Appellant's bus transportation service to ONGC not liable for service tax under Section 65(91) rent-a-cab category

CESTAT Kolkata held that appellant's provision of two 45-seater buses to ONGC for transportation services in Assam and North-Eastern Region did not constitute rent-a-cab service under Section 65(91) of Finance Act, 1994. The tribunal found that since ownership and possession of vehicles remained with appellant throughout the contract period, with payments based on kilometre/duration, the service was transportation rather than renting. Following precedent from Shree Gayatri Tourist Bus Service case, CESTAT ruled the service was not liable to service tax under rent-a-cab category, allowing the appeal and setting aside demand for service tax, interest, and penalty.

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Issues Involved:
1. Classification of service provided by the Appellant.
2. Liability to pay Service Tax under 'rent-a-cab service'.
3. Validity of interest and penalty imposed.

Issue-wise Detailed Analysis:

1. Classification of Service Provided by the Appellant:

The Appellant contended that the service they provided was not 'rent-a-cab service' but rather a transportation service. The Appellant provided two 45-seater buses to ONGC for transportation purposes. The ownership and possession of the vehicles remained with the Appellant during the contract period. The Appellant argued that in a 'rent-a-cab service', the ownership and possession of the vehicle are temporarily transferred to the hirer, which was not the case here. The Tribunal observed that the Appellant retained ownership and possession of the vehicles, and the service provided was transportation and not renting.

2. Liability to Pay Service Tax under 'rent-a-cab service':

The Department alleged that the Appellant had rendered 'rent-a-cab service' and had not discharged Service Tax. A Show Cause Notice was issued demanding Service Tax of Rs. 1,14,806/-. The adjudicating authority confirmed the demands, which were upheld by the Commissioner (Appeals). The Tribunal, however, noted that the agreement between the Appellant and ONGC did not involve the transfer of possession of the vehicles to ONGC. The Tribunal cited clauses from the contract which indicated that the Appellant was responsible for the operation and maintenance of the vehicles. The Tribunal concluded that the service provided was transportation, not 'rent-a-cab service', and thus not liable to Service Tax under the specified category.

3. Validity of Interest and Penalty Imposed:

Since the Tribunal held that the service rendered by the Appellant was not 'rent-a-cab service' and thus not liable to Service Tax, the demands for interest and penalty were also deemed unsustainable. The Tribunal set aside the demands of Service Tax along with interest and penalty confirmed in the impugned order.

Conclusion:

The Tribunal allowed the appeal filed by the Appellant, setting aside the demands of Service Tax, interest, and penalty. The Tribunal determined that the service provided by the Appellant was transportation and not 'rent-a-cab service', thereby not attracting Service Tax under the disputed category. The decision in the case of Shree Gayatri Tourist Bus Service v. Commissioner of Central Excise, Vadodra was relied upon to support this conclusion.

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