Ms. Jyoti Balasundaram, Vice President - Service tax demand of Rs. 64,34,753 covering the period April 2001 to March 2008 confirmed against M/s. Ajith Travels and M/s. Ajith Transports under the proviso to section 73(1) and 73(2) of the Finance Act, 1994, together with interest under section 75 ibid, and penalties of Rs. 65 lakhs and Rs. 1,000 under sections 78 and 77 of the Finance Act, 1994 respectively stand challenged in the above appeals. The demand is on the ground that the assessees were rendering tour operators service by using contract carriages as tourist vehicles.

2. We have heard both sides. The stand of the appellant is that they possess a permit only under section 74 of the Motor Vehicles Act for contract carriage operators and do not possess a permit under section 88(9) of the Motor Vehicles Act for tourist vehicles. We note that in the case of Secretary, Federation of Bus Operators Association of Tamil Nadu v. Union of India 2001 (134) ELT 618/[2007] 6 STT 49, the Hon’ble Madras High Court has held that even if the petitioners before the Court possess permits issued only under section 74 of the Motor Vehicles Act for contract carriage that would not save them because what is required is not a ‘tourist permit’ but a ‘user of 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. The Court rejected the argument that the permit granted under section 74 for contract carriage operators would not attract liability to pay service tax under section 65(52) of the Finance Act, 1994 unless it is a tourist permit but clarified that the only condition is that the vehicle should be a tourist vehicle under section 2(43) of the Motor Vehicles Act. Paras 41 and 42 of the High Court’s judgment are reproduced hereinbelow :-

"41. We have already rejected that argument holding that a permit contemplated under section 65(52) of the Finance Act need not necessarily be a "tourist permit". We have also clarified therein that the only condition is that the vehicle should be a "tourist vehicle" under section 2(43) of the Motor Vehicles Act; it should be used by the concerned tour operator for the purposes of a "tour" and the said "tourist vehicle" should have been covered by any permit granted under the Motor Vehicles Act and/or the Rules framed thereunder. 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 contract 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.

42. Even if the petitioners permits are only under section 74 of the Motor Vehicles Act for contract 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."

3. We