VKJ Latest News Update

VKJ Law Offices of Vinay K. Jain Advocates & Solicitors

ST – Entire demand is raised consequent upon verification of accounts maintained by assessee – no suppression: CESTAT

2019-TIOL-2079-CESTAT-MAD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI
DIVISION BENCH B1
COURT NO. III

Appeal No. ST/233/2011

Arising out of Order-in-Appeal No. 127/2010 (M-III-ST), Dated: 26.11.2010
Passed by the Commissioner of Central Excise (Appeals), Mahatma Gandhi Road, Chennai

Date of Hearing: 25.02.2019
Date of Decision: 18.03.2019

M/s SSS TOURS AND TRAVELS
NO 40, HIG, NH-I, MARAIMALAI NAGAR
KANCHEEPURAM – 603209

Vs

COMMISSIONER OF GST AND CENTRAL EXCISE
CHENNAI NORTH COMMISSIONERATE

Appellant Rep by: Shri T Ramesh, Adv.
Respondent Rep by: Shri K Veerabhadra Reddy, ADC (AR)

CORAM: Sulekha Beevi C S, Member (J)
Madhu Mohan Damodhar, Member (T)

ST – The assessee is registered for providing services under category of “Rent-a-Cab” Operator Services – During verification of accounts of assessee, it was observed that they had not paid service tax under the said category – SCN was issued proposing to demand service tax along with interest and also for imposing penalties – The assessee has been contending that their activity would not fall within the levy of service tax net as they were charging the customers on per kilometre basis and there was no renting of vehicle involved – This issue has been mired in litigation for a long time and there are conflicting decisions also – Taking into account the fact that there are conflicting decisions on the issue as also the same being interpretational, assessee cannot be saddled with allegation of suppression of facts with intention to evade payment of service tax – Moreover, the Department has not produced any cogent evidence to show that there was a positive act of suppression on the part of assessee – The entire demand has been raised on verification of accounts of assessee – This shows that nothing was suppressed with any intent to evade payment of service tax – The SCN is time-barred – The assessee succeeds on the ground of limitation – Since the issue on limitation is found to be in favour of assessee, Tribunal do not think it necessary to go into the merits of the case – The impugned Order is set aside on the ground of limitation: CESTAT

Appeal allowed

Case laws cited:

Commissioner of Customs & Central Excise Vs. Sachin Malhotra – 2014-TIOL-2039-HC-UKHAND-ST… Para 3.1

M/s. Wheels Tourists Operator Vs. Commissioner of G.S.T. & C.Ex., Chennai – 2018-TIOL-2310-CESTAT-MAD… Para 3.1

S.K. Kareemun Vs. Commissioner of C.Ex., Cus. & S.T., Hyderabad-III – 2015-TIOL-80-CESTAT-BANG… Para 3.1

C.S.T. VS. M/s. Vijay Travels reported in 2014 (36) S.T.R. 513 (Guj.)… Para 4.1

Anil Kumar Agnihotri Vs. Commissioner of Central Excise, Kanpur – 2018-TIOL-670-HC-ALL-CX … Para 4.3

M/s. Vijay Travels Vs. C.S.T., Ahmedabad – 2010-TIOL-1113-CESTAT-AHM… Para 7.1

M/s. Rahul Travels Vs. C.C.E., Nagpur/Pune-III 2016-TIOL-3282-CESTAT-MUM… Para 7.4

FINAL ORDER NO. 40529/2019

Per: Bench:

Brief facts are that the appellants are registered for providing services under the category of “Rent-a-Cab” Operator Services.

2. During the course of verification of accounts of the appellant, it was observed that the appellants had not paid service tax under the above category for the period from April 2005 to September 2006. Show Cause Notice was issued proposing to demand service tax along with interest and also for imposing penalties. After due process of law, the Original Authority confirmed the demand of Rs. 3,14,262/- along with Education Cess and interest and imposed penalty under Sections 76 and 77 as well as penalty of Rs. 6,41,094/- under Section 78 of the Finance Act, 1994. In appeal, the Commissioner (Appeals) upheld the demand, interest and penalty imposed under Section 78 ibid, but however set aside the penalties imposed under Sections 76 and 77 ibid. Aggrieved, the appellants are now before the Tribunal.

