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2005 Supreme(Kar) 290
2006(3) Kar. L.J. 215 (DB)
IN THE HIGH COURT OF KARNATAKAAT BANGALORE
(DIVISION BENCH)
N.K. SODHI, C.J. AND K.L. MANJUNATH, J.
K.T. RAJSHEKAR AND ANOTHER
V.
STATE OF KARNATAKA AND OTHERS
Writ Appeal Nos. 2327, 2328, 2329, 3376, 4331 and 5550 of 1999 and Writ Petition Nos. 28589 to 28615 of 1999 (T-MVT).
Decided on 25th May 2005
Sri Puttige R. Ramesh, Advocate for Appellants in W.A. Nos. 2327, 2328 and 2329 of 1999;
M/s. King and Partridge, Advocates for Appellant in W.A. No. 3376 of 1999;
M/s. Murthy and Kumar, Advocates for Appellants in W.A. No. 4331 of 1999;
Sri V.R.S, Naik for M/s. King and Partridge, Advocates for Appellant in W.A. No. 5550 of 1999 and for Petitioner in W.P. Nos. 28589 to 28615 of 1999;
Sri, M.N. Sheshadri, Government Advocate for Respondents in W.A. Nos. 2327, 2328, 2329 and 4331 of 1999;
Sri K.N. Puttegowda, Additional Government Advocate for Respondents in W.A. Nos. 3376 and 5550 of 1999 and W.P. Nos. 28589 to 28615 of 1999.
Headnote:Motor Vehicle Act, 1988 - Private Service Vehicle - Section 2(ee) -Private service vehicle -Meaning. [N. K. Sodhi CJ and K. L. Manjunath, J]: Private service vehicle means an omnibus which is constructed or adapted to carry more than nine persons excluding the driver and is used by or on behalf of the owner for the purpose of carrying persons for or in connection with his trade or business otherwise than for hire or reward. In other words, a private service vehicle is one which is used by or on behalf of its owner for carrying his employees or other persons in connection with his business and it must not carry any person for hire or reward. What is important is that it must be used by or on behalf of its owner .
Cases Referred: 1998(99) E. L. T. 202; 1996(9) SCC 284; AIR 1967 SC 1424; AIR 1986 AP 7.
KARNATAKA MOTOR VEHICLES TAXATION ACT, 1957 - Levy of tax on private service vehicles - Schedule, Clauses (8) & (5) (a) -Levy of tax on Private Service Vehicles -Contractor transferred vehicles in the name of a company -Transfer registered -Permits obtained by company from RTA to ply as Private Service Vehicles to carry its employees -Hence, not contract carriages -Have to be taxed under Clause (8) of Part A of Schedule to the Act and not under Clause (5)(a) since the company uses the vehicles only for transportation of its employees otherwise than for hire or reward and cannot be treated as contract carriages. [N. K. Sodhi CJ and K. L. Manjunath, J]: It is true that no consideration had passed but there is no law which prohibits the transfer of a vehicle without consideration. Both the Contractor and the Company agreed in a lawful manner to arrive at an arrangement whereby tax is paid at a lower rate. We do not find anything wrong with their action. The fact that the vehicles are not shown in the assets of the Company or that the maintenance of the vehicles is the responsibility of the Contractor are not relevant for determining whether the vehicles are liable to be taxed as contract carriages or private service vehicles. One may say that there was a lacuna in the Taxation Act of which the Company and the Contractor took advantage of and without violating any law arrived at the aforesaid arrangement with a view to pay tax at a lower rate. The Legislature appears to have noticed this lacuna and introduced Clause 8A in part A of the Schedule to the Taxation Act by Act No.6 of 2000 with effect from 1.4.2000 whereunder private service vehicles already under lease agreement with industrial undertakings or companies for the purpose of providing transport conveyance to their employees from residence to factories and vice versa are now taxed on the basis of floor area. This amending Act gives an indication that the Legislature was not averse to the kind of arrangement arrived at between the Contractor and the Company.
KARNATAKA MOTOR VEHICLES TAXATION ACT, 1957 - Taxing Private Service Vehicles - Schedule, clauses (8) & (5) (a) -Taxing Private Service Vehicles -Consideration. [N. K. Sodhi CJ and K. L. Manjunath, J]: The fact that the vehicles are not shown in the assets of the Company or that the maintenance of the vehicles is the responsibility of the Contractor are not relevant for determining whether the vehicles are liable to be taxed as contract carriages or private service vehicles.
