Rent-a-Cab classification fails where buses remain under supplier control and the arrangement is treated as transport service.

Supplying buses with drivers and maintenance to a transport corporation was treated as a transport arrangement, not Rent-a-Cab Service, because route control and ticket issuance remained with the corporation and effective operational control did not pass to the recipient. The Tribunal also noted that the legal position was unsettled during the relevant period and accepted the supplier's bona fide belief of non-taxability, so the extended limitation period was not available and the consequential penalties could not survive. The demand therefore failed on merits and on limitation, and the assessee obtained full relief.

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Issues: (i) Whether the arrangement for supplying buses with drivers and maintenance to the transport corporation constituted Rent-a-Cab Service and attracted service tax. (ii) Whether the demand was barred by limitation and whether the penalties were sustainable.

Issue (i): Whether the arrangement for supplying buses with drivers and maintenance to the transport corporation constituted Rent-a-Cab Service and attracted service tax.

Analysis: The contract required the appellant to provide buses with drivers and to maintain the buses, while route control and ticket issuance remained with the transport corporation. Rent-a-Cab Service covers renting of a cab as a taxable service, but not every arrangement involving a vehicle and driver. On the facts found, the service retained the character of transport service rather than hiring of a cab for the client's disposal and control. The Tribunal also relied on the larger bench view that such an arrangement did not amount to Rent-a-Cab Service.

Conclusion: The activity was not taxable as Rent-a-Cab Service, and the demand failed on merits.

Issue (ii): Whether the demand was barred by limitation and whether the penalties were sustainable.

Analysis: The dispute involved a period for which the law had remained unsettled, and the appellant's belief that the activity was not taxable was treated as bona fide. In such circumstances, invocation of the extended period was not justified. Since the demand itself was not sustainable and was time barred, the consequential penalties under the penalty provisions also could not survive.

Conclusion: The demand was barred by limitation, and the penalties were not sustainable.

Final Conclusion: The impugned order was set aside and the assessee obtained complete relief.

Ratio Decidendi: Supplying vehicles with drivers does not amount to Rent-a-Cab Service where effective operational control remains with the supplier and the arrangement is one of transport service rather than hiring for the client's disposal, and in a genuinely unsettled legal position the extended period and consequential penalties cannot be sustained.

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