Rent-a-Cab Not Exempt – Demand Time-Barred

Centax Editorial Board

April 4, 2026

• 2 min. read

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Case Details: Tamil Nadu Transmission Corporation Ltd. vs. Commissioner of GST & Central Excise, Coimbatore (2026) 40 Centax 352 (Tri.-Mad)

Judiciary and Counsel Details

S/Shri Ajayan T.V., Member (J) & M. Ajit Kumar, Member (T)
V. Ravindran, Adv. for the Appellant.
Sanjay Kakkar for the Respondent.

Facts of the Case

The appellant, being a State Transmission Utility under the Electricity Act, 2003, had hired motor vehicles for official use under rent-a-cab service. Liability to service tax arose under the reverse charge mechanism from the relevant period, and during enquiry the appellant admitted non-registration and non-payment of service tax. The department thereafter issued a show cause notice proposing recovery of tax along with interest and imposition of penalties, which was confirmed by the adjudicating authority. Aggrieved by such confirmation, the appellant preferred an appeal before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The matter was accordingly placed before the CESTAT.

CESTAT Held

The CESTAT held that the expression ‘transmission or distribution of electricity’ covered only those core and ancillary services which had a direct and proximate nexus with such activity. Applying the dependence test, it was observed that hiring of motor vehicles for official use did not bear such direct and proximate nexus and, therefore, was not eligible for exemption under the relevant provisions. The tribunal further held that the issue involved interpretational complexity and there was no evidence of fraud, suppression of facts, or willful misstatement on the part of the appellant. Consequently, the extended period of limitation was held to be inapplicable, rendering the show cause notice time-barred. The demand was thus set aside on the ground of limitation, notwithstanding the finding on taxability.

List of Cases Cited

Commissioner v. Sri Rajayalakshmi Cement Products — 2017 (52) S.T.R. 309 (Tri.-Hyd) — Referred [Para 3.1]
Easland Combines, Coimbatore v. Commissioner — 2003 (152) E.L.T. 39 (S.C.) — Relied on [Para 12]
Gujarat Energy Transmission Corporation Ltd. v. Commissioner — (2024) 17 Centax 258 (Tri. -Ahmd) — Referred [Para 3.1]
Hyderabad Power Installations (P) Ltd. v. Commissioner — 2016 (45) S.T.R. 217 (Try.Hyd.) — Referred [Para 3.1]
Jodhpur Vidyut Vitran Nigam Ltd. v. UOI — 2022 (56) G.S.T.L. 273 (Raj.) — Relied on [Paras 3.1, 7, 10]
Md. Aub Khan v. Commissioner — 2015 (40) S.T.R. 267 (Tri.-Bang) — Referred [Para 3.1]
MSC Agency (India) Pvt Ltd v. Commissioner — 2014 (6) TMI 592 – CESTAT Mumbai — Referred [Para 3.2]
Noida Power Company Ltd. v. Commissioner — 2014 (33) S.T.R. 383 (Tribunal) — Referred [Para 3.1]
S.K. Shah v. Commissioner — 2019 (2) TMI 1103 CESTAT MUMBAI — Referred [Para 3.1]
Tangedco v. Commissioner — 2024 (18) Centax 145 (Tri. Mad) — Relied on [Paras 3.1, 10]
Torrent Power Ltd. v. UOI — 2020 (34) G.S.T.L. 385 (GUJ.) — Relied on [Paras 3.1, 6, 10]
Uniworth Textiles Ltd. v. Commissioner — 2013 (288) E.L.T. 161 (S.C.) — Relied on [Para 12]