2001 (4) TMI 7 - HC - Service Tax

Service Tax on 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

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."

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