2023 (8) TMI 850 - AT - Service Tax

Appellant not liable for Service Tax on bus hiring to transport corporation under 'Rent a Cab operator Service'.

Green Logistics Corporation Versus C.C.E. & S.T. -Vadodara-I

The appellant was not held liable to pay Service Tax on the hiring of buses to Maharashtra State Road Transport Corporation under the head of 'Rent a Cab ... Time limitation - Levy of Service Tax - Rent a Cab operator Service - hiring of Buses to Maharashtra State Road Transport Corporation (MSRTC) - penalties - HELD THAT:- There is no dispute that the issue involved interpretation of law regarding taxability of the service of hiring of buses. On this issue various cases have been decided and though finally it was held that the hiring of the buses also falls under ‘rent a cab service’ but considering the bonafide of the assessee the demand is set aside on the ground of time barred. This has been considered in the case of COMMISSIONER OF SERVICE TAX VERSUS VIJAY TRAVELS [2015 (1) TMI 809 - GUJARAT HIGH COURT] wherein the Hon’ble Gujarat High Court while dealing with the demand for the longer period upheld the order of the Tribunal to the extent the demand was set aside on time bar. Even though the demand on merit was sustainable, but demand for the extended period was set aside. Considering this legal position is the present case since entire demand is beyond normal period the same is not sustainable - the penalties are also not sustainable. The impugned order is set aside and appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether hiring of buses to a State Road Transport Undertaking falls within the taxable service of 'Rent a Cab Operator Service' or any other taxable service. 2. Whether a demand for service tax relating to hiring of buses for the period May 2008 to March 2010 is barred by limitation (normal period) or could be sustained by invoking the extended period of limitation. 3. Whether penalties under Sections 76, 77 and 78 of the Finance Act, 1994 are sustainable where the tax demand is time-barred or where there is bonafide belief/absence of mala fide suppression; and whether relief under Section 80 is appropriate. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Taxability: whether hiring of buses to a State Road Transport Undertaking falls under 'Rent a Cab Operator Service' or another taxable head Legal framework: Service tax regime as applicable to 'Rent a Cab Operator Service', 'Tour Operator Service' and 'Supply of Tangible Goods Service' as per the Finance Act and related classification principles governing services versus sale/supply of goods. Precedent treatment: Various decisions have addressed the question and, as noted by the Tribunal, the later trend of authorities and courts concluded that hiring of buses can fall under 'Rent a Cab Operator Service'. Earlier ambiguity and differing approaches existed at adjudicatory levels. Interpretation and reasoning: The Tribunal observed that though there was no dispute that on merits the hiring of buses could be held taxable under the rent-a-cab head (and related authorities ultimately supported taxability), the question had been legally contentious and not free from doubt during the relevant period. Ratio vs. Obiter: The finding that hiring of buses is taxable under rent-a-cab (or akin) is treated as a merit-based view supported by subsequent consistent authorities - this is explanatory of the merits but not the operative basis for disposing the appeal. The Tribunal did not rest its decision on this point alone. Conclusion: On merits the service in question was capable of being held taxable under rent-a-cab operator service (and related heads), but that substantive conclusion is not determinative of the appeal because limitation governs the outcome. Issue 2 - Limitation: whether extended period can be invoked for the disputed period (May 2008-March 2010) Legal framework: Statutory limitation rules for assessment/demand of service tax, distinguishing the normal assessment period from the extended period (five years) which requires establishment of deliberate suppression, fraud, or mala fide conduct to invoke the longer limitation. Precedent treatment: The Tribunal relied on and followed the reasoning in decisions (reproduced and cited) holding that invocation of the extended period necessitates proof of deliberate suppression or mala fide conduct; where taxability was ambiguous and assessees acted under bona fide belief, extended limitation cannot be invoked. The Tribunal specifically referenced a High Court/Tribunal decision (Vijay Travels) and the Tribunal's own decision (Pearl Travels) where extended-period demands were set aside in similar factual/ legal circumstances. Interpretation and reasoning: The Tribunal reasoned that the issue of taxability of hiring of buses was not free from doubt during the relevant period and that the assessee had a bona fide belief and had even been discharging tax under other relevant heads in the past. The Tribunal concluded that there was no record of intentional suppression or mala fide conduct sufficient to justify invoking the extended five-year period. Where the entire demand related to a period beyond the normal limitation, it held the demand unsustainable. Ratio vs. Obiter: The holding that invocation of the extended limitation requires deliberate suppression/mala fide (and such was absent here) is the ratio applied to set aside the demand. References to the factual ambiguity and reliance on prior decisions are supporting ratio; discussion of merits of taxability is largely obiter in the context of disposal on limitation. Conclusion: The entire demand for the period May 2008-March 2010 is time-barred because the extended period could not be lawfully invoked in absence of evidence of deliberate suppression or mala fide; therefore the tax demand is not sustainable despite possible merit-based taxability. Issue 3 - Penalties and relief under Section 80 where demand is time-barred or bonafide belief exists Legal framework: Penal provisions under Sections 76, 77 and 78 of the Finance Act, 1994; Section 80 permitting waiver of penalties where failure to pay tax was bona fide and not due to intentional omission or suppression. Precedent treatment: The Tribunal relied on authorities recognizing that penalties requiring culpability (suppression, deliberate default) cannot be imposed where such culpability is absent, and that relief under Section 80 is available where bona fide belief or ambiguity existed. The Tribunal cited decisions where penalties were set aside in similar contexts. Interpretation and reasoning: Given the Tribunal's conclusion that the entire demand was time-barred because extended limitation could not be invoked (and that there was no mala fide suppression), the imposition of penalties tied to the taxable demand could not stand. The Tribunal treated penalty imposition as consequential upon the unsustainable demand and, applying the principle that penalties requiring intent are inappropriate where bona fide belief existed, held penalties unsustainable. Ratio vs. Obiter: The decision that penalties are not sustainable where the underlying tax demand is time-barred or where no suppression/mala fide is shown is the operative ratio in disposing of penalty issues. Observations regarding the applicability of Section 80 are applied as part of the ratio to relieve the assessee from penalties in the circumstances. Conclusion: Penalties under Sections 76, 77 and 78 are not sustainable in the facts of this case; where the demand is set aside as time-barred and no mala fide suppression is established, penalty relief follows (and Section 80 principles justify setting aside penalties). Cross-reference The Tribunal's disposition rests on limitation (Issue 2) and that finding directly determines Issue 3 (penalties); the merit finding on taxability (Issue 1) is acknowledged but not dispositive. Precedents treating extended limitation and penalty relief in cases of bona fide belief were followed to reach the conclusions above.