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CX – Sourcing of 'Emergency response vehicles' while handling hydrocarbons which are inflammable and combustible is an Input Service – service availed is not that of 'rent-a-cab': CESTAT

By TIOL News Service

MUMBAI, APRIL 06, 2018: THE appellant manufactures 'compressed natural gas' which is obtained by subjecting 'liquefied natural gas' to a process of gasification and compression before transporting.

Safety requirements mandate presence of emergency response vehicles which the appellant sources from elsewhere and on the service tax discharged thereon for the period between 1 st May 2011 and 31 st March 2015, credit was availed to the extent of Rs.13,57,800/-.

Paragraph 1.8, Annexure – C titled 'Important Changes in CENVAT Rules, 2004' to D.O. F.No. 334/3/2011-TRU dated 28 February 2011 reads -

1.8 Similarly services relating to motor vehicle i.e. rent-a-cab, use of tangible goods, insurance or repair of vehicle shall not constitute an "input service? except in respect of output services where credit on motor vehicle is permitted as "capital goods".

The jurisdictional authorities viewed that such 'rent-a-cab service' is not an Input service in terms of rule 2(l) of CCR, 2004 as amended w.e.f 01.04.2011.

The demand was confirmed along with penalty and interest and since the order was upheld by the Commissioner(A), the appellant is before the CESTAT.

It is submitted that the service availed is not 'rent-a-cab service' as the vehicles are specially configured and conform to safety requirements; that they are not for carrying passengers. Further, the contract was for 'hire' which is materially different from renting to bring it within the ambit of 'rent-a-cab'; an expression peculiar to a scheme in Motor Vehicles Act, 1988. Reliance is placed on the decision of the Tribunal in P B Bobde = 2015-TIOL-2721-CESTAT-MUM and Nihilent Technologies Pvt. Ltd. - 2017-TIOL-2696-CESTAT-MUM

The AR supported the impugned order and pleaded that in view of the decision in Express Tours and Travels Pvt. Ltd. - 2005-TIOL-338-CESTAT-MUM there is no difference between the terms 'hiring' and 'renting'.

The Bench considered the submissions and observed thus –

"4. It is clear that the tax on 'rent-a-cab' service was envisaged to subject the recipients of the scheme in Motor Vehicles Act, 1988 to tax. In re PB Bobde, relying upon the decision of the Hon'ble High Court of Uttarakhand in Commissioner of Customs & Central Excise vs. Sachin Malhotra & Ors [2015(37)STR 684] - 2014-TIOL-2039-HC-UKHAND-ST that hiring of vehicles does not render provider of vehicles to be taxed as provider of 'rent-a-cab service'. The earlier decision of the Tribunal in re Express Tours and Travels Pvt. Ltd. did not have the benefit of the judgment of the Hon'ble High Court of Uttarakhand and hence it is the decision in re PB Bobde which shall prevail…The emergency response vehicles are also not intended to carry passengers on hire and, even if the distinction between 'hire' and 'renting' is ignored, it is clear that the service availed by the appellant is not that of 'rent-a-cab'. Consequently, the disallowance of CENVAT credit and the resultant recovery of duty will not sustain."

The appeal was allowed.

(See 2018-TIOL-1089-CESTAT-MUM)


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