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PETITIONER: HINDUSTAN AERONAUTICS LIMITED

       Vs.

RESPONDENT: REGISTERING AUTHORITY & ORS.

DATE OF JUDGMENT:       10/09/1999

BENCH: S.R.Babu, R.C.Lahoti

JUDGMENT:

RAJENDRA BABU, J.  :

     The  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. He  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. A 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. The  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.

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     Appeals  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. The  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.

     The  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.

     The  matter was carried by way of writ petitions.  The

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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.

     The  contentions urged before the authorities and  the High Court are reiterated before us.

     Tax  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.

     All  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 ..

     It  has 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:-

     a)  Bus Rs.  4.00 per KM plus detention charges of Rs. 15/-  per  hour.   b)  Car(Diesel) Rs.   1.50  per  KM  plus detention  charges of Rs.  6/- per hour.  c) Car(Petrol) Rs. 3.00  ---- do ----- d) Jeep(Diesel) Rs.  1.50 ---- do  ----- e)  Jeep(Petrol) Rs.  2.00 ---- do ----- f) Van/Minibus/ Rs.

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2.00 per KM plus detention Station Wagon/ charges of Rs.10/- Ambulance per hour.  (diesel) g) --do(Petrol) Rs.  3.00 per KM -- do -- h) Truck(diesel) Rs.  4.00 per KM -- do --

     2.   The  above  charges will be levied on  garage  to garage basis.

     3.   In 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.

     4.   The  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.

     5.   The  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.

     6.   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 approval.

     This issues with the approval of General Manager.

     Although  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.

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     Other  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.

     In the 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.