CESTAT rules additional Service Tax demand as invalid under RCM on Rent-a-Cab services

CESTAT rules additional Service Tax demand as invalid under RCM on Rent-a-Cab services

The bench stated that the claim was computed wrongly by interpreting an internal ledger item

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the demand for additional service tax is invalid under the Reverse-Charge Mechanism (RCM) on rent-a-cab services.

In October 2014, a letter was issued by the Superintendent, Service Tax Range to the appellant, Global Logic India Limited alleging that the scrutiny of records submitted by the appellant showed that it had recovered expenses amounting to Rs.1,72,70,301 from its customers towards rent a-cab services.

It was alleged that under the title 'Details of Hire of Vehicle' expense for the Financial Year 2013-2014, the appellant showed relevant ledger line item expenses of Rs.3,44,67,299. The abated value of @40 percent was also disclosed in the service tax returns.

However, the Superintendent referred to certain ledger items mentioned in the chart. One of the entries was named 'Recovery of expenses' for an amount of Rs.1,72,70,301. The Superintendent surmised that the entry pertained to expenses incurred on rent-a-cab services, which were eventually recovered from its customers and no service tax had been discharged on the same.

But in its December 2014 reply, the appellant explained there was no recovery of expenses from the customers. The amount of Rs.1,72,70,301 in the chart was only a re-classification of expenditure in the books of account of the appellant. The appellant also pointed out that the expenses relating to rent-a-cab services were initially accounted for in the ledger head '211402 STF-WEL hire of vehicles.' This was later transferred to the relevant head of expenses by way of re-classification.

The appellant claimed the re-classification had no bearing on the total value of rent-a-cab services, which had been correctly computed and offered to tax. It was evident in the service tax returns.

The bench comprising Justice Dilip Gupta (president) and Raju, (technical member) held, "The additional demand of service tax is claimed on the amount on which service tax has already been paid by the appellant. This demand has been computed by wrongly interpreting an internal ledger item."