2025 (7) TMI 1713 - AT - Service Tax

Bus transport services for employees and children exempt from service tax under Notification 25/2012, Entry 23(b)

M/s. Century Pulp & Paper Versus Commissioner of CGST - Dehradun

The CESTAT held that the appellant's arrangement for providing bus services to transport employees and school children did not attract service tax under ... Taxability - providing bus services to the factory employees and school going children on various routes on the terms and conditions mentioned in the agreements - applicability of N/N. 30/2012-ST dated 20.06.2012 (as amended from time to time) - Applicability of reverse charge mechanism - HELD THAT:- The appellant had entered into an agreement with various tour and travel agencies for providing buses to the appellants for transportation of their employees and the school going children as per their requirement on various routes on per day payment basis alongwith the payment of amount towards diesel and mobil oil consumed on actual basis. These facts when glanced through the definition of the contract carriage it becomes clear that the appellant entered into the contract for taking motor vehicles on hire for carrying passengers. Admittedly the appellant has not used the hired contract carriage / motor vehicle / bus for the purposes of tourism or conducted tour or charter. It becomes clear that the activity of taking contract carriage / buses for transportation of school children / employee of the appellant on payment of per day charges alongwith the charges of diesel / mobil oil is an activity fully exempted from payment of tax in terms of notification no. 25/2012 dated 20.06.2013, entry no. 23(b). The decision relied upon by the department in the case of Anil Kumar Agnihotri vs. Commissioner of Central Excise Kanpur [2018 (1) TMI 171 - ALLAHABAD HIGH COURT] is not applicable to the fact and circumstances of the present case: the activity in the present case not being rent a cab service. It is not even precisely, ‘hire’ due to terms and conditions of the agreement between the appellant with the tour operator. By virtue of Section 75 of the Finance Act, 2001 and in view of Notification No. 20/2009-S.T., dated 7th July, 2009, no Service tax is leviable in respect of the amount paid by the appellants by carrying the passengers (Employees and Scholl Children) in contract carriage. Thus, even if it is assumed that service rendered by the appellant comes under the category of 'tour operator' in sub-clause (n) of clause (105) of the Finance Act, in any case, for the period from 1st April, 2000 onwards, no Service tax whatsoever can be demanded from the appellants. Consequently, no penalty can be imposed on them for the said period. Finally it is observed that the findings in Impugned order regarding setting aside demand for extended period have attained finality. The department’s appeal being withdrawn. The order confirming the demand for the normal period is hereby set aside in the light of entire above discussion - Appeal allowed. ISSUES: Whether the service of providing bus transportation to factory employees and school children qualifies as 'renting of a motor vehicle designed to carry passengers' attracting Service Tax under the Reverse Charge Mechanism (RCM) as per Notification No. 30/2012-ST dated 20.06.2012.Whether the exemption under entry no. 23(b) of Notification No. 25/2012-ST dated 20.06.2012 applies to the bus services engaged by the appellant, thereby excluding the liability to pay Service Tax.Whether the extended period for demand of Service Tax was rightly invoked or not.Whether penalties and interest can be imposed when the service is exempted under the relevant notifications and statutory provisions. RULINGS / HOLDINGS: On the applicability of Service Tax under RCM: The service of transportation of employees and school children by contract carriage buses falls under the exemption provided by entry no. 23(b) of Notification No. 25/2012-ST, and therefore, the appellant is not liable to pay Service Tax under the Reverse Charge Mechanism as per Notification No. 30/2012-ST.Regarding the exemption under Notification No. 25/2012-ST: The activity of hiring contract carriages for transportation excluding tourism, conducted tours, charter or hire is 'fully exempted from payment of tax' under entry no. 23(b) during the relevant period.On the extended period invocation: The extended period for demand was wrongly invoked, and the order confirming demand for the extended period was set aside by the Commissioner (Appeals), a finding which has attained finality.On imposition of penalties and interest: Since no Service Tax is leviable for the relevant period due to exemption under Notification No. 20/2009-ST and validation under Section 75 of the Finance Act, 2011, no penalty or interest can be imposed on the appellant. RATIONALE: The Court applied the statutory framework under the Finance Act, 1994, particularly Section 68(2) empowering issuance of notifications for reverse charge, and the relevant Notifications Nos. 30/2012-ST, 25/2012-ST, and 20/2009-ST.The definition of 'contract carriage' under Section 2(7) of the Motor Vehicles Act, 1988 was pivotal in determining the nature of the service, emphasizing that the buses were hired for point-to-point transportation excluding tourism or charter.Notification No. 25/2012-ST entry no. 23(b) exempted contract carriages used for transportation excluding tourism, which was supported by earlier notifications and clarifications including Circular No. 334/13/2009-TRU and retrospective validation under Section 75 of the Finance Act, 2011.The Court distinguished the present case from precedents relied upon by the department that dealt with rent-a-cab services or different factual matrices, noting that the present service was not 'rent a cab' service but contract carriage exempted under the exemption notification.The principle of 'no Service Tax leviable' under the exemption notification and retrospective validation negated the imposition of any tax, interest, or penalty for the relevant period.The decision reflects adherence to the established exemption regime and rejects the department's attempt to tax exempted contract carriage services under the reverse charge mechanism.