2001 (4) TMI 7 - HC - Service Tax

Service tax upheld on tourist vehicles under Finance Act ss.65,66; s.2(43) MVA, s.88(9) permits covered

HC held that liability to service tax under the Finance Act arises where operators use 'tourist vehicles' within the meaning of s.2(43) Motor Vehicles Act ... Classification of 'Tour Operators' - Service Tax on Carriage - violence to the language of Section 65(52) of the Finance Act - Definition of the 'contract carriage' and 'stage carriage' - Distinction between Contract Carriage and Stage Carriage (1) Service tax on Motor Cab Owner’s or Maxi Cab Operators, tour operators or rent-a-cab operator (2) Scheme operator - Stage Carriage Operations :HELD THAT:- All the learned Counsel pointed out that the petitioners' spare buses may not be the 'tourist vehicles' within the meaning of Section 2(43) of the Motor Vehicles Act and, therefore, they are not liable. Indeed, if the vehicles owned by the petitioners are not the 'tourist vehicles' within the meanings of Section 2(43) of the Motor Vehicles Act read with Rule 128 of the rules framed thereunder then, such petitioner would not be required to be registered under the Finance Act. The learned Senior Counsel for the Department very fairly accepted this position. However, he pointed out that it would be for the petitioners to raise their objections before the concerned authorities under the Finance Act and their objections would be decided upon. Therefore, the petitioners are permitted to raise the objections before the concerned authorities issuing the notices and the authorities will decide as to whether the petitioners' vehicles are the 'tourist vehicles' as contemplated under Section 2(43) of the Motor Vehicles Act, which is sine qua non for the application of the Finance Act. Needless to mention that if they are not the 'tourist vehicles', the provisions of the Finance Act would not apply and more particularly the provisions of Section 65(51) and the other allied sections like Section 66(3), etc. No other point was argued before us in respect of the 'stage carriage operators'. II. 'Contract Carriage Operators': We do not see as to how the cases of the holders of contract carriage permits would be in any manner different from the holders of the stage carriage permits and the owners of the spare buses thereunder. The same rationale would apply even to the contact carriage vehicles covered by the permit under Section 74 of the Motor Vehicles Act. In fact, the most of the petitioners, who are having the contract carriage, are having the permits under Section 88(9) of the Motor Vehicles Act read with Section 82, which are nothing but 'tourist permits', issued for the purpose of promoting the tourism and obviously issued to the tourist vehicles as contemplated under that section. Therefore, there will be no question of entertaining their objections and they will straightaway be covered under Section 65(52) of the Finance Act. Such petitions, where the permits are under Section 88(9) of the Motor Vehicles Act, would be straightaway liable to be dismissed and are dismissed as such. Even if the petitioners permits are only under Section 74 of the Motor Vehicles Act for contact carriage, that would not save the petitioners because what is required is not a 'tourist permit' but a 'user of a tourist vehicle' by the tour operator in his business and further such 'tourist vehicle' should have been covered under a permit granted under the Motor Vehicles Act and/or the rules framed thereunder. There would be, therefore, no question of treating the holders of the permits under Section 74 of the Act for the contract carriage in any different manner. No other point was argued before us in respect of 'contract carriage operators'. Maxi Cabs/Motors Cabs: - persons or organisations that are 'motor cab owners' or 'maxi cab operators'. - There can be no doubt that such motor cabs or maxi cabs are plied as 'contract carriages' and/or under Section 88(9) of the Motor Vehicles Act read with Rules 82 to 85 of the Motor Vehicles Act. It would, therefore, be clear that the moment a vehicle which carries the permit as a 'motor cab' or 'maxi cab' is rented by a person, who is engaged in the business of renting cabs, such person who is so engaged in the business of renting cabs would be in the tax dragnet of service tax. The main argument by some of the learned Counsel was that a person who owns a motor cab or maxi cab is not a 'tour operator' within the meaning of Section 65(52) of the Finance Act as the permit granted to ply the motor cab or maxi cab is not necessarily a 'tourist permit' nor could such vehicles be called 'tourist vehicles'. The learned Counsel addressed us in relation to Section 65(50), (51) and (52) of the Finance Act. No hesitation in holding that if the petitioners are plying the motor cabs or maxi cabs and the services are provided by them to any person in relation to the renting of the cabs, such service becomes a 'taxable service' and, therefore, comes within the ambit of Section 66(3) of the Finance Act. In view of these provisions, it is not at all necessary to rely exclusively on Section 65(50), (51) and (52) which deal with the services offered by the 'tour operators'. That subject is entirely distinct and separate from the subject of the services provided by a rent-a-cab scheme operator though relevant as we have already shown in paragraph 50 while dealing with the petitions of 'tour operators'. We have already pointed out that the only requirement is the user by a person of the 'tourist vehicles' for the 'tour' and being engaged in that business. We have no doubts that a cab-owner who engages in that business for the purposes of renting a cab could also be held to be a 'tour operator' and would be covered under