Tribunal Rules in Favor of Bus Owners in Service Tax Appeal

Case Name:

Theegala Naga Venkata Padmavati and T Gunna Mahalaxmi vs. Commissioner of Central Tax, Visakhapatnam– GST

Key Takeaways:

1. The issue involved whether the hiring of vehicles/buses by the appellants to APSRTC falls under “Rent a Cab” service and is chargeable to service tax.
2. The appellants argued that their activity falls under “Transfer of Right to Use”, a deemed sale of goods, and presented various circulars and memos to support their claim.
3. The Tribunal ruled in favor of the appellants, holding that the activity of hiring of vehicles by the appellants falls under “Transfer of Right to Use” and not “Rent a Cab”.
4. The appeals were allowed, and the impugned order was set aside, entitling the appellants to consequential benefits in accordance with the law.

Case Synopsis:

The Customs, Excise and Service Tax Appellate Tribunal, Hyderabad, regarding Service Tax Appeal No. 30350 of 2023 and Service Tax Appeal No. 30351 of 2023. The appeals were filed by Theegala Naga Venkata Padmavati and T Gunna Mahalaxmi against the Commissioner of Central Tax, Visakhapatnam– GST.

The issue involved in these appeals is whether the hiring of vehicles/buses by the appellants to Andhra Pradesh State Road Transport Corporation (APSRTC) falls under the “Rent a Cab” service and thus chargeable to service tax.

Here’s a breakdown of the key points:

1. Background: The appellants are owners of buses that have been hired to APSRTC. APSRTC is a Public Sector Undertaking providing transportation services in the state of Andhra Pradesh. The appellants are members of the ‘Hire Bus Owners Welfare Association’, a registered association. APSRTC introduced a hire bus system to meet the demand for paid transport, and private bus owners, including the appellants, were required to provide buses, drivers, and bear all expenses, including fuel. APSRTC reimbursed various expenses to the appellants.

2. Legal Definitions: It refers to the relevant sections of the Finance Act 1994, which define “Cab” and “Rent-a-cab scheme operator”. It also mentions the show cause notice issued by the Department proposing to demand service tax on the hire charges received by the appellants from APSRTC.

3. Arguments and Rulings: The appellants argued that their activity falls under “Transfer of Right to Use”, a deemed sale of goods under Article 366 (29A)(d) of the Constitution. They also submitted a copy of the Writ Petition filed before the Hon’ble High Court at Hyderabad and various circulars and memos issued by the Commercial Tax Department, Andhra Pradesh, and APSRTC, clarifying that the hiring of vehicles to APSRTC falls under “transfer of right to use”. The Adjudicating Authority, however, confirmed the demand for service tax.

4. Appeal and Decision: The appellants appealed before the Commissioner (Appeals), which was dismissed, and then before the Tribunal. After considering the arguments, judgments, circulars, and memos presented by both parties, the Tribunal held that the activity of hiring of vehicles by the appellants falls under “Transfer of Right to Use” and not “Rent a Cab”. Therefore, the appeals were allowed, and the impugned order was set aside.

In conclusion, the Tribunal ruled in favor of the appellants, stating that the activity in question provided by the appellants is in the nature of “Transfer of Right to Use” and not “Rent a Cab”. Therefore, the appellants shall be entitled to consequential benefits in accordance with the law.

FAQ:

Q1: What was the issue in the appeals?

A1: The issue revolved around whether the hiring of vehicles/buses by the appellants to APSRTC falls under “Rent a Cab” service and is chargeable to service tax.

Q2: What was the ruling of the Tribunal?

A2: The Tribunal ruled in favor of the appellants, holding that the activity of hiring of vehicles by the appellants falls under “Transfer of Right to Use” and not “Rent a Cab”.

Q3: What were the key arguments presented by the appellants?

A3: The appellants argued that their activity falls under “Transfer of Right to Use”, a deemed sale of goods, and presented various circulars and memos to support their claim.

Q4: What are the implications of the Tribunal’s ruling?

A4: The ruling entitles the appellants to consequential benefits in accordance with the law, and it sets a precedent for similar cases involving the hiring of vehicles to entities for specific purposes.