Rent-a-Cab classification sustained prima facie, but financial hardship justified partial pre-deposit and stay of recovery.

In a stay application against service tax demand and penalties, the tribunal found a prima facie case that renting specified vehicles under customer contracts fell within Rent-a-Cab Scheme Operator service, and treated the cited precedent as distinguishable because the agreements identified the vehicles to be rented. It also considered financial hardship, noting that the business had closed since October 2004 and that some amount had already been deposited. On that basis, further pre-deposit was limited and the balance of service tax and penalties was stayed pending appeal.

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Issues: Whether, in a stay application relating to service tax demand and penalties, the applicant had made out a prima facie case for waiver of pre-deposit and stay of recovery, and whether financial hardship justified partial waiver.

Analysis: The applicant had rented out specified numbers of vehicles under contracts with customers, and on a prima facie view the activity was treated as rendering Rent-a-Cab Scheme Operator service. The reliance on the cited precedent was found distinguishable because the present agreements specified the vehicles to be rented. At the same time, the closure of the business since October 2004 and the amount already deposited were taken into account for considering hardship.

Outcome: Further pre-deposit of Rs. 2 lakhs towards the service tax demand was directed, and on such deposit the balance of service tax and penalties was waived and recovery stayed pending the appeal.

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