Stage carriage buses on kilometre basis fall outside rent-a-cab service, defeating demand, extended limitation, and penalties.

Providing stage carriage buses on a kilometre basis to factories, firms and other users was treated as outside rent-a-cab service because the provider was not shown to be engaged in the business of renting cabs. The 01.05.2007 amendment expanded the definition of cab to certain larger motor vehicles, but it did not remove the basic requirement that the service be supplied by a rent-a-cab scheme operator. The demand was therefore unsustainable on merits. The classification issue was also considered debatable and the demand period substantially time-barred, so the extended period of limitation and consequential penalties could not be sustained.

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Issues: (i) Whether providing buses on contract basis to factories, firms and other users on a kilometre basis amounted to rent-a-cab service under the Finance Act, 1994. (ii) Whether the demand, extended period and penalties could be sustained in the facts of the case.

Issue (i): Whether providing buses on contract basis to factories, firms and other users on a kilometre basis amounted to rent-a-cab service under the Finance Act, 1994.

Analysis: The taxable service of renting a cab applies only when the provider is a rent-a-cab scheme operator, that is, a person engaged in the business of renting cabs. The definition of cab after the 01.05.2007 amendment extended to certain motor vehicles capable of carrying more than twelve passengers, but the essential statutory requirement remained that the service must be rendered by a person carrying on the business of renting cabs. The buses in question were part of a stage carriage transport operation and were used to provide public and contract transport services rather than a cab-renting business. The charging pattern was based on actual kilometres run, not on a fixed monthly rent typical of cab hiring.

Conclusion: The activity did not fall within rent-a-cab service and the demand on merits was not sustainable.

Issue (ii): Whether the demand, extended period and penalties could be sustained in the facts of the case.

Analysis: The dispute was found to be highly debatable on classification, and the demand covered a substantial period that was already time-barred. On that footing, invocation of the extended period was not justified. Since the foundation of the levy itself was not sustainable and the issue was arguable, the consequential penalties also could not stand.

Conclusion: The extended period and penalties were not sustainable.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: A transport entity operating stage carriage buses and charging on an actual-kilometre basis is not a rent-a-cab scheme operator unless it is shown to be engaged in the business of renting cabs; where the classification issue is debatable, the extended period and penalties cannot be sustained.

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