TMI Blog2006 (9) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ge bus operators. The petitioners in other writ petitions are all the taxi operators. Since the common questions of facts and law are involved in all these writ petitions, they have been clubbed and disposed of by this common order. 2. I have heard learned Counsels Shri K.R. Prasad, Vijayshankar Associates, Shri, N. Nagaraju, ENNAR Associates, Shri. G.B. Sreenivasan appearing on behalf of the petitioners and Shri. Aravind Kumar learned ACGSC, Shri. Ashok Harnahalli, CGSC appearing on behalf of the respondents and perused the material on record. 3. It is relevant to note certain provisions of Chapter V of the Finance Act, 1994 (as amended) relating to service tax on tour operators as they stood on the date of filing of writ petitions, which read thus: Sec. 65 (72): Taxable Service means any service provided- (a) xxxxxx (n) to any person, by a tour operator in relation to a tour: Section 65(76) tour' means a journey from one place to another irrespective of the distance between such places; Section 65(77) tourist vehicle has the meaning assigned to it in clause (43) of Section 2 of the Motor Vehicles Act, 1988 (59 of 1988) Section 65(78) tour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to identify the exact value of service and charge tax on such aspect of service. Hence, in the absence of machinery provision to identify the exact value of the service rendered, the imposition of service tax on the gross amount charged by the petitioners is bad in the eye of law. The petitioners further questioned the competency of the Parliament to enact the Service Tax Law by referring to entries 54 and 56 of List II of the VII Schedule of the Constitution. According to the petitioners, as levy of tax in question is traceable to entries 54, 56 and 60 of Schedule of List II of the Constitution r/w. Article 366(29A) (d) of the Constitution, the levy of service tax by the Parliament is bad in the eye of law and that therefore, the Parliament has no jurisdiction to enact the impugned provisions. 5. Shri. Arvind Kumar, learned Assistant Solicitor General of India countered the arguments advanced on behalf of the petitioners by submitting that the provision relating to service tax is a self contained Act by itself which contains all the necessary requirements of law and that the levy is not traceable to either of the entries 54, 56 and 60 and consequently, the Parliament can l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the tourist vehicles which are granted with tourist permits under the provisions of M. V. Act. Thus, all these petitioners can be termed as 'tour operators' or' contract carriage operators' and consequently, they are liable to be levied service tax, whether or not, such taxes are recovered by the petitioners from their customers. 7. The earlier definition of 'tour operator' was any person who held a tourist permit granted under the M.V. Act, 1988 and therefore, the persons responsible for payment of service tax were the tour operators, who necessarily had the tourist permits. Therefore, non-permit holders who operated as 'tour operators by using tourist permits which may have been leased or hired from persons who held tourist permits were not covered under the definition of 'tour operators'. Section 65(78) of the Finance Act, 1994 (as amended) has been revised to mean a tourist operator, any person engaged in the business of operating a tourist vehicle covered by a permit granted under the M.V. Act, 1988. Therefore, as per the new definition, even non-permit holders who operate as 'tour operators' by using tourist vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;. Consequently the 'service provider, i.e., 'tour operator' comes within the ambit of provisions of 'Service Tax ' and he is liable to be levied service tax as he is indulging in rendering taxable service as defined U/S. 65(72) of the Finance Act. The judgment relied upon by the petitioners in the case of M/s. International Tourist Corporation v. State of Haryana and other reported in AIR 1981 Supreme Court. 774 and in the case of M/s. Builders Association of India v. State of Karnataka and other reported in AIR 1993 SC 991 (popularly known as Builder's case are not helpful to the case of the petitioners. In the second case, i.e., Builder's case, the levy of tax on works contract was challenged and the Hon'ble Apex Court has held that the levy of tax is traceable to Entry 54 based on sale and purchase. In that case it is observed that whenever the contractor constructs the building on behalf of his client or the owner of the building, the sale of goods namely the cement, bricks, iron, mortar etc., takes place and therefore, the levy is traceable to entry 54 of list II. In the first matter i.e., AIR 1981 SC 774, the levy of tax on passenger by the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has observed in Paragraph 76, thus: 76. When we consider the provisions of Section 65(48)(n) and (o) the language thereof has to be appreciated independently and with its natural meaning along with the language of Section 65(38) and Section 65(62). Considering both these provisions, it cannot be said that this amounts to a tax on the passenger carried by road. The whole concept of the service tax is unique and could not be said to be a part of Entry 56 even if we give broadest possible scope to that entry as is contended by the learned Counsel. The incidence of tax is the service provided by the 'tour operator' or the 'rent-a-cab scheme operator' and it need not be always a service provided to a passenger at least in case of a 'rent-a-cab scheme operator' though the carrying of passengers may be part of the exercise. We wish to clarify that the tax under Entry 56 is because a passenger is carried by road while this challenged service tax is because of the service provided in locating or making available by engaging a taxi. The tax under Entry 56 will not be payable by a person who does not own or ply a vehicle while such would not be a necessity in case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the legislator in legislating the enactment. As aforesaid, the service tax is not the tax on income or tax on goods or passengers as contended by the petitioners, inasmuch as, the service tax is a tax on the service rendered by a 'service provider' to a client or customer and it has a distinct nature of taxable event. The two taxes, one levied on passengers or on owner of the vehicles and another levied on service provider may in one sense may overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. Since such a levy of service tax does not find place in the State list, obviously, the center has power to legislate under residuary power of the Parliament i.e., under Entry 97 of the Union List read with Article 248(2) of the Constitution. Hence, the challenge of the enactment on that score is not sustainable. 