2016 (2) TMI 770 - AT - Service Tax

Service tax liability rests with service providers, not sub-letters. Penalties overturned.

The Tribunal dismissed the Revenue's appeal, affirming that the liability to pay service tax on services provided by sub-contractors rested with the ... Liability to pay service tax - rent-a-cab operator's sub-letting - service provided by actual contractor - abatement of 60% - penalty not leviable where service not renderedLiability to pay service tax - rent-a-cab operator's sub-letting - service provided by actual contractor - Whether the respondent is liable to pay service tax in respect of services actually provided by other rent a cab operators who took the respondent's vehicles on sub letting - HELD THAT: - The Tribunal accepted the finding that the services in question were actually rendered by the other rent a cab operators who had taken the respondent's vehicles on sub letting. The legal liability to discharge service tax rests with the person who provides the taxable service. Merely supplying or sub letting vehicles to another operator does not, in the absence of a case that the respondent itself provided the service or that such letting falls within the definition of the service, transfer the tax liability to the vehicle owner. The Revenue did not contend that the respondent himself provided those services nor produce evidence that would attribute the provision of those services to the respondent. The Commissioner(Appeals) therefore rightly confined the respondent's liability to service tax on services actually rendered by the respondent to its customers (subject to the stated abatement), and rightly set aside penalties imposed in respect of the sub letting transactions. [Paras 5]Revenue's appeal rejected; no service tax liability fastened on the respondent for services provided by other operators (respondent liable only for services it itself rendered, subject to abatement) and penalties set aside.Final Conclusion: The appeal by Revenue is dismissed; the order of Commissioner(Appeals) holding that the respondent is not liable for service tax in respect of services provided by other rent a cab operators (and confining respondent's liability to services it rendered, subject to abatement, with penalties set aside) is sustained. Issues:1. Liability of service tax on vehicles sub-let by a rent-a-cab operator to other cab operators.2. Responsibility for payment of service tax on services provided by sub-contractors.3. Validity of penalties imposed on the respondent.Analysis:Issue 1: Liability of service tax on vehicles sub-let by a rent-a-cab operator to other cab operatorsThe case involved a rent-a-cab scheme operator who was registered with the Service Tax Department. The Revenue found that the operator was sub-letting vehicles to other cab operators, some of whom were not registered or had not discharged their service tax liabilities. A show-cause notice was issued proposing demand of tax, which was confirmed by the Joint Commissioner. On appeal, the Commissioner(Appeals) held that the operator was not liable to pay service tax on cabs sub-let to other cab agencies. The Commissioner observed that the liability to pay service tax rested with the actual service providers, the other cab operators, and not the respondent. The Commissioner set aside the penalties imposed on the operator. The Revenue appealed against this decision.Issue 2: Responsibility for payment of service tax on services provided by sub-contractorsThe Revenue contended that since the other cab operators did not discharge their service tax liability and the respondent did not provide evidence of such discharge, the responsibility to pay the service tax should lie with the respondent. However, the Tribunal rejected this argument. The Tribunal emphasized that the services were actually provided by the other rent-a-cab operators, not the respondent. It was clarified that the one who provided the services was liable to pay the service tax. The Tribunal noted that the respondent did not directly provide the services or that letting of vehicles to sub-contractors fell under the definition of rent-a-cab service. Therefore, the Tribunal found no merit in the Revenue's appeal and rejected it.Issue 3: Validity of penalties imposed on the respondentThe Commissioner(Appeals) had set aside the penalties imposed on the respondent. The Tribunal, in line with its decision on the liability of service tax, upheld the setting aside of penalties. The Tribunal's decision was based on the understanding that the responsibility for service tax lay with the actual service providers, not the respondent who sub-let the vehicles.In conclusion, the Tribunal dismissed the Revenue's appeal, affirming that the liability to pay service tax on services provided by sub-contractors rested with the actual service providers, not the respondent who sub-let the vehicles. The Tribunal also upheld the setting aside of penalties imposed on the respondent.