Rent-a-cab service requires hirer possession and control; mere vehicle hiring falls outside the taxable category.

Providing vehicles was examined against the statutory definition of rent-a-cab service under the Finance Act, 1994, which turns on whether the hirer obtains possession and control of the vehicle and can use it as his own. Where the owner retains possession and control, the arrangement is only hiring and does not fall within the taxable category. On the material relied upon, the service did not satisfy the rent-a-cab test. The notice also did not invoke section 73A, and the cited authorities supported the assessee. The service tax demand and penalties were therefore held unsustainable, and the appeal succeeded.

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Issues: Whether the activity of providing vehicles was taxable as rent-a-cab service under the Finance Act, 1994 and whether the demand and penalties could be sustained.

Analysis: The activity fell for consideration under the statutory definition of rent-a-cab service, which depends upon the hirer obtaining freedom to use the vehicle with possession and control. The controlling distinction between hiring and rent-a-cab service is that in a taxable rent-a-cab arrangement the hirer must have possession and control over the vehicle and may use it as his own, whereas in a mere hiring arrangement the owner retains possession and control. The material relied on established that the appellant's service did not answer that description. The notice also did not invoke Section 73A of the Finance Act, 1994, and the authorities cited consistently supported the assessee.

Conclusion: The demand for service tax and the penalties were not sustainable and the appeal succeeded.

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