Service Tax collected for service of providing cars on hire for Transportation of staff Exigible: CESTAT Allows Appeal [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, allowed an appeal and held that the service tax collected for the service of providing cars on hire for transportation of staff was exigible.

The facts of the case are that the appellant, M/s. SMTT Holidays, had not paid service tax on the hire charges collected for providing cars for transportation of staff to M/s. Computer Science Corporation of India (P) Ltd, located in MEPZ-SEZ. After due process, the Adjudicating Authority confirmed the demand as proposed in the show cause notice (SCN) along with applicable interest and penalties.

The Commissioner of Service Tax (Appeals-1), Chennai, rejected the appeal filed. The counsel for the appellant then appeared before the CESTAT to contend that the entire demand is founded on erroneous interpretation of Notification No. 04/2004-ST by the department which proceeds on the incorrect assumption that services must be physically rendered and consumed wholly within the geographical boundaries of the SEZ in order to qualify for the exemption.

Further, it was argued that interpretational disputes could not attract penalties. The tribunal considered the decision in PRR Travels v. Commissioner of GST & Central Excise, Chennai and held that the applicable is eligible for exemption from service tax for rent-a-car services provided to SEZ units as per the overriding effect under Section 51 of the SEZ Act on any other law and exemption provided by Section 26 of the Act.

The bench of Ajayan T.V. (Judicial Member) and Vasa Seshagiri Rao (Technical Member) adhered to judicial discipline and held that the disputed order cannot be sustained and is liable to be set aside. The appeal was allowed with consequential relief(s).

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