2017 (9) TMI 1263 - AT - Service Tax

Forum overturns Commissioner's decision on service tax for vehicle rentals, citing legal distinctions.

M/s. Om Sakthi Travels Versus Commissioner of Service Tax, Chennai

The forum set aside the Commissioner's decision confirming the demand for service tax liability on renting motor vehicles, along with interest and ... Rent-a-cab service - Section 11D of Central Excise Act, 1944 - demand of service tax - Held that: - In the landmark judgment, Commissioner, Customs & Central Excise Versus Sachin Malhotra, Raj Kumar Taneja, M/s. Shiva Travels [2014 (10) TMI 816 - UTTARAKHAND HIGH COURT] the Hon’ble High Court has clearly laid down that in the case of rent a cab scheme, there is a requirement that the hirer should have freedom to use the vehicle as he pleases which undoubtedly implies that he must have possession and control over the vehicle, which is not the case in the services provided by the appellant therein - also, the show cause notice has not made any reference to Section 73A - appeal allowed - decided in favor of appellant. Issues:1. Recovery of service tax liability on renting motor vehicles.2. Applicability of Section 73A in the case.3. Interpretation of rent-a-cab scheme and distinction from hiring.Analysis:1. The case involved the appellants providing various vehicles, including those with more than 12 seaters, to customers, leading to a demand for service tax liability by the department. The Commissioner confirmed the demand, along with interest and penalties, which the appellants challenged before the forum.2. During the hearing, the appellant's consultant argued that the issue had been settled in favor of the assessee by various decisions, including the Commissioner of Central Excise Vs. Sachin Malhotra and other relevant judgments. On the contrary, the respondent supported the adjudication, citing the collection of tax amount from customers and invoking the provisions of Section 73A.3. The forum acknowledged the settled nature of the issue in favor of the assessee, citing the landmark judgment by the Hon'ble High Court of Uttarakhand in the case of Sachin Malhotra. The judgment emphasized the distinction between rent-a-cab and hiring, highlighting the necessity for the hirer to have possession and control over the vehicle under the rent-a-cab scheme. The forum found the show cause notice lacking reference to Section 73A and concluded that the issue aligned with the judgments favoring the appellant. Consequently, the impugned order was set aside, and the appeal was allowed.This detailed analysis of the judgment showcases the issues involved, the arguments presented by both sides, and the forum's decision based on legal precedents and interpretations of relevant statutes.