12. The present levy of service tax also does not affect the Entry 60 of List II of 7th Schedule of the Constitution, inasmuch as, the levy is a tax on service rendered by the 'tour operators' for remuneration. If the petitioners do not render any service, there will be no service tax. On the other hand, the professional tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to note the observation of the Hon'ble Supreme Court in the case of 20th Century Finance Corporation Ltd., and another etc. v. State of Maharashtra reported in AIR 2000 Supreme Court. 2436 wherein it is held as under: Our endeavour here is to discern what transfer, in the context of clause (d), means. Is it simply signing of a document that brings about a transfer of right to use any goods or is it also necessary to give control of the goods to complete the transfer with the intent of passing the right to use the goods to the hirer? A combined reading of the first and the second limb of clause (29A) suggests that mere execution of a document de hors passing the domain of the goods does not result in transfer of right to use any goods and wilt not constitute a 'deemed sale' within the meaning of clause (29A). The deemed sale' envisaged in sub-clause (d) involves not only a verbal or written transfer or right to use any goods but also an overt act by which the transferor places the goods at the disposal of the transferee to make their use possible. On this construction, it is explicit that transfer of right to use any goods involves both passing of a right in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates Acts. Let us take another example, where by the contract the transfer of right to use car 'X' is executed in Delhi: the car 'X' is in Gurgaon (Haryana), the hirer is handed over the key of the car 'X' in Delhi: as both the execution of the contract as well as the act of passing of the control/domain of the car takes place in Delhi, the transfer is complete in Delhi, so the deemed sale is within Delhi State and outside all other States; the taxable event will, therefore, be in Delhi no matter where the situs of the car 'X' is at the time of transfer and no matter where the car 'X' will be used in or out of India. If the hirer takes the car 'X' to Bombay, Tamil Nadu or any part of India, no State in which it is used will be entitled to levy tax for in none of the States the taxable event under sub-clause (d) arises. Regarding non-existent and unspecified goods, the following example will clarify the position. In the example referred to above - the contract of the right to transfer an unspecified equipment (which is not in existence or which may be with the supplier) is entered into in Gujarat. The lessor places the order to the man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a method followed in good drafting. The word 'pertain' is synonymous with the word 'relate'. The term 'relate' is also defined as meaning to bring into association or connection with. The expression 'in relation to' (so also 'pertaining to'), is a very broad expression which presupposes another subject matter. These are words of comprehensiveness which might have both a direct significance as well as an indirect significance depending on the context. The phrase 'in relation to' the tour means in the aid of tour also. Therefore, if any service is rendered in relation to or in the aid of tour is liable to be taxed. the taxable service is therefore not only means mere providing of car, taxies contract carriages on a temporary basis but it would also include other facilities supplied in relation to tour as a whole 16. The tour operators provide wide varieties of services apart from services of allowing the temporary user of the motor vehicle. The petitioners, apart from proper maintenance of the motor vehicles also provide wide range of other value-added services such as providing the service of porters, guides, providing tape r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in [2006 (3) S.T.R. 260 (S.C.)= 2004 (167) E.L.T. 3(S.C.) = 2004 AIR SCW 3991], the measure of taxation cannot be affected the nature of taxation and therefore, the fact that the service tax is levied as a percentage on the gross charges collected by tour operators cannot alter or affect the Legislative competence of the Parliament in the matter. 19. It is further argued on behalf of the petitioners that the enactment is violative of Article 14 of the Constitution by contending that there is no rationale or reason as to why stage carriage operators are kept out of the Service tax net. 20. Said contention also is liable to be rejected. Having regard to the diverse economic criteria that go into the formulation of a fiscal policy, the legislature enjoys wide latitude in the mater of selection of persons, subject matter, and events for taxation. It is sufficient if the law deals equally with the members of the well-defined area. Un equals cannot be treated equally. It is not open to challenge the law on the ground that it is not made applicable to other persons. A legislature does not have to tax everything in order to be able to tax something. If there is equality and uniform ..... X X X X Extracts X X X X X X X X Extracts X X X X
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