Cases Referred: 1998(99) E. L. T. 202; 1996(9) SCC 284; AIR 1967 SC 1424; AIR 1986 AP 7.
Motor Vehicle Act, 1988 - Section 2 - Contract carriage - Section 2(7) -Contract carriage -Meaning. [N. K. Sodhi CJ and K. L. Manjunath, J]: A vehicle could be said to be a contract carriage only if it carries passengers for hire or reward and is engaged under a contract for its use as a whole by a person with a holder of a permit in relation to such a vehicle. One of the essential requirements of a contract carriage is that it must carry passengers for hire or reward . In other words, if a vehicle does not carry passengers for hire or reward it cannot be described as a contract carriage within the meaning of the M. V. Act and also for the Taxation Act even if it is operating under a contract.
Cases Referred: 1998(99) E. L. T. 202; 1996(9) SCC 284; AIR 1967 SC 1424; AIR 1986 AP 7.
Motor Vehicle Act, 1988 - Section 50 - Levy of tax on private service vehicles - Section 50 -Levy of tax on private service vehicles -Contractor transferred vehicles in the name of a company -Transfer registered -Permits obtained by company from RTA to ply as Private Service Vehicles to carry its employees -Hence, not contract carriages -Have to be taxed under Clause (8) of Part A of Schedule to the Karnataka Motor Vehicles Taxation Act, 1957 and not under Clause (5)(a) since the company uses the vehicles only for transportation of its employees otherwise than for hire or reward and cannot be treated as contract carriages. [N. K. Sodhi CJ and K. L. Manjunath, J]: . Before tax could be levied on any motor vehicle as a contract carriage in terms of clause 5( a) in Part A of the Schedule it must be a contract carriage . It is true that no consideration had passed but there is no law which prohibits the transfer of a vehicle without consideration. Both the Contractor and the Company agreed in a lawful manner to arrive at an arrangement whereby tax is paid at a lower rate. We do not find anything wrong with their action. The fact that the vehicles are not shown in the assets of the Company or that the maintenance of the vehicles is the responsibility of the Contractor are not relevant for determining whether the vehicles are liable to be taxed as contract carriages or private service vehicles. One may say that there was a lacuna in the Taxation Act of which the Company and the Contractor took advantage of and without violating any law arrived at the aforesaid arrangement with a view to pay tax at a lower rate. The Legislature appears to have noticed this lacuna and introduced Clause 8A in part A of the Schedule to the Taxation Act by Act No.6 of 2000 with effect from 1.4.2000 whereunder private service vehicles already under lease agreement with industrial undertakings or companies for the purpose of providing transport conveyance to their employees from residence to factories and vice versa are now taxed on the basis of floor area. This amending Act gives an indication that the Legislature was not averse to the kind of arrangement arrived at between the Contractor and the Company.
Cases Referred: 1998(99) E. L. T. 202; 1996(9) SCC 284; AIR 1967 SC 1424; AIR 1986 AP 7.
words and phrases - Contract carriage - Contract Carriage -A vehicle could be said to be a contract carriage only if it carries passengers for hire or reward and is engaged under a contract for its use as a whole by a person with a holder of a permit in relation to such a vehicle. One of the essential requirements of a contract carriage is that it must carry passengers for hire or reward . In other words, if a vehicle does not carry passengers for hire or reward it cannot be described as a contract carriage within the meaning of the M. V. Act and also for the Taxation Act even if it is operating under a contract.
Cases Referred: 1998(99) E. L. T. 202; 1996(9) SCC 284; AIR 1967 SC 1424; AIR 1986 AP 7.
words and phrases - Private Service Vehicle - Private service vehicle -Private service vehicle means an ominibus which is constructed or adapted to carry more than nine persons excluding the driver and is used by or on behalf of the owner for the purpose of carrying persons for or in connection with his trade or business otherwise than for hire or regard. In other words, a private service vehicle is one which is used by or on behalf of its owner for carrying his employees or other persons in connection with his business and it must not carry ay person for hire or reward. What is important is that it must be used by or on behalf of its owner .
Cases Referred: 1998(99) E. L. T. 202; 1996(9) SCC 284; AIR 1967 SC 1424; AIR 1986 AP 7.
