No Service Tax payable for renting a vehicle to UPSRTC as 60% of Abetment on assessable value allowable as per Exemption Notification: CESTAT [Read Order]

The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that abatement of 60% of assessable value is allowable as per Exemption Notification. The Tribunal held that there is no need to pay Service Tax for renting vehicles to Uttar Pradesh State Road Transport Corporation ( UPSRTC ). M/s MYR Logistics & Travel Service, the Appellant is providing vehicles to M/s Uttar Pradesh State Road Transport Corporation ( UPSRTC ). Revenue collected information from UPSRTC about the amount paid to the Appellant for the period from 2009-10 to 2012-13. It appeared to Revenue that the amount so received by the Appellant was considered towards providing ‘Rent-a-Cab Operators service’ and was chargeable to Service Tax. Therefore, a Show Cause Notice dated 09.04.2014 was issued demanding Service Tax of Rs.1,40,911/- for the said period on a consideration of Rs.43,79,274/- received by the Appellant. The Appellant submitted before the Original Authority that the Appellant was entitled to abatement of 60% of the assessable value vide Notification No.09/2004 dated 09.07.2004, 01/2006S.T. dated 01.03.2006 and Notification No.6/2005-S.T. dated 01.03.2005. The abated value is eligible for small-scale exemption and after allowing transit exemption, the Appellant was not required to pay any service tax. The SCN was adjudicated vide Order-In-Original dated 30.07.2014 wherein the Original Authority confirmed the demand as proposed in the SCN and also imposed penalties under Sections 77 & 78 of the Finance Act, 1944. The Commissioner (Appeals) partly allowed the appeal filed by the Appellant by setting aside the penalty of Rs.10,000/- imposed under Section 77 of the Act, for violation of Section 70 of the Act read with Rule 7 of the Rules. He also set aside the order of the Original Authority to pay a prescribed amount under Rule 7(C) of the Rules for the period of delay in filing of ST - 3 Returns. Commissioner (Appeals) has examined Explanation “B” of Notification No.6/2005-S.T. dated 01.03.2005 and held that while arriving at the aggregate value of taxable service under the said explanation, such sum is to be excluded which is exempted from the whole of Service Tax. Under the said Notification No.09/2004 and 1/2006-S.T., abatement of 60% is allowed which does not amount to an exemption from the whole of the Service Tax and therefore, the whole of the consideration received by the Appellant needs to be taken into consideration while arriving at an aggregate value of the services provided. That Notification No. 06/2005-ST dated 01.03.2005 (as amended) seeks to exempt taxable service of aggregate value up to Rs. Ten lakhs in any financial year in the case of rent-a cab service, the value under Section 67 of the Finance Act, 1994 would be 40% of the gross amount as per notification No. 01/2006-ST dated 01.03.2006. The rest 60% of the value is attributable to the value of goods which is exempt under Notification No. 01/2006-ST dated 01.03.2006. According to explanation No. (B) of clause-3 of notification number 06/2005-ST dated 01.03.2005, the gross amount that is exempt from payment of service tax would not constitute the aggregate value of taxable service. As would be evident from the table above, the taxable value in every financial year is far less than the exempted limit. As such, no service tax is payable by the Appellant. A two-member bench comprising Mr P K Choudhary, Member (Judicial) and Mr Sanjiv Srivastava, Member (Technical) observed that “the impugned order to the extent of confirmation of the demand and imposition of penalty under Section 77 of the Act of Rs.200 for every day during which the party continued to fail to get itself registered under Section 69 of the Act read with provisions of Rule 4 of the Rules ibid, starting with the first day of such failure after the due date, till the date of actual compliance and penalty of Rs.1,40,911/- under Section 78 of the Act are set aside. “ The CESTAT allowed the appeal filed by the Appellant. Ms. Stuti Saggi, Advocate appeared for the Appellant and Shri Santosh Kumar, Authorised Representative for the Respondent. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates