The Chennai bench of the Customs Excise and Service Tax Appellate Tribunal ( CESTAT ) observed that Bangalore Metropolitan Transport Corporation ( BMTC ) was not included in category of rent a cab scheme operators for Service Tax purposes.
The issue to be decided was whether the service of providing buses on contract basis by the appellant to various factories and firms can be classified as rent-a-cab service or not.
The appellant, a government-owned transport undertaking in Tamil Nadu, was accused by the Revenue of evading service tax obligations. The allegation stemmed from the provision of vehicles to government departments, sister concerns, and private parties without proper declaration and payment of service tax. A show cause notice was issued on April 12, 2013, asserting that the appellant had engaged in Rent-a-Cab operator services without necessary amendments in their Service Tax Registration certificate and without fulfilling tax obligations.
The notice proposed a demand of Rs. 1, 38, 571/- in service tax, along with interest and penalties. The appellant responded with a detailed reply, but the original authority upheld the demand, along with substantial penalties under various sections of the Finance Act, 1944. Following an unsuccessful appeal to the Commissioner ( Appeals ), the appellant had lodged this further appeal.
The counsel for the appellant M.N. Bharathi argued that the disputed ruling lacks legal validity as it was issued without a proper assessment of the facts, relevant laws, and binding judicial precedents on the matter. They asserted that the appellant, being a State Government Corporation owned by Tamil Nadu, had no intention to evade legitimate tax owed to the Central Government. Rather, they claim it’s a matter of interpreting statutory provisions, and the appellants genuinely believed they were not covered under the Rent-a-Cab operator scheme.
The bench observed that the rent-a-cab scheme operator was defined as any individual engaged in the cab rental business. Hence, the primary inquiry was whether the Bangalore Metropolitan Transport Corporation ( BMTC ) could be categorized as engaged in cab rental services. It was crucial to note that while defining taxable services, there had been a deliberate effort to identify specific service providers for service tax imposition. In various definitions, the term “services provided by any person to any person” was used, making any service provider liable if the service fell within the taxable service definition. However, in some instances, the term “services provided by a commercial concern to any person” was utilized, requiring the service provider to be a commercial entity, exempting charitable trusts.
The two member bench of the tribunal comprising Vasa Sesha Giri Rao ( Technical member ) and S.S Garg ( Judicial member ) noted that the definition explicitly excluded BMTC from the service provider category. This conclusion had been affirmed by the Honorable Supreme Court, which dismissed the Department’s appeal. Given these circumstances and in adherence to the precedent set by previous decisions.
The bench viewed that the impugned order was not sustainable in law and therefore set aside the same by allowing the appeal of the appellant with consequential relief.
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