Rent-a-cab service tax applies only when possession and control pass to the hirer, not mere hiring arrangements.

Service tax under the rent-a-cab entry applies only where the transaction is a rental under which possession and control of the vehicle pass to the hirer. The phrase "in relation to" widens the scope of the charge, but does not extend it beyond the statutory concept of renting cabs. A mere hiring arrangement, where the owner retains possession, control and operation and the customer only travels in the vehicle, is materially different and falls outside the taxable service. On that basis, the distinction between pure hiring and rent-a-cab service was upheld, and the charge was treated as inapplicable to mere hiring.

---

---

Issues: Whether service tax under Section 65(105)(o) of the Finance Act, 1994 is attracted only when the vehicle is rented under a rent-a-cab scheme with transfer of possession and control to the hirer, and not in a case of mere hiring where the owner retains possession and control.

Analysis: The taxable service is confined to a service provided by a rent-a-cab scheme operator, meaning a person engaged in the business of renting cabs. The expression "in relation to" expands the width of the charge, but it does not enlarge the charge beyond the statutory concept of renting of cabs. The scheme under Section 75 of the Motor Vehicles Act, 1988 contemplates that the hirer may use the vehicle as he pleases, which necessarily involves possession and control during the hiring period. A mere arrangement where the owner retains possession, control, and operation of the vehicle while the customer only travels in it is materially different. On that basis, a distinction exists between pure hiring and renting under the rent-a-cab scheme.

Conclusion: Mere hiring without transfer of possession and control does not fall within the taxable service of rent-a-cab scheme operator; the Tribunal's view was upheld and the question was answered against the assessee, in favour of the Revenue.

Ratio Decidendi: For service tax to arise under the rent-a-cab entry, the transaction must be one of renting of a cab under which possession and control pass to the hirer; mere hiring, where the owner retains control, is outside the charge.

---