Hiring of buses without transfer of possession is not rent-a-cab service; extended limitation also fails absent suppression.

Providing buses on hire to transport corporations on a kilometre basis, while the operator retains possession, control and running responsibility, is hiring and not renting of cabs; the transaction therefore does not fall within rent-a-cab scheme operator service, and the service tax demand failed on merits. The extended period of limitation also could not be invoked because the department had prior knowledge, returns were filed, and the issue was subject to conflicting judicial views, so suppression or mala fide intent was not established. The Tribunal set aside the impugned order and allowed the appeals.

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Issues: (i) whether providing buses on hire to transport corporations, while retaining possession and control of the vehicles, amounts to taxable rent-a-cab scheme operator service; and (ii) whether the demand is sustainable by invoking the extended period of limitation.

Issue (i): whether providing buses on hire to transport corporations, while retaining possession and control of the vehicles, amounts to taxable rent-a-cab scheme operator service.

Analysis: The activity consisted of giving buses on hire on kilometre basis, with the operators retaining possession and control of the buses and bearing the running expenses. The taxable entry covered service in relation to renting of cabs, and the distinction between hiring and renting turned on transfer of possession and control to the hirer. Where the owner retains control and the customer merely uses the vehicle for transport, the transaction does not become renting. The Tribunal relied on the settled distinction drawn in the case law and held that the contract was one of hiring buses, not renting cabs.

Conclusion: The activity was not classifiable as rent-a-cab scheme operator service and the demand on merits failed in favour of the assessee.

Issue (ii): whether the demand is sustainable by invoking the extended period of limitation.

Analysis: The department had prior knowledge of the activity from earlier proceedings, the appellants had been filing returns, and the issue itself had seen conflicting judicial views. On these facts, suppression or mala fide intention could not be attributed so as to justify the extended limitation period.

Conclusion: The demand raised by invoking the extended period of limitation was time-barred and unsustainable in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeals were allowed, as the classification adopted by the revenue and the extended-period demand were both unsustainable.

Ratio Decidendi: For service tax purposes, a transaction is taxable as renting only when possession and effective control of the vehicle pass to the hirer; mere hiring of buses with ownership and control retained by the operator is not rent-a-cab service, and the extended period cannot be invoked absent suppression or mala fide intent.

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