"chargeable exp." includes exp. incurred in payments made in class of hotel, HC

Facts in Brief:

1. This judgment shall dispose of the writ petitions mentioned above. In the said writ petitions, the petitioners have challenged the notices sent to them by the Deputy Commissioner of Central Excise, Service Tax Cell. Practically, in all the petitions such notices have been challenged.

2. By the said notice, the concerned authority has treated the no-ticees as the "tour operators" and requested them to register themselves with the office and follow the procedures prescribed in the Finance Act, 1994 and the rules framed thereunder with effect from 1-4-2000. In all these writ petitions, the contention of the petitioners is that the petitioners do not come within the mischief of the Finance Act, 1994 imposing the "service tax" vide Section 66 read with Section 65(38) and Section 65(52) and the notice itself is without jurisdiction.

3. The petitioners in these petitions can be classified in the following categories:

(I) Petitioners who are "Stage Carriage Operators" owning a "spare bus" covered under a "spare bus permit" as per Section 72(2)(xvii) of the Motor Vehicles Act, 1988.

(II) Petitioners who are "Contract Carriage Operators", owning the vehicles covered under Section 74 of the Motor Vehicles Act, 1988.

(III) Petitioners who are the owners of the "Maxi Cabs or Taxis" and having a permit under Section 74 of the Motor Vehicles Act, 1988.

HC held as under,

4. In Federation of Hotels and Restaurants case, cited supra, the Apex Court was considering the "legality" and "legislative competence" of the tax levied by the Parliament on the "expenditure". The impugned Act was "Expenditure Tax Act, 1987" which envisaged a tax at 10% ad valorem on the chargeable expenditure incurred in the class of hotels wherein the room charges for any unit of residential accommodation are four hundred rupees or more per day per individual. The term "chargeable expenditure" was defined by Section 5 of that Act and included the expenditure incurred in or payments made in such class of hotels in connection with the provisions of any accommodation, residential or otherwise; or food or drink by the hotel, whether at the hotel or outside, or by any other person at the hotel; or any accommodation in such hotel on hire or lease; or any other services envisaged in that section.

5. The challenge was on the ground that this tax, which was being imposed under Entry 97 of List-I under Article 248 of the Constitution of India was beyond the legislative competence as in fact, this expenditure tax was squarely covered under Entry 62 of List-II which pertained to the taxes on luxuries, including taxes on entertainments, amusements, betting and gambling and also could be covered under entry 54 of List-II as the transaction in question also amounted to "sale of food stuff (goods)" to the customers. The Supreme Court upheld the validity of the levy of the tax. The Supreme Court accepted that the said tax could have and had "distinct aspects".

6. The Apex Court recognized the said "distinct aspect", viz., and the "expenditure aspect" of the transaction and held the same to be falling within the "Union Power". It held that that aspect had to be distinguished from the aspect of luxury or sale of goods. The following observations in paragraph 19 are apposite :

"The submissions of the learned Attorney General that the tax is essentially a tax on expenditure and not on luxuries or sale of goods falling within the State power, must, in our opinion, be accepted. As contended by the learned Attorney General, the distinct aspect namely, the expenditure aspect of the transaction falling within the Union power must be distinguished and the legislative competence to impose a tax thereon sustained....

7. The decision in Federation of Hotels and Restaurants case is clear that even if the tax is on account of the business or calling or trade of the taxpayer, i.e. of running a cab agency or conducting tours by using tourist vehicles or taxis, the tax is on the distinct aspect of service provided by him and, therefore, the argument that this falls under entry 60 of List-II is clearly incorrect and has to be rejected. This challenge by the "rent-a-cab scheme operators", which also is applicable to the "tour operators" viz. "state carriage operators", "contract carriages operators", "cab/maxi cab operators" has absolutely no basis and would have to be rejected.

8. We have already found that the argument regarding the non-applicability of the provisions of the Finance Act to the stage carriage operators, contract carriage operators, cab/maxi cab operators, is absolutely incorrect. We have already indicated in the judgment earlier that all those petitions, which were argued only on the applicability of the Finance Act, would have to be dismissed.

9. However, since later on during the course of arguments, the question of "legislative competence" was also raised, we did not dismiss the matters then at the conclusion since all these petitions were argued as a "group matter". We now make it clear that all the writ petitions filed by the "stage carriage operators", "contract carriage operators", "cab/ maxi cab operators" and "rent-a-cab scheme-operators" would be liable to be dismissed and are accordingly dismissed subject to the rider which we have spoken of in paragraph 36.

10. For the reasons stated above, all the above writ petitions are dismissed.  

Case Reference - Secy. Federn. Of Bus-Operators ... vs Union Of India (Uoi).