Service Tax is not leviable on School buses as they are not categorised under the definition of Cab’

The CESTAT, Ahmedabad in Akshar Travels v. C.C.E. & S.T.-Daman [Service Tax Appeal No. 263 of 2012-DB dated August 17, 2023] ruled that, use of motor vehicle for transportation of school children is clearly different from rent-a-cab service, hence no service tax is to be leviable on transportation of children to and from school.

Facts

Akshar Travels ("the Appellant") was engaged in the business of transportation of passenger, more specifically providing buses for transporting school children. The Appellant was providing transportation services to the school which is owned and managed by M/s. J.K Paper Limited ("the service recipient") for which the Appellant was charging rent on a monthly basis from the service recipient.

The Revenue Department ("the Respondent") contended that since, the service recipient is a commercial organization and the Appellant was providing rent-a-cab service accordingly the amount received from the service recipient was liable for service tax under the category of rent- a-cab service.

The Adjudicating Authority vide an order ("the Impugned Order") confirmed the demand under the category of rent-a- cab service.

Aggrieved by the Impugned Order the Appellant filed an appeal before the CESTAT, Ahmedabad.

The Appellant submitted that transportation services were used by an educational body which was excluded from the definition of "cab" as provided under Section 65 (20) of the Finance Act, 1994 ("the Finance Act"). Therefore, service tax is not leviable.

The Appellant relied upon the Judgement of M/s. Maharashtra State Road Transport Corporation v. Commissioner of Central Excise [2016 (42) STR 32 (Tri. Mumbai)] wherein the CESTAT, Mumbai held that, tour operator service and Rent-a-Cab service are exempted if the journey is organized or arranged for an educational body.

Issue

Whether motor vehicles rented for use by an educational body will be liable for service tax?

Held

The CESTAT, Ahmedabad in Service Tax Appeal No. 263 of 2012-DB ruled as under:

• Observed that, the motor vehicle if rented by an educational body will not be included within the meaning of rent-a-cab.
• Relied upon the Judgement ofM/s. Maharashtra State Road Transport Corporation v. Commissioner of Central Excise [2016 (42) STR 32 (Tri. Mumbai)] wherein the CESTAT, Mumbai held that, tour operator service and Rent-a-Cab service are exempted if the journey is organized or arranged for an educational body.
• Opined that, the Appellant has provided the bus service to the school for transportation children from and to school, this service is clearly for the school children who are taking education in the school.
• Held that, the motor vehicle has been used by an educational body for transportation of school children and therefore, the same is excluded from the definition of cab under Section 65(20) of the Finance Act.
• Set aside the Impugned Order.

Relevant Provision:

Section 65(20) of the Finance Act 

"cab" means –

(i) A motorcab, or
(ii) A maxicab, or 
(iii)Any motor vehicle constructed or adapted to carry more than twelve passengers, excluding the driver, for hire or reward" 

Provided that the maxicab referred to in sub-clause (ii) or motor vehicle referred to in sub – clause (iii) which is rented for use by an educational body imparting skill or knowledge or lessons on any subject or field, other than a commercial training or coaching centre, shall not be included within the meaning of cab;"