By TIOL News Service

MUMBAI, MAY 08, 2013: THE appellant is engaged in the business of transport solutions and undertook supply of cabs to M/s. Mahindra & Mahindra for the transportation of their staff. However, they did not register with the Central Excise department and pay service tax on the consideration received of Rs. 3.55 crores during the during the period 01/09/2001 to 31/05/2002. A show cause notice dated 13/10/2003 was issued to the appellant inter alia demanding service tax of Rs.17,77,448/- by classifying the service under the category of ‘Rent-a-Cab service'.

The demand was confirmed and penalties and interest were also imposed.

Since the Commissioner(A) dismissed their appeal, the appellant is before the CESTAT.

It is submitted that the appellant does not own any cabs; that they had entered into an agreement dated 21/11/2001 with M/s. Mahindra & Mahindra Ltd. for carrying out pick-up and drops of the staff of Mahindra & Mahindra as per the requirement of the said client; that they had hired the cabs from other vehicle owners and supplied the vehicles to M/s. Mahindra & Mahindra as per the contract; that the activity cannot be considered as ‘Rent-a-Cab Service' inasmuch as they have not undertaken any renting and that they were paid consideration based on the mileage used.

It is further submitted that in June, 2002 they had filed an application for registering themselves under ‘Storage and Warehousing Services' and ‘Rent-a-Cab-Services' and the department sought clarifications from them with regard to the registration under ‘Rent-a-Cab Services' which was replied to by them in August, 2002. In September, 2002 the department granted registration and sought information regarding date of commencement of the service and also to pay service tax @ 5% with applicable interest and to file relevant returns. In March, 2003 they had replied to the department informing that they are not operating under ‘rent-a-cab scheme' and informed the department that the consideration received by them during the period 01/09/2001 to 31/05/2002 would be Rs 3.55 crore and thereafter a show cause notice dated 13 th October 2003 was issued to them.

Based on the above, it is submitted that they did not suppress any information from the department and, therefore, extended period of time could not have been invoked by the department to confirm the demand.

The appellant also relied on the following decisions -

+ Kuldip Singh Gill - (2005-TIOL-908-CESTAT-DEL)

+ Ganesh Maniyani - (2007-TIOL-2055-CESTAT-BANG)

+ Deepak Transport Bus Service - (2012-TIOL-560-CESTAT-MUM)

+ Sri Sai Krishna Travels - (2010-TIOL-07-CESTAT-BANG)

+ Larsen & Toubro Ltd. - (2007-TIOL-75-SC-CX)

The Revenue representative submitted that from the terms of the contract entered into by the appellant with M/s. Mahindra & Mahindra Ltd., it is apparent that the same was for supply of cabs of different specifications along with drivers and, therefore, the activity would come squarely under the category of ‘Rent-a-Cab Services'. On the point of limitation, it is submitted that the information was provided to the department about the activities of the appellant and the consideration received for the same, only in March, 2003 and the show cause notice has been issued in October, 2003, i.e. within a period of one year from the date of knowledge, and, therefore, the demand is sustainable in law.

The Bench perused the agreement and inter alia observed -

"…There is no stipulation either in the Act or in the Rules that the person renting the cabs should also own the vehicles. So long as the person rents a cab either owned by him or cabs procured from elsewhere, the liability to pay service tax would arise and, therefore, the activity undertaken by the appellant gets squarely covered under the definition of ‘Rent-a-Cab Services'."

As for the case laws relied upon by the appellant the bench noted that all those decisions were based on the Tribunal ruling in Kuldip Singh Gill's case which has been overruled by the Punjab & Haryana High Court wherein it was held that the transport services provided by the respondent was taxable under the category of ‘Rent-a-Cab' Services.

On the question of limitation, the Bench observed that even though the appellant applied for registration in June, 2002, there were number of correspondences exchanged between the department and the appellant, and the information relating to the consideration received by the appellant during the period 01/09/2011 to 31/05/2002 was furnished by the appellant to the department only in March, 2003, even though the department had sought for these details as early as in October, 2002.

Narrating the above factual scenario, the Bench held that since the SCN had been issued on 13 th October 2003, i.e. within a period of one year from the date of knowledge, it could not be alleged that the show cause notice is time barred, as held by the apex Court in the case of Nizam Sugar Factory Ltd. - (2006-TIOL-56-SC-CX).

Finding no merit in the appeal, the same was dismissed by the Bench.

(See 2013-TIOL-703-CESTAT-MUM)