Bus Hiring to APSRTC Classified as Deemed Sale, Subject to Sales Tax, Not Service Tax; Appeals Allowed, Benefits Granted.

The Tribunal determined that the appellant's activity of hiring buses to the Andhra Pradesh State Road Transport Corporation (APSRTC) is classified as "Transfer of Right to Use" rather than "Rent a Cab" service. This classification means the activity is considered a deemed sale of goods, thus subject to sales tax instead of service tax. Consequently, the Tribunal allowed the appeals, set aside the impugned order, and granted the appellants consequential benefits.

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Issues involved:
The issue involved in this appeal is whether the hiring of vehicles/buses by the appellant to Andhra Pradesh State Road Transport Corporation (APSRTC) falls under "Rent a Cab" service and thus chargeable to service tax.

Details of the Judgment:

Issue 1 - Interpretation of service tax applicability on hiring of vehicles:
The appellant owned buses hired to APSRTC under a hire bus system introduced to meet transportation demand. The RTC only provided a conductor, while the appellant was responsible for the driver, maintenance, and expenses. The appellant purchased a new vehicle as per RTC specifications, which RTC registered and reimbursed various expenses. The Finance Act 2007 expanded the definition of "Cab" and "Rent-a-cab scheme operator." The Department issued a show cause notice for service tax, ignoring a stay granted by the High Court and relying on a previous Tribunal ruling.

Issue 2 - Applicability of "Transfer of Right to Use" vs. "Rent a Cab" service:
The appellant argued that their activity falls under "Transfer of Right to Use," deemed a sale of goods under the Constitution. They presented a writ petition and circulars supporting this argument. The AR relied on a High Court judgment and APSRTC tender clauses. The DR supported the adjudicating officer's orders and cited previous Tribunal and High Court judgments.

Judgment:
After reviewing the arguments, circulars, and agreements, the Tribunal found that the activity of hiring vehicles to APSRTC constitutes "Transfer of Right to Use" and not "Rent a Cab" service. Citing a clarification by the Central Government, the Tribunal held that the activity is a deemed sale of goods liable to sales tax, not service tax. The appeals were allowed, and the impugned order was set aside, granting the appellants consequential benefits.

(Order Pronounced in open court on 09.11.2023)

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