TaxTMI 
TaxTMI 
2024 (3) TMI 562
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....mers. For this purpose, the appellants have 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 introductio....
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....with Section 68 ibid, Rule 6 of the Service Tax 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 Trib....
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....the vehicles are registered as commercial vehicle; whereas in their case under MLA, the vehicles are registered as private 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 demonstr....
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....provisions of the Finance Act, 1994, as applicable in the present case of 'Rent-a-Cab Scheme' service, are extracted and given below: "Finance Act, 1994 65. (105) "taxable service" 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....
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.... Scheme operator, by another rent-a-cab scheme operator who has sub-let the motor cab to the latter operator provided who pays service tax on the amount billed to his client for renting out the motor cab so obtained by him." However, the above scope of levy of service tax on Rent-a-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 provisio....
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....d some representations have been received. 2. The matter has been examined. I am directed to draw your attention to the fact that in any given case involving hiring, leasing or licensing of goods, it is essential to determine whether, in terms of the contract, there is a transfer of the right to use the 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; ....
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....er of the risks and rewards associated with that asset to the lessee. It is for a short term period and at the end of the lease period the lessee does not have an option to purchase the asset. The cost of repairs, maintenance and obsolescence rests with the lessor. 4.2. Similarly in the aircraft industry there are "dry leases" and "wet leases". Generally speaking, "wet leases" may involve 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 var....
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....ties: 4.2 The lessee warrants that it has obtained all consents, licences, approvals as are necessary for or in connection with the execution, validity and enforceability of this MLA and the vehicle lease contract and for the use and operation of the vehicle and undertakes to give them effective and in force at all times during the period of this MLA and till the vehicle is delivered back to the ALD as specified in this MLA." Further, we find that there 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....
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.... discharged as provider of 'management, maintenance or repair service' and on commission received from insurance companies as provider of 'business auxiliary services' while, claiming the transaction to be 'deemed sale', the 'lease rental' was not offered up as consideration for rendering taxable service. A portion of the confirmed demand pertains to the period prior to 'negative list' regime of taxation of services. Revenue challenges the discarding of tax liability for the extended period proposed in the show 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....
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....ng so. In 'works contracts', there is an aspect that is beyond the taxing powers of the States which could, under Parliamentary sanction, be taxed by the Union. In both 'sales' and 'services', the taxable event is determined by the existence of 'buyer/recipient' and 'seller/provider' with the conclusion of the contractual obligation as the definitive event to be taxed. In the absence of concurrent jurisdiction, the vivisection of such enumerations in Article 366(29A) of the Constitution of India alone can confer the authority under List-I of the Seventh Schedule in 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 ....