By Puloma Dalal, Jayesh Gogri, Chartered Accountants
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Is service tax attracted on hiring of vehicles where Cab provider is required to maintain the said vehicles and also required to do repairing, fuelling etc. under Rent a cab operator’s service?
Facts:
Service tax was demanded from the Appellant as Rent-a-cab operator. The scope of contract with the client stipulated that vehicles were required for transportation of personnel of client under their instructions/directions and vehicles would move on official duty to outstation, depending upon exigencies of client work for which no other extra charge was to be paid. Further, vehicles were provided normally on the basis of 12 hours of duty in a day.
Hiring charges were calculated for actual number of working days on pro rata basis and maintenance etc. was responsibility of the assessee and no extra charge was to be paid. Assessee was assured minimum fixed charges per vehicle per month yet was required to maintain log book and invoices had to be based on the usage.
Held:
Vehicles were not rented to client-had it been otherwise, client would have to ensure maintenance, repairing, proper running and fuelling of the vehicle. Possession and ownership of vehicle remained with assessee and he was only required to provide service for 12 hours in a day. In case of rent, owner of property is de-possessed and possession passes on to person who has taken it out for usage. It was immaterial whether hiring of vehicle is for a day or a month. The fact that payment had to be made after verification of log book showed that monthly payment may vary from vehicle to vehicle based on kilometres run and not on monthly rent basis.
Payment of minimum fixed charges per vehicle per month was only a safety measure to ensure some minimum payment to avoid nil payment, if client did not use the vehicle at all, and could not lead to conclusion that vehicle was let out on rent and liable to service tax u/s. 65(91) of the Finance Act, 1994- Section 65(105)(o).