Private Service Vehicle
Karnataka Motor Vehicles Taxation Act, 1957 - Section 2(ee) -Private service vehicle -Meaning.
[N. K. Sodhi CJ and K. L. Manjunath, J]: Private service vehicle means an omnibus which is constructed or adapted to carry more than nine persons excluding the driver and is used by or on behalf of the owner for the purpose of carrying persons for or in connection with his trade or business otherwise than for hire or reward. In other words, a private service vehicle is one which is used by or on behalf of its owner for carrying his employees or other persons in connection with his business and it must not carry any person for hire or reward. What is important is that it must be used by or on behalf of its owner .
Payment of tax
Karnataka Motor Vehicles Taxation Act, 1957 - Sections 4 & 3 -Payment of tax -Who is to pay under law.
[N. K. Sodhi CJ and K. L. Manjunath, J]:According to Section 4 of this Act the tax levied under Section 3 is to be paid in advance either by the registered owner of the vehicle or by any other person having possession or control of the motor vehicle for a quarter, half year or year at his choice within fifteen days from the commencement of such quarter, half year or year, as the case may be.
This order will dispose of a bunch of writ appeals (Writ Appeal Nos. 2327,2328,2329,3376,4331 and 5550 of 1999) and Writ Petition Nos. 28589 to 28615 of 1999 in which common questions of law and facts arise. Counsels for the parties are agreed that the decision in Writ Appeal No. 3376 of 1999 will govern the other cases as well. Writ Petition Nos. 28589 to 28615 of 1999 came up for hearing before a learned Single Judge and when he was informed that the issues involved therein were pending in these writ appeals the same was referred to be heard along with these cases.
2. For the sake of convenience, facts are being taken from Writ Appeal No. 3376 of 1999.
3. The short question that arises for consideration in Writ Appeal No. 3376 and other cases is whether the action of the respondents in levying higher rate of tax under the Karnataka Motor Vehicles Taxation Act, 1957 (hereinafter called 'the Taxation Act') in respect of private service vehicles registered in the name of Bharath Earth Movers Limited (for short, ‘the Company’) treating them as contract carriages is justified.
4. The Company is a public sector undertaking of the Government of India and is employing several thousand employees residing at various places in and around Bangalore District. It has its factory Bangalore Complex situated at New Thippasandra Post, Bangalore. With a view to provide transportation facilities to its employees the Company invited tenders for hiring contractors to ply 23 buses on its behalf to pick up its employees from their residence to the factory for work and to drop them back after the work at various places from the factory. The tender submitted by M/s. N.T. Rahamathulla Khan and Associates (hereinafter called the Contractor) was accepted and the Company entered into an agreement with the Contractor on 23-4-1994 for carrying its employees to and from the factory. The agreement was initially executed for a period of three years and the same was renewed on 1-5-1997 and the same was still in force when the writ petition came to be filed out of which the present appeal has arisen. As per the agreement, the Contractor is to ply the buses on behalf of the company to carry it employees from various points in and around Bangalore district to the factory and back at the prescribed timings on all working days of the month as decided by the Company. The payment to be made to the Contractor was also agreed between the parties as per Annexure-II to the agreement the company agreed to pay hire charges of Rs. 10.50 per kilometer per bus per day and over and above the run of 200 kilometers per day it is paying Rs. 9.50 per kilometer per bus per day It appears that after the agreement had been executed the Contractor transferred 23 vehicles in the name of the Company and approached the authorities under Section 50 of the Motor Vehicles Act, 1988 (hereinafter referred to as the ‘M.V. Act’) to get the transfer registered in its name. It is common case of the parties that the vehicles stand transferred in the name of the Company in the registration certificates. These vehicles had not been purchased by the Company as no monetary consideration had passed nor are they included in the list of assets of the Company. The Company then obtained permits from the Regional Transport Authority for plying the vehicles as Private Service Vehicles for carrying its employees to and from the factory. It is not in dispute that permits were issued in the name of the Company on the basis of which the Contractor is plying the vehicles on behalf of the former in terms of the aforesaid agreement. It is also not in dispute that the Contractor while plying the buses is not carrying any passenger for hire or reward but is only transporting the employees of the Company to and from the factory.
5. There is in force in the State of Karnataka the Taxation Act, which provides for the levy of tax on all motor vehicles, which are suitable for use on roads. Section 3 of the Taxati
