By TIOL News Service

NEW DELHI, JUNE 13, 2013: THE period of dispute is from 1/6/07 to 31/7/08.

The appellants owned buses. They entered into contract with PEPSU Road Transport Corporation (PRTC), a Punjab State Government Undertaking, under which they put their buses at the disposal of PRTC. In terms of the contract, the repair and maintenance of the buses and expense on diesel was to be borne by the appellant and the driver was also to be provided by the appellants on their expense. The buses, however, were to be operated by PRTC on various routes and the conductors were of PRTC. The buses were being operated as stage coaches. The conductors on the buses were of PRTC who were selling the tickets.

The appellants were not entitled to the sale proceeds of the tickets. In terms of the contracts the appellants were to receive an amount on per day basis which was to be paid on fortnightly basis. However, if on any day, the actual kilometres covered by a bus was less than 50% of the allotted kilometres in terms of the agreement, in that case no payment would be made for that day to the owner of the hired bus.

The department took a view that the appellants are providing "Rent-a-Cab service" and are liable to pay Service Tax.

Since the lower authorities upheld the demands, the appellant is before the CESTAT and after mentioning the contents of the agreement entered submitted -

+ their activity of providing their buses to PRTC does not fall under the category of rent a cab scheme operator's service as the appellants have only provided their vehicles to PRTC and have not provided any transport service to PRTC inasmuch as they are not capable of providing any transport service without a permit, that in view of this, the ratio of judgment of Punjab & Haryana High Court in the case of CCE, Chandigarh vs. Kuldeep Singh Gili - (2010-TIOL-436-HC-P-H-ST) would not be applicable, as this judgment is applicable only if the service provider provides transport service to the service recipient;

+ that at the most the appellant's activity of providing their buses to PRTC can be classified under the category of supply of tangible goods service which became taxable w.e.f. 16/5/08 under Section 65 (105) (zzzzj) of the Finance Act, 1994, that in this regard, the appellant rely upon the Tribunal's judgment in the case of G. Karunakar Reddy vs. CST, Hyderabad - (2010-TIOL-1842-CESTAT-BANG) and that in any case even if the appellant activity is treated as rent a cab service, they would be eligible for abatement in terms of Notification No. 1/2006-ST and in addition to this also to the benefit of Notification No. 6/2005-ST, that benefit of these exemption notifications has not been considered by the lower authorities and if these notifications are taken into account there would be no service tax liability.

The Revenue representative reiterated the findings of the lower authorities and placed reliance on the decision in Deepak Transport Bus Service vs. CCE, Pune -III - 2012-TIOL-560-CESTAT-MUM, Secretary Federation of Bus Operator Association of Tamilnadu vs. Union of India - (2003-TIOL-33-HC-MAD-ST).

The Bench observed -

"6. On going through the facts of this case and also going through the judgment of coordinate bench of the Tribunal in the case of Deepak Transport Bus Service vs. CCE, Pune - III (supra) we find that the facts of this group of cases are identical to the facts of the case of M/s Deepak Transport Bus Service and issue involved is also identical. Moreover, we also find that the stand of the appellants themselves is that they are not providing transport service to PRTC but have given their buses on hire. In view of this, following the ratio of the Tribunal judgment in the case of Deepak Transport Bus Service vs. CCE, Pune -III (supra) we hold that the activity of the appellants would be taxable as rent a cab service under Section 65 (105) (o) and read with Section 65 (20) and 65 (91) of the Finance Act, 1994. However, we find that the Commissioner (Appeals) has not considered the appellant's claim with regard to their eligibility for abatement under Notification No. 1/2006-ST and also for the benefit of exemption under Notification No. 6/2005-ST. In view of this, while upholding that the service provided by the appellants is taxable as rent a cab service, we remand the matters to Commissioner (Appeals) for considering the appellant's plea with regard to their eligibility for the benefit of Notifications No. 1/2006-ST and 6/2005-ST and re-quantification the duty liability and also redetermination of the quantum of penalty which would be proportionate to service tax demands upheld…."

The appeals were disposed of as above.

(See 2013-TIOL-888-CESTAT-DEL)