No service tax on school bus, rules Appellate Tribunal

Aug 23, 2023

Synopsis
The Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has ruled that school buses are not considered "cabs" and therefore cannot be subjected to service tax. This ruling came in response to an appeal by Akshar Travels, who provided buses for rent to a school owned by JK Paper Ltd. The tribunal held that the buses were used exclusively for transporting school children and therefore did not fall under the definition of a commercial organization.

School buses do not fall under the definition of ‘cab’ and therefore no service tax can be levied on it, Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) said in its ruling. The bench was hearing the appeal by Akshar Travels for providing buses for rent on a monthly basis to a school owned and managed by JK Paper Ltd.

A two-member bench consisting of Ramesh Nair and CL Mahar 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, 1994.

The chief commissioner of excise and customs had ruled that as service recipient is JK paper Limited which is a commercial organization and cannot be treated as educational body and demanded service tax on the income for the financial year 2007-08. 

“We do not agree with this contention of the revenue for the reason that the transportation was used for school children who are studying in the school run by J.K Paper Ltd therefore, the bus service was exclusively used for transportation of children and not for the business purpose of JK Paper Ltd,” the bench noted.

[The Economic Times]