Rent-a-Cab service tax demand fails where third-party records were uncorroborated and employee-driver evidence showed metered taxi operations.

Service tax demand under Rent-a-Cab services was found unsustainable where it was based mainly on third-party material from departmental records, web sources, yellow pages and income-tax data, without independent investigation at the assessee's premises or business operations. The assessee rebutted the demand with salary bills showing the drivers were employees and a Chartered Accountant's certificate stating that the vehicles were operated as metered taxis, not as rent-a-cab services. In the absence of corroborative evidence to support the department's case, the demand was rejected and the impugned order was set aside in favour of the assessee.

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Issues: Whether the demand of service tax under the category of Rent-a-Cab services was sustainable when it was raised mainly on the basis of third-party information and records, and whether the assessee's evidence showing that the drivers were employees and the vehicles were operated by the assessee himself displaced the demand.

Analysis: The demand was founded on information from the Public Vehicles Department, web sources, yellow pages and income-tax records, without any independent investigation at the assessee's end. The assessee produced salary bills of the drivers and a Chartered Accountant's certificate indicating that the vehicles were being operated as metered taxis and not as rent-a-cab services. In the absence of corroborative investigation and in view of the documentary material produced by the assessee, the demand could not be sustained.

Conclusion: The demand of service tax was held to be unsustainable and the impugned order was set aside in favour of the assessee.

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