Service Tax Liability under RCM on Rent-a-Cab Services: CESTAT holds demand of Additional Service Tax invalid [Read Order]

The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), Allahabad held the demand of additional service tax invalid on the ground that service tax liability under the reverse-charge mechanism on rent-a-cab services.

From the records, a letter dated 14.10.2014 was issued by the Superintendent, Service Tax Range to the appellant, M/s Global Logic India Limited alleging that the scrutiny of records submitted by the appellant showed that the appellant had recovered expenses amounting to Rs. 1,72,70,301/- from its customers towards rent a-cab services and for this allegation reliance was placed on a chart.

In this chart titled “Details of Hire of Vehicle expense for FY’14, the appellant showed relevant ledger line items for the expenses incurred during the year to be Rs. 3,44,67,299/- and the abated value of @40% had also been duly disclosed in the service tax returns for the year 2013-14. The Superintendent, however, referred to certain ledger items mentioned in the chart. One of those entries was named “Recovery of expenses” for an amount of Rs. 1,72,70,301.

The Superintendent surmised that this entry pertained to expenses incurred on rent-a-cab services by the appellant, which were eventually recovered from its customers, and that no service tax had been discharged on the same. It was explained by the appellant in its reply dated 12.12.2014 that there was actually no recovery of expenses from the customers and that the number of Rs. 1,72,70,301/- indicated in the chart was only a re-classification of expenditure in the books of account of the appellant. The appellant pointed out that the expenses relating to rent-a-cab services were initially accounted for in the ledger named "211402 STF-WEL HIRE OF VEHICLES" and later transferred to the relevant heads of expenses by way of re-classification.

According to the appellant, this re-classification of expenses has no bearing on the total value of rent-a-cab services which had been correctly computed and duly offered to tax by the appellant, as would be evident from the Service Tax returns filed by the appellant for the period April to September 2013 and October 2013 to March 2014.

The bench consisting of Justice Dilip Gupta, President, and Raju, Technical Member held that “additional demand of service tax is claimed on the amount on which service tax has already been paid by the appellant. This demand has been computed by wrongly interpreting an internal ledger item.”

To Read the full text of the Order CLICK HERE

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