, thereafter, it would be worthwhile to see that under Section 65(48)(o) of the Finance Act, the services provided to any person by a rent-a-cab scheme operator in relation to renting of a cab has been declared to be a "taxable service" and this service is made taxable under Section 66(3) as amended. The only other provision which would be worth seeing would be Section 67(n) under which, the taxable service provided by a rent-a-cab scheme operator shall be the gross amount charged by such operator from such persons for services in relation to the renting of a cab and includes such rental. It will, therefore, be seen that the Finance Act takes into its sweep the services provided to any person by any person engaged in the business of renting of motor cabs or maxi cabs. Section 2(22) of the Motor Vehicles Act provides "maxi cab" means any motor vehicle constructed or adapted to carry more than six passengers but not more than twelve passengers excluding the driver for hire or reward. Similarly, Section 2(25) of the Motor Vehicles Act provides "motor cab" means any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward.
(48) There can be no doubt that such motor cabs or maxi cabs are plied as "contract carriages" and/or under Section 88(9) of the Motor Vehicles Act read with Rules 82 to 85 of the Motor Vehicles Act. It would, therefore, be clear that the moment a vehicle which carries the permit as a "motor cab" or "maxi cab" is rented by a person, who is engaged in the business of renting cabs, such person who is so engaged in the business of renting cabs would be in the tax dragnet of service tax.
(49) The main argument by some of the learned Counsel was that a person who owns a motor cab or maxi cab is not a "tour operator" within the meaning of Section 65(52) of the Finance Act as the permit granted to ply the motor cab or maxi cab is not necessarily a "tourist permit" nor could such vehicles be called "tourist vehicles". The learned Counsel addressed us in relation to Section 65(50), (51) and (52) of the Finance Act.
(50) We have already shown that every "motor cab" or "maxi cab" is a "contract carriage" and would certainly come under the definition of Section 2(43) of "tourist vehicle" as it is required to be constructed, adapted and maintained under the Motor Vehicles Act and the Rules framed thereunder as a "tourist vehicle". If any person uses such a vehicle in the business of operating tours then, certainly, such a person would be a "tour operator" and would come under the dragnet of the Finance Act under Section 65(52).
(51) However, in our opinion, the provisions of Section 65(48)(o) read with Section 66(3) of the Finance Act are extremely relevant and under any circumstances would cover the persons like petitioners. Under those provisions, there is no necessity whatever of having any "tourist permit" as such and it is enough if a person is engaged in the business of renting of motor cabs or maxi cabs.
(52) It was further tried to be argued that number of petitioners did not have a licence or a permit under Rent-a-cab Scheme, 1989 under the Motor Vehicles Act. The argument is clearly erroneous. That was a requirement only under the unamended provisions of Section 65 and more particularly under the definition clause which then was Section 65(32). It ran as under :
"rent-a-cab scheme operator" means a person who is a holder of a licence under the Rent-a-Cab Scheme, 1989 framed by the Central Government under Motor Vehicles Act, 1988 (59 of 1988).
We have already pointed out that the scope of amended provision, which is as per Section 65(38), has been widened by deleting the requirement of holding a licence under Rent-a-cab Scheme, 1989. Under the amended provision any person engaged in business of renting of cabs becomes a rent-a-cab scheme operator.
(53). We have, therefore, no hesitation in holding that if the petitioners are plying the motor cabs or maxi cabs and the services are provided by them to any person in relation to the renting of the cabs, such service becomes a "taxable service" and therefore, comes within the ambit of Section 66(3) of the Finance Act. In view of these provisions, it is not at all necessary to rely exclusively on Section 65(50), (51) and (52) which deal with the services offered by the "tour operators." That subject is entirely distinct and separate from the subject of the services provided by a rent-a-cab scheme operator though relevant as we have already shown in paragraph 50 while dealing with the petitions of "tour operators". We have already pointed out that the only requirement is the user by a person of the "tourist vehicles" for the "tour" and being engaged in that business. We have no doubts that a cab-owner who engages in that business for the purposes of renting a cab could also be held to a "tour operator" and would be covered under Section 65(50), (51) and (52) of the Finance Act.
(54) We have, therefore, no hesitation in holding that if the petitioners are plying the maxi cabs or motor cabs and giving the services in relation to the renting of a motor cab or maxi cab then, they would be in the tax-net and cannot complain that they are not covered by the Finance Act."
20. The Punjab & Haryana High Court was also considering the question as to whether transport service provided by the respondent-firm to the Indian Oil Corporation was liable to service tax or not? The Court, after considering various provisions as also decision of the H
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igh Court of Judicature at Madras in the case of Secretary, Federation of Bus-operators Assn T.N. v. UOI (supra), applied all vital observations of Madras High Court mutatis mutandis to the case before the High Court. Accordingly, it held that transport service provided to Indian Oil Corporation was the taxable service and it set aside the decision of the Tribunal by upholding the view canvassed by the Revenue." 6. Tribunal also examined similar issue in S K Kareemun : 2016 (42) STR 988 (Tri. Bang.), the Tribunal referred to the decision of Hon'ble Uttarkhand High Court (supra) and held that the said decision is with reference to the statutory provisions for the period prior to 01.06.2007. The Tribunal's order has been affirmed by Hon'ble Supreme Court reported in 2016 (44) STR J-279 (SC). 7. In view of the above legal position, we find that the appellants liability for service tax under rent a cab service cannot be contested. On merits we uphold the impugned order confirmed the service tax liability. 8. However, we note that the claim of the appellant for abatement available as per Notification 1 of 2006 dated 01.03.2006 as well as the exemption for threshold turnover limit applicable for small scale service provider during the relevant financial years have not been considered for a decision by the lower authorities. Accordingly, we find that the matter has to go back to the original authority for reconsideration the quantification of service tax, if any, payable by the appellant after due consideration of available abatement and SSI exemption based on the details submitted by the appellant. 9. The appeal is disposed of in above terms.