TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 562
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.... been entered into a Master Lease Agreement (MLA) with the Lessees. Under the MLA, as and when any lessee requires a motor vehicle for use by him/it or for its employees, the lessee approaches the appellants with the requirements. The motor vehicle, to be purchased and leased by the appellants to the customer, is selected by the lessee pursuant to which, the appellants purchase the motor vehicle and instructs the dealer of the motor vehicle to deliver the said vehicle to the lessee. The motor vehicle is purchased by the appellants from the motor vehicle dealer and therefore always it remains as the property of the appellants. However, for the purposes of the Motor Vehicles Act, 1988, the Motor Vehicle is registered in the name of the Lessee as the User thereof and the appellants name is record under the heading of 'hypothecated to/financer'. In terms of the Operating Lease Agreement, the aforesaid transaction is 'deemed sale' of motor vehicles by the appellants to their clients, which has been recognized under Article 366 (29A) of the Constitution of India. Such activity is not subjected to levy of service tax both prior to the introduction of negative list, as any specified taxabl....
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.... Rules, 1994 and for imposition of penalties under Section 76, 77, 78 ibid. The various Show Cause Notices (SCNs) issued on the appellants were adjudicated by Commissioner in confirming the adjudged demands along with interest under Sections 73 and 75 ibid, respectively, besides imposition of penalties under Sections 76, 77, 78 ibid, vide impugned order dated 04.11.2015. The details of these SCNs are as follows: S. No. Show Cause Notice No & Date Period of demand Amount of Service Tax Demanded In Rs. 1 F. No. ST/HQ/AE/A/279/ 06/3456 dated 18.10.2011 01.04.2006 to 31.03.2011 39,57,88,487 2 F. No. ST/MUM/Dn-III/GrV/ALD/Auto/SCN/51/2012 dated 18.10.2012 01.04.2011 to 31.03.2012 14,45,42,318 3 F. No. ST/MUM/Dn-III/Gr-I/ ALD/Auto/SCN/2013/3543 dated 13.05.2014 01.04.2012 to 31.03.2013 20,71,78,374 4 F. No. ST/MUM/Dn-III/Gr-I/ ALD/Auto/SCN/2013/305 dated 23.03.2015 01.04.2013 to 31.03.2014 23,55,89,507 Total 98,30,98,686 Feeling aggrieved with the impugned order, the appellants have preferred these appeals before the Tribunal. 3.2 Learned Advocate for the appellants contends that purchase of motor vehicles under operation leas....
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....vate vehicles. 3.4 In the impugned order dated 04.11.2015, the Commissioner has confirmed the demands on the ground that the services rendered by the appellants under MLA, are Rent-a-Cab operator service for the pre-Negative list period and thereafter as a service, which is not specifically covered under the 'negative list'. In this regard, learned Advocate stated that in a lease transaction there does not necessitate the transfer of ownership. In the lease transaction under MLA in their case, the vehicle is given on lease to their customers as lessee and is always physically available to the lessee himself; He is not required to seek approval or inform the appellants to use the vehicle; even when the lessee decides to move the vehicle on permanent basis to another location, it is only for the requirement of registration under Motor Vehicles Act, 1988, when it involves different States/UTs, he is informing the appellants. Accordingly, he submitted that the motor vehicle on lease/MLA is at the discretion or will of the lessee customers, sufficiently demonstrating that the transfer of control and possession of the vehicle is with the lessee. Hence, he stated that the lease tra....
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...." means any service provided or to be provided,- (a) .... xx xx xx xx xx (o) to any person, by a rent-a-cab scheme operator in relation to the renting of a cab; 65. (91) "rent-a-cab scheme operator" means any person engaged in the business of renting of cabs; 65. (20) "cab" means (i) a motorcab, or (ii) a maxicab, or (iii) any motor vehicle constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward: Provided that the maxicab referred to in sub-clause (ii) or motor vehicle referred to in subclause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of cab;" 6.3. At the time of introduction of service tax levy on Rent-a-Cab scheme services vide Notification No.26/97-ST dated 11.07.2017, the Ministry of Finance had issued clarification on the scope of levy as follows: "3. RENT-A-CAB SCHEME OPERATORS 3.1 As per Section 88 of the Finance Act, 1997, 'rent....
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....-Cab Scheme service has to be understood in the context of definition of Rent-a-Cab Scheme Operator provided earlier under Section 65(32) as follows: "65. (32) "rent-a-cab scheme operator" means a person who is the holder of a license under the Rent-a-Cab-Scheme, 1989 framed by the Central Government under the Motor Vehicles Act, 1988 (59 of 1988)"; This definition was later amended in the Finance (No.2) Act, 1998 as provided in paragraph 6.2 referred above, so as to include 'any person' providing a service instead of limiting it to the 'person holding a license under the Motor Vehicles Act, 1988'. However, the context of the service provided, whether it is by a 'person holding license' under Motor Vehicles Act or after amendment by 'any person', which is subject to levy of service tax remained the same i.e., 'renting of cabs'. 6.4 From the plain reading of the above legal provisions, it transpires that for the period relating to the pre-negative list regime i.e., prior to 01.07.2012, the taxability was determined in terms of coverage of an activity under the service tax net be defining taxable services under Section 65(105) ibid, which enumerated each of the specified se....
