Tribunal Rejects Revenue's Appeal on Service Tax Demand for Passenger Transportation

The Tribunal upheld the decision dismissing the service tax demand under the supply of tangible goods service, rejecting the Revenue's appeal. The services provided by the respondent, involving transportation of passengers with vehicles under their ownership and control through drivers, were deemed akin to vehicle hiring rather than supply of tangible goods services, as the right of possession and effective control was not transferred.

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Issues:
Classification of services under 'rent-a-cab' service or supply of tangible goods service.

Analysis:
The case involved the respondent, engaged in providing buses to customers, mainly tour operators, without being registered with the department. The department issued show cause notices proposing service tax on amounts recovered by the respondent under the category of 'supply of tangible goods' under section 65 (105)(zzzzj). The Commissioner dropped all proceedings against the respondent, leading to the Revenue filing an appeal. The Revenue argued that services provided by the respondent should be classified under 'supply of tangible goods' due to the effective control retained by the respondent over the buses through drivers. On the other hand, the respondent's counsel contended that the vehicles remained under the ownership of the respondent, with drivers and helpers provided by them, and the responsibility of transporting passengers undertaken by the respondent.

The nature of services provided by the respondent involved picking up and dropping passengers, transporting them to designated spots based on pre-determined routes, with consideration dependent on distance traveled and time involved. The dispute centered around whether these services should be classified as 'rent-a-cab' or supply of tangible goods service. The show cause notice proposed service tax under the supply of tangible goods service, which requires goods to be supplied without transferring the right of possession and effective control. The Commissioner noted that the vehicles remained under the ownership of the respondent during service, with receipts varying based on vehicle usage and kilometers run. This led to the conclusion that the services provided were akin to vehicle hiring, with the vehicles under the effective control of the respondent through drivers, thereby falling outside the purview of supply of tangible goods services.

Ultimately, the Tribunal upheld the impugned order that dismissed the service tax demand under the supply of tangible goods service, rejecting the appeal filed by the Revenue.

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