Section 65(50), (51) and (52) of the Finance Act. We have, therefore, no hesitation in holding that if the petitioners are plying the maxi cabs or motor cabs and giving the services in relation to the renting of a motor cab or maxi cab then, they would be in the tax-net and cannot complain that they are not covered by the Finance Act. As it is, majority of the petitioners are having the 'tourist permits' under Section 88(9) of the Motor Vehicles Act read with Rules 82 to 85 of the rules framed thereunder. Such persons can never contend that the Act is not applicable to them but, even others who are simply engaged in the business of renting the cabs would come in the taxnet. We have already found that the argument regarding the non-applicability of the provisions of the Finance Act to the stage carriage operators, contract carriage operators, cab/maxi cab operators, is absolutely incorrect. We have already indicated in the judgment earlier that all those petitions, which were argued only on the applicability of the Finance Act, would have to be dismissed. However, since later on during the course of arguments, the question of 'legislative competence' was also raised, we did not dismiss the matters then at the conclusion since all these petitions were argued as a 'group matter'. We now make it clear that all the writ petitions filed by the 'stage carriage operators', 'contract carriage operators', 'cab/ maxi cab operators' and 'rent-a-cab scheme-operators' would be liable to be dismissed and are accordingly dismissed. Issues Involved:1. Classification of petitioners as 'tour operators' under the Finance Act, 1994.2. Applicability of the Finance Act, 1994 to Stage Carriage Operators.3. Applicability of the Finance Act, 1994 to Contract Carriage Operators.4. Applicability of the Finance Act, 1994 to Maxi Cabs and Motor Cabs.5. Legislative competence of the Central Government to impose service tax on tour operators and rent-a-cab scheme operators.Detailed Analysis:1. Classification of Petitioners as 'Tour Operators':The petitioners challenged the notices from the Deputy Commissioner of Central Excise, Service Tax Cell, which classified them as 'tour operators' under Section 65(52) of the Finance Act, 1994, and required them to register and comply with the prescribed procedures. The petitioners contended that they did not fall within the ambit of the Finance Act, 1994, as their operations did not constitute taxable services under Section 65(38) and Section 65(52).2. Applicability of the Finance Act, 1994 to Stage Carriage Operators:The court examined whether the vehicles owned by Stage Carriage Operators, particularly spare buses covered under Section 72(2)(xvii) of the Motor Vehicles Act, 1988, could be classified as 'tourist vehicles' and whether the operators could be deemed 'tour operators' under the Finance Act. It was determined that:- A vehicle must be a 'tourist vehicle' as defined in Section 2(43) of the Motor Vehicles Act and conform to Rule 128 of the Central Motor Vehicles Rules.- A stage carriage vehicle can acquire the character of a 'contract carriage' under Section 88(8) of the Motor Vehicles Act.- The court rejected the contention that a spare bus operating under a special permit could never be a 'tourist vehicle.'- Petitioners were allowed to raise objections before the concerned authorities if their vehicles did not meet the criteria of 'tourist vehicles.'3. Applicability of the Finance Act, 1994 to Contract Carriage Operators:The court considered whether Contract Carriage Operators with permits under Section 74 of the Motor Vehicles Act, 1988, fell under the definition of 'tour operators' in the Finance Act. It was held that:- The permit under Section 74 need not necessarily be a 'tourist permit.'- The vehicle should be a 'tourist vehicle' used by the operator for tours and covered by any permit under the Motor Vehicles Act.- The rationale applied to Stage Carriage Operators also applied to Contract Carriage Operators.4. Applicability of the Finance Act, 1994 to Maxi Cabs and Motor Cabs:The court addressed whether owners of Maxi Cabs and Motor Cabs, covered under Section 74 of the Motor Vehicles Act, were 'rent-a-cab scheme operators' under Section 65(38) of the Finance Act. It was concluded that:- Any person engaged in the business of renting cabs, including motor cabs and maxi cabs, is deemed a 'rent-a-cab scheme operator.'- The amended provisions of the Finance Act do not require a licence under the Rent-a-Cab Scheme, 1989.- The service provided by renting cabs is a taxable service under Section 66(3) of the Finance Act.5. Legislative Competence of the Central Government:The petitioners challenged the legislative competence of the Central Government to impose service tax on the grounds that the subject fell under Entry 56 or Entry 60 of List-II of the Seventh Schedule to the Constitution of India. The court held that:- The service tax is on the service provided by tour operators and rent-a-cab scheme operators, not on passengers or the profession, trade, or calling.- The tax on services is distinct from taxes on passengers or professions and falls under the Union's legislative competence via Entry 97 of List-I.- The court relied on the principle that the measure of the tax does not determine its nature.Conclusion:The court dismissed the writ petitions, holding that the petitioners, including Stage Carriage Operators, Contract Carriage Operators, and owners of Maxi Cabs and Motor Cabs, fall within the ambit of the Finance Act, 1994, and are liable for service tax. The legislative competence of the Central Government to impose such a tax was upheld. The petitioners were allowed to raise objections before the concerned authorities if their vehicles did not qualify as 'tourist vehicles.'