Rent-a-cab taxability on long-term hire upheld; duplicate penalty under Section 76 rejected and Section 78 concession applied.

A long-term contractual hire of a cab was treated as taxable rent-a-cab operator service because the arrangement was not mere on-demand, per-kilometre hiring; the service tax demand was therefore upheld. On penalty, separate penalty under Section 76 was held unsustainable where penalty under Section 78 had been imposed. The assessee's payment of service tax, interest and 25% of the duty amount was accepted as sufficient discharge of the Section 78 penalty where the statutory concessional option had not been properly extended. The penalty was thus confined to the Section 78 framework, and duplication under Section 76 was disallowed.

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Issues: (i) Whether providing a cab under a long-term hire arrangement to B.S.N.L. amounted to taxable rent-a-cab operator service; (ii) whether penalty under Section 76 of the Finance Act was sustainable alongside penalty under Section 78 and whether payment of service tax, interest and 25% penalty entitled the appellant to the statutory concession under Section 78.

Issue (i): Whether providing a cab under a long-term hire arrangement to B.S.N.L. amounted to taxable rent-a-cab operator service.

Analysis: The arrangement was not a case of hiring a cab on demand on a per-kilometre basis. The Tribunal distinguished the earlier decision relied on by the appellant, since that case dealt with a different factual pattern. It followed the High Court ruling applied by the Revenue, which treated a cab given on hire under a contractual arrangement as taxable rent-a-cab service.

Conclusion: The activity fell within rent-a-cab operator service and the service tax demand was upheld.

Issue (ii): Whether penalty under Section 76 of the Finance Act was sustainable alongside penalty under Section 78 and whether payment of service tax, interest and 25% penalty entitled the appellant to the statutory concession under Section 78.

Analysis: The Tribunal accepted the contention that once penalty under Section 78 was imposed, separate penalty under Section 76 was not sustainable. It also held that where the assessee had paid the service tax, interest and 25% of the duty amount as penalty, and the statutory option contemplated under Section 78 was not properly extended, such payment constituted good discharge of the penalty liability under Section 78.

Conclusion: The appellant was granted relief to the extent that the penalty was treated in accordance with Section 78 and separate penalty under Section 76 was not sustained.

Final Conclusion: The demand of service tax was sustained, while the penalty issue was settled in part in favour of the appellant by recognising compliance with the Section 78 concession and disallowing separate penal duplication.

Ratio Decidendi: A long-term contractual hire of a cab can constitute taxable rent-a-cab service, and where the statute provides a conditional reduced-penalty option, payment of tax, interest and the prescribed reduced penalty can amount to sufficient discharge when that option is not properly granted.

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