2024 (9) TMI 1080 - AT - Service Tax

Rent-a-cab service provider liable for service tax despite retained vehicle ownership, penalty reduced under Section 78

CESTAT New Delhi held that appellant providing vehicles to clients with retained ownership constituted rent-a-cab service liable for service tax. The ... Appellant was providing rent-a-cab service or not - extended period of limitation - demand with interest and penalty. Whether the appellant was providing rent a cab service? - HELD THAT:- Admittedly, the appellants are providing motor vehicles to various clients based on the agreements and received considerations for the same. It is also admitted that ownership of the vehicle continued to remain with the appellant with registration, insurance and other requirements so that the vehicle is owned by the appellant all throughout - In the instant case, it is noted that the car had been hired on monthly basis by the client SECL, as per the sample work order. The rate contract also stipulated that such rate is inclusive of service tax. Accordingly, the impugned order is correct in holding that the appellant is liable to service tax in respect of the services rendered by him under the category of 'rent-a-cab services'. It is also noted that the aforesaid work order specifically includes that the rate was inclusive of service tax. This clearly means that the appellant was liable to pay the service tax dues for the provision of the said service. Extended period of limitation - Suppression of facts or not - HELD THAT:- The appellant had taken service tax registration under the rent -a -cab service in 2001- 02. The appellant had filed the returns upto 31.3.2005, and thereafter stopped filing returns. It is recorded in the show cause notice that it was during the examination of the records of SECL that the activity of the appellant came to the knowledge of the department - the appellant was aware that he/she was liable to pay the service tax dues for the provision of the said service, and failed to do so. This clearly establishes their intent to evade the tax. In view of the same, the extended period has been correctly invoked by the department. Payment of interest - HELD THAT:- In the case of PRATIBHA PROCESSORS VERSUS UNION OF INDIA [1996 (10) TMI 88 - SUPREME COURT] the Supreme Court held that “Interest is compensatory in character and is imposed on an assessee who has withheld payment of any tax as and when it is due and payable’. Accordingly, the demand of interest in the impugned order is correct. Penalties - HELD THAT:- Penalty u/s 77 upheld - Section 78 of the Finance Act,1994 provides for reduced penalty at 25%, provided the service tax and the interest thereon is paid within 30 days from the date of communication of the order of the Central Excise Officer determining such service tax - In the instant case, the order in original was passed on 31.10.2017. As per the impugned order, the appellant has paid the entire tax and interest amount on 11.07.2016, which is well before the date of the instant order in original. In view of the above, the appellant is eligible for the benefit of reduced penalty under Section 78 of the Act. Appeal allowed. Issues Involved:1. Whether the appellant was providing rent-a-cab service.2. Applicability of extended period for demand.3. Liability of the appellant for the period April 2010 to December 2010.4. Imposition of interest and penalties under Sections 77 and 78 of the Finance Act, 1994.5. Eligibility for reduced penalty under Section 78 of the Finance Act, 1994.Detailed Analysis:1. Whether the appellant was providing rent-a-cab service:The Tribunal examined the sample work order from SECL, which indicated that the appellant provided Tata Indica vehicles on a monthly rental basis, inclusive of service tax. The Tribunal noted that the appellant provided vehicles under both rate and non-rate contracts, with drivers employed by the appellant, and all maintenance and statutory charges borne by the appellant. The vehicles remained under the appellant's control and possession. Based on the statutory provisions under Section 65(105)(o) of the Finance Act, 1994, and relevant case law, the Tribunal held that the appellant was indeed providing rent-a-cab service and was liable to pay service tax.2. Applicability of extended period for demand:The Tribunal noted that the appellant had service tax registration since 2001-2002 but stopped filing returns after March 2005. The department discovered the appellant's activities during an investigation of SECL's records. Despite several reminders, the appellant did not furnish the required information or appear for personal hearings. The Tribunal found that the appellant was aware of their service tax liability, as the work order from SECL included service tax. This established the appellant's intent to evade tax, justifying the invocation of the extended period for demand.3. Liability of the appellant for the period April 2010 to December 2010:The appellant contended that the liability for service tax should only be on Ms. Anita Sakhuja until March 2010, as her son Mr. Gautam Sakhuja became the proprietor thereafter. The Tribunal noted that the appellant continued to operate under the same registration number and received payments from SECL under the same business name. The appellant failed to inform the department about the change in proprietorship or amend the registration certificate. Therefore, the Tribunal held that the appellant was liable for the entire period up to December 2010.4. Imposition of interest and penalties under Sections 77 and 78 of the Finance Act, 1994:The Tribunal upheld the imposition of interest, citing the Supreme Court's decision in Pratibha Processors v. Union of India, which characterizes interest as compensatory for withholding tax payments. The Tribunal also upheld the penalty under Section 77, agreeing with the adjudicating authority's findings that the appellant failed to furnish records despite ample opportunities.5. Eligibility for reduced penalty under Section 78 of the Finance Act, 1994:The Tribunal accepted the appellant's submission for a reduced penalty under Section 78, as the appellant had paid the entire service tax and interest before the adjudicating authority's order. Section 78 provides for a reduced penalty of 25% if the tax and interest are paid within 30 days from the order's communication. The Tribunal held that the appellant was eligible for this benefit.Conclusion:The Tribunal modified the impugned order as follows:1. Upheld the demand for service tax on rent-a-cab service along with interest.2. Upheld the penalty under Section 77.3. Reduced the penalty under Section 78 to 25% of the confirmed demand.The appeal was allowed to the extent of the reduced penalty under Section 78. The order was pronounced in open court on 18.09.2024.