Tourist vehicle classification drives service tax liability; matter remitted for fresh verification of permits and vehicle status.

Service tax liability on transport operators depended on whether the vehicles used were tourist vehicles within the meaning of the Motor Vehicles Act and whether the assessees held the permits contemplated by section 88(9). The adjudication had not recorded a finding on this foundational question and had instead treated unmet specifications as irrelevant to the vehicle's character, which was insufficient to determine tax liability. The impugned order was therefore set aside and the matter remitted for fresh verification of the vehicle status and permits before a revised decision.

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Issues: Whether service tax liability on the assessees engaged in transport operations depended on whether the vehicles used were "tourist vehicles" within the meaning of the Motor Vehicles Act and whether the matter required fresh verification of permits and vehicle specifications.

Analysis: The demand was founded on the premise that the assessees were rendering tour operator service by using contract carriages as tourist vehicles. The controlling question, in light of the High Court guidance, was whether the vehicles operated by the assessees answered the statutory definition of tourist vehicle under section 2(43) of the Motor Vehicles Act and the relevant rules, and whether the assessees held permits of the kind contemplated by section 88(9) of that Act. The adjudication did not record a finding on this basic issue. Instead, it proceeded on the view that non-fulfilment of certain specifications did not change the character of the vehicle, which was insufficient for determining tax liability.

Conclusion: The impugned order was set aside and the matter was remitted to the adjudicating authority for fresh decision after verifying whether the vehicles were tourist vehicles and whether the relevant permits existed. The appeals succeeded only to that extent.

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