Aeronautics Limited Vs. Registering Authority & Ors  INSC 328 (10
R.C.Lahoti RAJENDRA BABU, J. :
appellant before us is Hindustan Aeronautics Limited situate at Sunabeda in Koraput
District, Orissa State. They possess several vehicles which are assessed to tax
under Item No. 6 of the Schedule annexed to Orissa Motor Vehicles Taxation Act,
1986 [hereinafter referred to as the Act]. In respect of vehicles bearing
registration Nos. ORK 3597, ORK 3810, ORK 5638, ORK 5639 and OSK 1563
proceedings were initiated by the Taxing Officer under the Act. On February 22, 1991 the Tax Inspector, Orissa Motor
Vehicle Department, stopped and checked the vehicles bearing registration Nos. ORK
3597 and ORK 3810 and the remaining three vehicles on March 4, 1991 while proceeding from Sunabeda to Koraput
carrying college students and employees.
issued a vehicle check report stating that the vehicle was being used for hire
and reward as contract carriage and seized the vehicle. The vehicle was
released on March 4,
1991 on payment of
differential tax for different periods.
notice was issued to the appellant to clarify (i) the date from which the bus
was plying to Koraput or to school at Sunabeda; (ii) amount of fare collected
from each student for such journey from time to time on daily/monthly basis,
and (iii) number of students performing journey in the bus.
Administrative Officer of the appellant replied to the said notice stating that
the vehicles are used only as an amenity extended to the children of the
employees to facilitate them to attend the school or college; that the tax paid
earlier was appropriate and sufficient; that the bus was not liable to tax at a
higher rate as it does not come within the definition of contract carriage and,
therefore, he claimed refund of the entire amount collected at the time of
release of the vehicle. The Taxing Officer did not accept the explanation
offered by the appellant and took the view that the appellant is realising hire
charges at different rates may be at nominal or subsidised rates from the travellers
or passengers of vehicle for their journey from Sunabeda to Koraput and vice
versa. Although it was made clear that they are not charging any amount from
any of the college or school going children to Koraput and back, even then the
view was taken that it should be deemed that they were charging money from travellers
or passengers for carrying them in their vehicles.
were preferred in respect of each of the said vehicles. It is contended before
the appellate authority that the vehicles of the appellant are private service
vehicles which are engaged for transporting its employees to different work
sites and are also used for providing transport to the school/college going children
of the employees and even if any charge was collected it does not amount to
plying the buses for hire or reward inasmuch as there was no motive to earn
profit. It is contended that there is no contract between the appellant and its
employees and, therefore, Section 2(7) of the Motor Vehicles Act, 1988 was not
attracted. In the absence of such a contract, it is claimed, the vehicles
cannot be termed as contract carriage in the light of the decision of this
Court M/s Tata Engineering and Locomotive Co. Ltd. v. The Sales Tax Officer and
Regional Transport Officer, Poona and Anr.,
AIR 1979 SC 343. Relying upon the decision in Hindustan Zinc Ltd. and Anr. v.
State of Rajasthan & Ors., AIR 1989 Rajasthan 124, it was claimed that even
if certain collections were made from the children of the company employees, it
does not justify to treat the buses as contract carriage. The appellate
authority is of the view that a private service vehicle should be understood to
be one which is used for own trade or business but it should not be used for
the purpose of hire or reward. On the material on record that the buses were
carrying college students and employees by collecting fees and, therefore, were
being used for hire or reward as a contract carriage.
appellate authority held that there was overwhelming evidence which showed that
the buses were used for hire or reward. That evidence was in the shape of hire
charges collected by the appellant under different receipt Nos. 4468 dated
3.12.90 for Rs. 100/-, 3845 dated 25.7.90 for Rs. 50/-, 3967 dated 14.8.90 for Rs.
50/-, 3804 dated 16.7.90 for Rs. 50/-, 3511 dated 14.7.89 for Rs. 100/-, 4025
dated 6.7.88 for Rs. 200/-, 91444 dated 5.8.87 for Rs. 200/-, 91448 dated
5.8.87 for Rs. 100/-, 4283 dated 25.11.88 for Rs. 100/-, 93249 dated 31.1.83
and 92053 dated 10.9.82 for Rs. 30/- which was held to fully prove that the
buses were being used for hire during the period from 1982 to 1990. The
circular No. HAL/KPT/CAF/3- 3/88/137 issued by the appellant on February 27, 1988 indicated that the revision of hire
charges to be levied for use of their vehicles for private purposes. Thus the
mode of use of the vehicles was contract carriage and, therefore, imposition of
higher tax is justified in terms of Entry 4 of the Schedule to the Act and on
that basis the appellate authority dismissed the appeals.
matter was further carried in revision to the revisional authority. The revisional
authority took the view that the proceedings of the taxing officer indicated
that the vehicles were used not only by its employees but also by outsiders and
the office memorandum clearly indicated that it was intended to let these
vehicles at stipulated hire charges not only for its own employees but also to
outsiders. In that view of the matter, the revisional authority affirmed the
view taken by the taxing officer and the appellate authority. He was of the
view that the children of the employees of the appellant- company were not in
any way connected with the trade or business of the appellant nor these buses
were run by educational institutions.
matter was carried by way of writ petitions. The High Court was of the view
that the taxing officer, the appellate authority and revisional authority had
appropriately considered the matter and question involved was, in fact,
correctly answered and the conclusion thereof could not be interfered with in a
proceeding arising out of Article 226 of the Constitution. On that basis the
High Court dismissed the writ petitions. Hence these appeals.
contentions urged before the authorities and the High Court are reiterated
under Entry 4 of the Schedule to the Act is attracted if a motor vehicle is
plying for hire and used for conveyance of passengers including motor cabs. In
view of the language adopted in the charging provision, namely, Entry 4 of the
Schedule to the Act the question for consideration is whether the motor vehicle
was plied for hire under Entry 4 of the Schedule and that must be a vehicle
which is used for conveying passengers. In Sales v. Lake & Ors., 1922 (1)
KB 553, the expression plies for hire arose for consideration. The language
used in the provision considered therein was every carriage of different
descriptions or other vehicle which is intended or used for the conveyance of passengers
and which plies for hire in any street, road or place and in which the
passengers or any of them are charged to any separate and distinct or at the
rate of separate and distinct fares for the respective places or seats therein.