3.1 On behalf of the appellant, Ld. Counsel Shri. T. Ramesh appeared and argued the matter. He submitted that the appellants are engaged in operation of cars for their customers on kilometre basis, as per requirement of the customers. Their drivers take the customers to their required destination and for such operation, they charge the customers on kilometre basis. They have various tariff schedules depending upon the distance that is to be covered. All along, the vehicle remains in the ownership of the appellant and no rent for the vehicle is collected from the customers. That at no point of time have the appellants given their vehicle for rent to any of these customers and that the activity, if any, would fall only under the style of hiring of vehicle. Therefore, the demand of service tax under the category of ‘Rent-a-Cab Operator Services’ cannot sustain. To support his argument, he relied upon the decision of the Hon’ble Uttarakhand High Court in the case of Commissioner of Customs & Central Excise Vs. Sachin Malhotra reported in 2015 (37) S.T.R. 684. (Uttarakhand) = 2014-TIOL-2039-HC-UKHAND-ST.

It is also pointed out by him that the Tribunal in the case of M/s. Wheels Tourists Operator Vs. Commissioner of G.S.T. & C.Ex., Chennai reported in 2019 (20) G.S.T.L. 86 (Tri. – Chennai) = 2018-TIOL-2310-CESTAT-MAD and also in the case of M/s. PRR Travels Vs. C.S.T., Chennai vide Final Order No. 41884/2018 dated 27.06.2018, has followed the decision rendered in the case of Sachin Malhotra (supra) to hold that hiring of the vehicle is outside the levy of service tax.

3.2 Ld. Counsel adverted to the decision in the case of S.K. Kareemun Vs. Commissioner of C.Ex., Cus. & S.T., Hyderabad-III reported in 2016 (42) S.T.R. 988 (Tri. – Bang.) 2015-TIOL-80-CESTAT-BANG. He submitted that the Tribunal in the said case has distinguished the decision rendered in the case of Sachin Malhotra (supra). However, in paragraph 5.6.2, the Tribunal has observed that the definition of ‘Rent-a-Cab Scheme Operator’, as it stood prior to 01.06.2007, was based on the definitions in the Motor Vehicles Act. That after the amendment brought forth with effect from 01.06.2007, the said adaptation from the Motor Vehicles Act has been done away with. The period involved in the present appeal is prior to 01.06.2007 and therefore, even if the decision in Sachin Malhotra (supra) has been distinguished by the Tribunal, the observations in paragraph 5.6.2 as well as 5.6.3 would conclude that the said decision is not applicable to the period prior to 01.06.2007.

3.3.1 Ld. Counsel put forward arguments on the ground of limitation. He submitted that there are a number of conflicting decisions on the said issue and that matters are still pending before the Hon’ble Apex Court. The appellants had not discharged their service tax as they believed that the activity did not fall within the said category of service. Therefore, suppression of facts with intent to evade payment of service tax cannot be alleged to invoke the extended period. The Show Cause Notice was issued on 16.10.2007 for the period from April 2005 to September 2006. The entire demand is therefore time-barred.

3.3.2 It is also submitted by the Ld. Counsel that the Original Authority has imposed penalty of Rs. 6,41,094/- under Section 78 of the Finance Act, 1994, which is more than the equal penalty envisaged under Section 78 ibid and that, in any case, this is not sustainable.

4.1 Ld. AR Shri. K. Veerabhadra Reddy appearing on behalf of the respondent supported the findings in the impugned Order. He argued that the authorities below have considered in detail the arguments put forward by the appellants. In fact, the activity rendered by the appellant would fall within Rent-a-Cab Services and even though the amount is collected on per kilometre basis, it would not take the activity outside the purview of levy of service tax. He relied upon the decision in the case of C.S.T. VS. M/s. Vijay Travels reported in 2014 (36) S.T.R. 513 (Guj.) and submitted that the Hon’ble High Court in the said decision had analyzed this issue and concluded that the provisions of the Finance Act do not make a distinction between ‘renting’ and ‘hiring’ of a vehicle and that even in the case of hiring of a vehicle, the same would fall within the levy of service tax.

