Hiring of vehicles to APSRTC not liable for Sales Tax: CESTAT sets aside Demand-cum-SCN [Read Order]

The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) observed that the hiring of vehicles to the Andhra Pradesh State Road and Transport Corporation (APSRTC) is not liable for sales tax, and the tribunal set aside the Demand-Cum Show Cause Notice (SCN).

The issue to be decided was whether the hiring of vehicles/buses by appellants to the Andhra Pradesh State Road Transport Corporation (APSRTC) falls under the "Rent a Cab" service and is thus chargeable to service tax.

The department issued a show cause notice for service tax, challenging appellants' vehicle rentals to APSRTC. Despite a High Court stay, the Deputy Commissioner confirmed the demand, imposing penalties. The Commissioner (Appeals) upheld this, prompting the appellant's appeal to the Tribunal.

The appellant, represented by Ashish Kumar Agarwal, contended that their activity constitutes a "Transfer of Right to Use," deemed a sale of goods under Article 366 (29A)(d) of the Constitution.

The appellant's case hinges on a Writ Petition filed in the High Court at Hyderabad, supported by circulars and memos from the Commercial Tax Department, Andhra Pradesh, and APSRTC. These documents contend that leasing vehicles to APSRTC qualifies as a 'transfer of right to use.' The AR strengthened the case, citing a judgment from the High Court of Andhra Pradesh and emphasizing clauses in the APSRTC Tender document, specifying usage restrictions and responsibilities during the agreement.

The Adjudicating Authority disregarded the stay issued by the High Court and, based on the precedent set by the Bangalore Bench of the Tribunal in the case of S K Kareemun, upheld the service tax demand. The Departmental Representative emphasized the decision's strength by highlighting the Supreme Court's dismissal of the SLP.

The counsel further reinforced the stance with support from the judgment of the High Court of Delhi in Hari Durga Travels v. Commissioner of Trade & Taxes, Delhi.

The two member bench of the Tribunal comprising Mr. Anil Choudhary, Member (Judicial) and A.K Jyothishi, Member (Technical), concluded that the appellant's vehicle hiring is deemed a "Transfer of Right to Use," not falling under "Rent a Cab Service." Scrutiny of judgments, circulars, and agreements concludes APSRTC maintains control.

Accordingly, the appeals were allowed and the  impugned order was set aside.

To Read the full text of the Order CLICK HERE

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