2018 (1) TMI 171 - HC - Service Tax

Court rules renting a motor cab falls under taxable service definition despite control retention.

The appellant's argument that they were not liable for service tax as they retained control of the cabs provided to GAIL was rejected by the assessing ... Taxable service - rent-a-cab scheme operator - charging of service tax - distinction between renting and hiring - possession and control - rent-a-cab scheme 1989Taxable service - rent-a-cab scheme operator - distinction between renting and hiring - possession and control - charging of service tax - rent-a-cab scheme 1989 - Whether the facility of motor cab provided by the appellant to GAIL falls within the taxable service defined by Section 65(105)(o) of the Finance Act and is chargeable to service tax - HELD THAT: - The Court held that the Finance Act taxes the service provided by a person under a rent-a-cab scheme and does not itself draw a statutory distinction between 'renting' and 'hiring'. Since the terms are not defined in the Act, ordinary common parlance may treat them as synonymous. Therefore, where a person provides services in relation to the renting of a cab under a rent-a-cab scheme, such service falls within the definition of taxable service in Section 65(105)(o) and is leviable under the charging provisions. The Court further observed that the fact that the operator may retain possession or control of the vehicle does not exclude the service from the tax net. The Central Government's rent-a-cab scheme 1989 established under the Motor Vehicles Act for licensing purposes does not affect the statutory incidence of service tax under the Finance Act, and therefore cannot be invoked to exclude the service from taxation.The service rendered by the appellant in providing motor cabs to GAIL falls within the taxable service under Section 65(105)(o) and is chargeable to service tax; the appeal is dismissed.Final Conclusion: The Court answered the substantial question in favour of the revenue, holding that the appellant's provision of motor cab services to GAIL is a taxable service under the Finance Act and dismissing the appeal. Issues:1. Whether the facility of motor cab provided by the appellant to GAIL falls under taxable services as defined under the Finance Act and is chargeable to service taxRs.Analysis:The appellant, a traveling agency, provided vehicles to GAIL under a monthly hiring agreement. The agreement stated that the control of the vehicle remains with the appellant, who would charge additional amounts if the vehicle is used beyond the prescribed mileage. The appellant argued that since the control of the cabs remained with them, they were not a 'rent-a-cab scheme operator' and should not be liable for service tax. However, this argument was rejected by the assessing authority, the first appellate authority, and the tribunal.The Finance Act defines 'taxable service' to include services provided by a rent-a-cab scheme operator. The Act levies service tax on such taxable services. In a case before the Madras High Court, it was held that providing services related to renting a motor cab falls within the tax net. On the other hand, the High Court of Uttarakhand distinguished between renting and hiring of cabs, stating that possession and control passing to the hirer determine tax liability.The Allahabad High Court observed that the Act does not distinguish between renting and hiring in its provisions. The court noted that in common usage, renting and hiring are used interchangeably. Therefore, the appellant providing services under a rent-a-cab scheme, regardless of possession and control, falls within the taxable service definition and is liable for service tax.The court clarified that the rent-a-cab scheme under the Motor Vehicles Act does not affect the service tax provisions. Thus, any person providing services of renting a motor cab is subject to service tax. Consequently, the court ruled in favor of the revenue and against the appellant, dismissing the appeal for lack of merit.