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.... goods. Further, the Supreme Court in the case of Bharat Sanchar Nigam Limited vs Union of India, reported in 2006(2) STR 161 SC, had laid down the following criteria to determine whether a transaction involves transfer of the right to use goods, namely,- a. There must be goods available for delivery; b. There must be a consensus ad idem as to the identity of the goods; c. The transferee should have a legal right to use the goods - consequently all legal consequences of such use, including any permissions or licenses required therefor should be available to the transferee; d. For the period during which the transferee has such legal right, it has to be to the exclusion to the transferor this is the necessary concomitant of the plain language of the statute - viz. a "transfer of the right" to use and not merely a licence to use the goods; e. Having transferred the right to use the goods during the period for which it is to be transferred, the owner cannot again transfer the same right to others. 3.1 This criteria must invariably be followed and applied to cases involving hiring, leasing or licensing of goods. The terms of the contract must be studied carefully vis-....
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....lve short term provision of an aircraft along with crew, maintenance and insurance while the lessee bears other operating expenses. In contrast, a "dry lease" is for a relatively longer term and involves the provision of an aircraft only without crew. 4.3 The above two situations have been elaborated only to explain and emphasize the diverse nature of such transactions. There can be variations and in some cases, a combination. 5. In all these cases, no a priori generalisations or assumptions about service tax liability should be made and the terms of the contract should be examined carefully, against the backdrop of the criteria laid down by the Supreme Court in the Bharat Sanchar Nigam Limited case as well as other judicial pronouncements." 7.3 We have examined various clauses contained in the sample Master Lease Agreement submitted by the appellants. This sample agreement has been entered into by the appellants ALD Automotive Private Limited (ALD) with Accenture Services Private Limited, and some of the important clauses which are relevant for such examination of 5-point criteria are as follows: "1. Purpose of the Contract: 1.1. The purpose of this contra....
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....re are separate clauses contained in this Master Lease Agreement for 'vehicle custody, use, maintenance and repairs'; 'vehicle return'; 'insurance'; 'terminal kilometres'; 'impose, taxes and other charges'; 'invoicing and payments'; 'amendments, early termination, waiver. Assignment, limitation of liability, arbitration' standard classes for the Lease agreement. 7.4 On careful examination of the above clauses, we are of the considered view that in the operational lease transaction as above there is complete compliance with the five point criteria laid down by the Hon'ble Supreme Court, as follows: (i) the goods i.e., the motor vehicle(s) have been agreed for delivery from the lessor to lessee; (ii) on identity of the goods i.e., the motor vehicle(s) under the lease arrangement, among the lessor and lessee they are in agreement of the goods handled in such lease and as per the terms and conditions thereof; (iii) the lessee being the transferee has got the legal right to use the motor vehicle(s) and consequently all legal consequences of such use, including any permissions or licenses required therefor are made available to the lessee; (iv) there is a definite lease pe....
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....w cause notice as well as the grant of abatement of sixty per cent available under Notification No. 1/2006-S.T., dated 1st March, 2006. 3. The levy of service tax on 'rent-a-cab' was subject to detailed examination by the Hon'ble High Court of Gujarat in Commissioner of Service Tax v. Vijay Travels [2014 (36) S.T.R. 513 (Guj.)] and we do not need to look elsewhere for a more authoritative exposition. By incorporation of Section 65(105)(o) in Finance Act, 1994 with effect from 16th July 1997, the 'service provided or to be provided to any person by a rent-a-cab scheme operator in relation to the renting of a cab' was taxable and the two key expressions deployed therein, viz., 'rent-a-cab scheme operator' was defined as '(91)... means any person engaged in the business of renting of cabs' and 'cab' as '(20)... means - (i) a motorcab, or (ii) a maxicab, or (iii) any motor vehicle constructed or adapted to carry more than 12 passengers, excluding the driver, for hire or reward...' in Section 65 of Finance Act, 1994. The definition has evolved over the time that the activity was brought within the tax net. Initially, it was intended to subjec....
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....n the Constitution of India. 13. Agreements/contracts of 'lease' are, acknowledgedly, taxable as 'deemed sale'; it is not the case of Revenue that any portion of the consideration for 'lease' is not 'deemed sale'. As the entire rental is subject to tax as 'deemed sale', there is no scope for any portion thereof to be leviable to tax by the Union and, thereby, under Finance Act, 1994. 14. In the above circumstances, and in the light of discharge of tax liability under Finance Act, 1994 on some of the consideration earned by the assessee, the scope for subjecting 'lease rental' to tax, as proposed in the show cause notice, cannot sustain in the absence of a valid machinery provision recognized in the taxing statute. Accordingly, the impugned orders are set aside and appeal of assessee allowed while appeal of Revenue stands dismissed." 8.2 We further find that Co-ordinate Bench of this Tribunal in a similar set of circumstances in the case of Orix Auto Infrastructure Services Ltd. (supra) had concluded that 'operating lease agreement' for providing motor vehicles by the appellant company to their customers, is squarely covered under the scope of 'deemed sale'. The relevant ....