The court was of the view that a vehicle cannot accurately be said to ply for
hire unless two conditions are satisfied. Firstly, there must be a soliciting
or waiting to secure passengers by the driver or other person in control
without any previous contract with them. And, secondly, the owner or person in
control who is engaged in or authorised the soliciting or waiting must be in
possession of a carriage for which he is soliciting or waiting to obtain
passengers. We are not concerned with the second condition. So far as the first
condition is concerned, a vehicle plies for hire means that is regularly used
for such hire, that is, the vehicle which is offered for such service
regularly. The expression to ply for hire means to exhibit the vehicle in such
a way as to invite those who may desire to hire it for travel in it on payment
of usual fares or to offer its use thereby soliciting customers.
the authorities have relied upon the circular No. HAL/KPT/CAF/3-3/88/137 issued
by the appellant on February
27, 1988. Therefore,
to correctly appreciate the matter in dispute, it is necessary to set out the
entire circular which is as under :- Sub : Revision of charges to be levied for
private use of Companys Vehicles ..
been decided to revise the charges for private use of Companys transport by
employees as indicated below with effect from 1.3.88 so as to cover the direct
cost of operations:-
Rs. 4.00 per KM plus detention charges of Rs.15/- per hour.
Rs. 1.50 per KM plus detention charges of Rs. 6/- per hour.
Rs.3.00 ---- do -----
Rs. 1.50 ---- do -----
Rs. 2.00 ---- do -----
Van/Minibus/ Rs.2.00 per KM plus detention Station Wagon/ charges of Rs.10/-
Ambulance per hour. (diesel)
Rs. 3.00 per KM -- do –
Rs. 4.00 per KM -- do --
above charges will be levied on garage to garage basis.
respect of Picnic trips arranges by employees through bodies recognised by HAL
the charges would be Rs. 1.50 per KM plus detention charges of Rs. 6/- per hour
for the bus on garage to garage basis.
charges for trucks provided to Hindustan Aeronautics Consumers Co- operative
stores will be Rs. 0.25 per KM on garage-to-garage basis for lifting the ration
commodities only and for other trips at the rates mentioned in para-1 above.
charges for the vehicles given for use by outside parties (other than HAL
employees or other recognised bodies of HAL) like State Govt. authorities and
other like institutions etc. will be 50% additional over the rates indicated in
para-1 above. When the vehicles are given for private use by outside parties,
they should deposit the full amount of expected usage in advance before the
Vehicles is moved out of the garage.
While it should be the policy to discourage the private use of companys
transport/vehicles, wherever it is considered necessary to permit such use in
unavoidable cases, the officers concerned will intimate the employees of the
revised rates before forwarding the requests to the General Manager for
issues with the approval of General Manager.
the circular is captioned Revision of charges to be levied for private use of Companys
Vehicles, it is made clear that the policy of the company is to discourage
private use of companys transport or vehicles but wherever it is considered
necessary to permit such use in unavoidable cases, the officer concerned will
intimate the employees of the revised rates before forwarding the requests to
the General Manager for approval. Thus the rates specified are not by way of an
offer to the general public but to regulate the use of the vehicles in a
particular manner. Thus the buses are not plied for hire or reward. And, in
addition to that, the vehicles are used mainly for their employees and their
children as part of the welfare measure of the employees. If the members of the
family of the employees, like the spouses or children, are allowed to travel in
those buses, it should not be treated as the vehicle being plied for hire or
reward. In such circumstances, we do not think that the authorities were
justified in treating the vehicles as being plied for hire or reward. They have
lost sight of the fact that the requirement to attract the charge under Entry 4
of the Schedule to the Act was plying of motor vehicles for hire and not mere
user. Therefore, we do not think that either the High Court or authorities
under the Act were justified in either imposing the higher rate of tax under
Entry 4 of the Schedule to the Act or upholding the same when challenged.
decisions in I.T.I. Limited v. Passenger Tax Officer, AIR 1996 Allahabad 79, TATA Engineering &
Locomotive Co. Ltd. v. The Sales Tax Officer & Regional Transport Officer,
Poona & Anr., 1979 (2) SCR 357, and Smt. H.M.T. Sittamma & Anr. v.
State of Karnataka & Ors., AIR 1979 Karnataka 211,
are adverted to by the learned counsel appearing in the case. However, these
cases turned upon the respective provisions of the Motor Vehicles Taxation Act
with which they were concerned in those cases. Therefore, these decisions may
not be of any relevance or application to the present case.
result, we set aside the order made by the High Court and consequently the
order made by the Taxing Officer as affirmed by the appellate/revisional
authority shall be quashed. Respondent are entitled to the refund of the
amounts withheld by way of differential tax in each of the cases within three
months from today. Appeals allowed accordingly.