‘Radio Taxi’ Operators Not Liable to pay Service Tax on services rendered to Corporate Clients: Delhi CESTAT [Read Order]

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The Delhi bench of the CESTAT today held that the services rendered by a radio taxi business wherein the invoices are directly raised on the corporate clients would not be subject to service tax under the head “rent-a-cab-service”.

The division bench, while dismissing the revenue’s appeal, said that such services would fall under the category of “hire-on-call-service” or “hire-on-demand-service” like provided by them to individual customers in which no tax can be demanded.

The respondent-assessee was engaged in the business of running of “radio taxies” and are providing transport services to both individual and corporate customers.

The department was of the view that transport services provided by the respondent, generally termed as “radio taxies”, are in two parts, firstly, transport services, where the driver of the radio taxies charges the passenger on the spot in car as per the meter reading and secondly, transport services where instead of taxi driver charging the passenger, invoices raised by the respondent directly on customer on some periodic basis and the settlement is done by the customer on such lumpsum amount.

The department found that regarding the second category, for which bills were raised periodically, instead of on the spot, service tax is payable under the head rent-a-cab-service.

However, the first appellate authority concluded the matter in favor of the assessee and observed that the service rendered by them to the corporate clients cannot fall under the category of “rent-a-cab-service” in as much as services provided by the respondent are in the nature of “hire-on-call-service” or “hire-on-demand-service”.

The bench noticed the decision of the Hyderabad bench wherein it was held that when the contract is to hire a vehicle, there is no renting of a cab. The said ratio has been followed in other decisions of the Tribunal also.

Citing various High Court decisions and the Hyderabad Tribunal’s decision, the bench confirmed the first appellate authorities’ order.

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