1. All these appeals are directed against the orders of the Commissioner (Appeals) upholding the order in original by which the appellants are required to pay service tax and penalties under the relevant provisions of Finance Act, 1994.
2. The appellants were engaged in providing service of rent-a-cab operator, according to Revenue. Since the appellants were not registered under the Service Tax Laws, and no service tax was deposited, show cause notice was issued on the ground that they had evaded payment of service tax amounts mentioned in the notice.
According to the Revenue, the assessee had admitted that service tax was payable by them and that they will try to pay the service tax that was due, alongwith interest. According to the assessees, there was a difference in Rent-a-cab scheme and Taxi permit scheme under the Motor Vehicles Act 1988, and that Taxi permit holder cannot work as a rent-a-cab operator without obtaining a license for Rent-a-cab scheme.
It was also the case that since they were not a licensee under rent-a-cab scheme; no service tax was required to be collected from them.
3. The authorities below found that under the Finance Act, 1994 as amended, the requirement of operators to be registered under Section 75 of the Motor Vehicle Act, 1988 in order to make them eligible as 'rent-a-cab' scheme operator, was dispensed with from 16-10-1998. As a result of such change in the definition, after 16-10-1998, a person to qualify as rent-a-cab scheme operator, had to simply engage in the business of rent-a-cab, and the requirement to hold a license had been dispensed with. The service provided on rent-a-cab operator was exempted from service tax upto 31-3-2000. Therefore, from 1-4-2000, such operators were covered under the definition of rent-a-cab scheme operator and were liable to pay service tax. It was also noticed by the authorities below that the Hon'ble High Court of Madras while upholding the constitutional validity of service tax on 'tour operators' and 'rent-a-cab scheme operators', in Secretary, Federation of Bus Operators Associations of Tamil Nadu v. Union of India held that tax on service was levied on a person if he was engaged in the business of engaging taxis for customers and giving them service even without owning or plying the vehicle. It was also held that if the person was plying cabs and services were provided by him to any person in relation to renting cabs, such services become taxable service and holding license under Rent-a-cab scheme was not required for levying service tax. The appeal against the above decision of Hon'ble Madras High Court came to be dismissed by Hon'ble Supreme Court as noticed by the lower authorities 2003 (157) E.L.T. A-144). It however, appears that the appeal was dismissed by the Hon'ble Supreme Court on the ground of not explaining the delay and not on merits.
4. The learned Counsel appearing for the appellants has argued that the appellants were not running any service as rent-a-cab scheme operators because the scheme contemplates handing over the custody of the cabs which were to be driven either by the hirer himself or his driver.
According to him, the appellants were keeping the custody of the vehicles with their own drivers. Therefore, since the cabs were not handed over to the customers and were driven by the drivers of the appellants, the nature of service provided by the operators was not rent-a-cab operator service. In short, it was submitted that the cabs were not rented but the operators themselves, through their drivers, were plying the cabs and retaining custody thereof.
5. Under Section 75 of the Motor Vehicles Act, 1988, the Central Government is empowered to enact a scheme for the purpose of regulating the business of renting of motor cabs or motor cycles to persons desiring to drive either by themselves or through drivers, motors cabs or motor cycles for their own use. The Central Government has framed a scheme, under the said provision known as 'Rent-a-cab scheme, 1989'.
Since the requirement of legislation obtaining license under rent-a-cab scheme was done away with in the context of the service tax laws, as noted above, it would not be open for the appellants to contend that they were not licensees under the scheme and therefore, they are not rent-a-cab operators. As per the definition of rent-a-cab scheme operator under Clause (91) of Section 65 of the Finance Act, 1994, rent-a-cab scheme operator means, any person engaged in the business of renting of cabs. Taxable service provided to any person, by rent-a-cab scheme operator, in relation to renting of cabs, is covered by Sub-clause (o) of Clause 105 of Section 65 of the said Act. Though no licensing requirement is incorporated in the same for the purpose of Service tax, the concept of rent-a-cab under the scheme is required to be kept in mind. The thrust of the llearned Counsel's argument is that, since in 'rent-a-cab', the key of the cab is to be handed over to the customer, unless vehicle is driven by the customer or his driver, the person providing the cab, cannot be called rent-a-cab operator. This argument is made in the context of the provision of Section 75 of the Motor Vehicles Act, relying upon the expression, 'to persons who desire to drive by themselves or through drivers'. It will, however, be noticed that the provision does not specifically tell that the cab which is not to be driven by the customer, is required to be driven by the customer's own driver. The words 'through driver' in the context would ordinarily mean any other driver, if the person does not himself drive such vehicle. Therefore, if motor cabs are given on rent alongwith drivers, the nature of service, prima facie, would remain the same as that of rent-a-cab scheme operator. Though the contention was not raised before the lower authorities, we have considered it since it is a point of law.
6. The learned Counsel for the appellants at this stage, submits that the financial position of the appellant is very weak and they may not be required to deposit any amount. The only statement on the aspect of financial position in the application is that they are facing financial hardship. The appellants have been operating several cabs and it is not possible to accept the plea of financial hardship on such a bald assertion.
7. Having regard to the facts and circumstances of the case, we therefore, direct that there will be interim stay of the penalty amounts payable under the impugned orders on the condition that the respective appellant deposits within eight weeks the entire amount of service tax payable under the impugned order passed against such appellant, failing which the appeal of the defaulting appellant shall stand dismissed. Post the matters for compliance on 15 November, 2006.