4.2 The decision of the Tribunal in the case of S.K. Kareemun (supra) was relied upon by the Ld. AR to draw our attention to the fact that the decision in Sachin Malhotra (supra) has been distinguished by the Tribunal in the said case. It is argued by him that the Tribunal has held that renting or hiring of a vehicle would come under the levy of tax net. Further, there is no such conclusion as argued by Ld. Counsel for appellant that has been made by the Tribunal with respect to the period prior to 01.06.2007.

4.3 The next decision relied upon by the Ld. AR is that of Anil Kumar Agnihotri Vs. Commissioner of Central Excise, Kanpur reported in 2018 (10) G.S.T.L. 288 (Allhd.) = 2018-TIOL-670-HC-ALL-CX

5. Heard both sides and have perused the records.

6. The Ld. Counsel for the appellant has put forward arguments on the ground of limitation. We will first address this issue before entering into the merits of the case.

7.1 As narrated above, the appellant has been contending that their activity would not fall within the levy of service tax net as they were charging the customers on per kilometre basis and there was no renting of the vehicle involved. This issue has been mired in litigation for a long time and there are conflicting decisions also. In M/s. Vijay Travels Vs. C.S.T., Ahmedabad – 2010 (19) S.T.R. 671 (Tri. – Ahmd.) = 2010-TIOL-1113-CESTAT-AHM, the Tribunal held that the hiring of a vehicle could not attract levy of service tax. The decision on merits was overturned by the Hon’ble High Court of Gujarat as reported in 2014 (36) S.T.R. 513 (Guj.) wherein it was held that there is no distinction between renting and hiring of vehicles and even if the consideration is received only on per kilometre basis, the same would fall under the category of Rent-a-Cab Services. Against the decision of the Hon’ble High Court of Gujarat, the assessee has filed appeal before the Hon’ble Apex Court as reported in 2015 (38) S.T.R. J425 (S.C.). The said decision has been appealed before the Hon’ble Supreme Court by the Revenue also as reported in 2016 (43) S.T.R. J172 (S.C.).

7.2 In Sachin Malhotra (supra), the Hon’ble High Court of Gujarat held that hiring of a vehicle wherein the consideration is received only on per kilometre basis and the ownership remains with the appellant, the levy of service tax cannot sustain under the category of Rent-a-Cab Services. This decision was followed by the Tribunal in M/s. Wheels Tourists Operator (supra) as well as M/s. PRR Travels (supra).

7.3 The Tribunal in the case of S.K. Kareemun (supra) has held that even in cases where consideration is received on per kilometre basis, the activity would fall under Rent-a-Cab Services. The appeal filed against this decision by one of the appellants in this batch of cases was dismissed by the Hon’ble Apex Court by upholding the decision of the Tribunal. In the said judgement, the Tribunal had distinguished the decision in Sachin Malhotra (supra). The Hon’ble Allahabad High Court in Anil Kumar Agnihotri (supra) analyzed a similar issue.

7.4 Further, in the case of M/s. Rahul Travels Vs. C.C.E., Nagpur/Pune-III reported in 2017 (47) S.T.R. 332 (Tri. – Mum.) = 2016-TIOL-3282-CESTAT-MUM, the decision in S.K. Kareemun (supra) was distinguished by the Tribunal by observing that hiring of cars and buses as contract carriage on payment based on their usage as per kilometre basis, though possession with repair and maintenance remained with the owner, is not taxable prior to 01.06.2007 either under Rent-a-Cab Service or under Tour Operator Service.

8. Taking into account the fact that there are conflicting decisions on the issue as also the same being interpretational, we are of the opinion that the appellant cannot be saddled with the allegation of suppression of facts with intention to evade payment of service tax. Moreover, the Department has not produced any cogent evidence to show that there was a positive act of suppression on the part of the appellant. The entire demand has been raised on verification of accounts of the appellant. This shows that nothing was suppressed with any intent to evade payment of service tax. We therefore hold that the Show Cause Notice is time-barred. The appellant succeeds on the ground of limitation.

9. Since the issue on limitation is found to be in favour of the appellant, we do not think it necessary to go into the merits of the case. The impugned Order is set aside on the ground of limitation.

10. The appeal is allowed with consequential reliefs, if any, as per law.

(Pronounced in open court on 18.03.2019)

Leave a Reply

Close Menu
%d bloggers like this: