1. In these three appeals, the question that arises for determination is whether an omnibus engaged by an employer for transporting exclusively his employees between their houses and his factory, for which service he (the employer) collect fares from his employees, should be treated as a contract carriage or merely an omnibus for She purpose of levy of tax under the Karnataka Motor Vehicles Taxation Act, 1957, (hereinafter referred to as the Act).
2. The appellants who were the writ petitioners (hereinafter referred to as the Companies) are Government Companies in which all the shares are held by the State. Their factories arc located in the outskirts at Bangalore. Each of them has been maintaining a fleet of omnibuses to provide transport facility to its employees between their houses and its factory. For providing such transport facility, they collect fares from their respective employees by deducting such fares from their salaries or wages. Such fares are small compared to the cost of providing such transport facility and the Companies subsidise their respective transport services.
3. For these vehicles, the Companies had obtained contract carriage permits under the Motor Vehicles Act, 1939. The Regional Transport Authority which granted such permits, had endorsed on each of the permits three conditions, one of which reads as follows:
'Only the bona fide Employees of the Factory and no other than these employees should be carried.'
The taxing authority has been levying taxes on these vehicles on the footing that they arc contract carriages. The Companies made applications to the Regional Transport Authority, Bangalore, and the Commissioner of Transport to alter the classification of these vehicles from contract carriages to omnibuses. Those applications were rejected by them. When such orders had been made by the Regional Transport Authority, the Companies had preferred appeals to the Commissioner of Transport who dismissed them.
The Companies presented Writ Petitions, W. P. No. 542 of 1972 and W. Ps. Nos. 2124 and 2180 of 1973, assailing the decisions of the Regional Transport Officer and the Commissioner of Transport and had prayed for issue of writs in the nature of Mandamus directing the Regional Transport Officer to classify these vehicles as 'omnibuses'.
4. Jagannatha Shetty, J., by his common order dated 29-5-1974, dismissed the writ petitions holding that the taxing authority was justified in treating these vehicles as contract carriages for the purpose of the Taxation Act. Feeling aggrieved by the decision of the learned single Judge, the Companies have preferred these appeals.
5. Mr. P. R. Ramachandra Rao, learned Counsel for the appellant in W. A. No. 417 of 1974, addressed the leading arguments. Mr. B. P. Bopanna, learned Counsel for the appellants in Writ Appeals Nos. 413 and 414 of 1974, adopted those arguments and supplemented them. The learned Government Advocate argued in support of the decision of the learned single Judge.
6. In order to appreciate the rival contentions of learned Counsel, it is necessary to set out the relevant portions of the Taxation Act and the Motor Vehicles Act.
7. Section 3 of the Taxation Act which is the charging Section, provides that a tax at the rates specified in Part A of the Schedule shall be levied on all motor vehicles suitable for use on roads, kept in the State.
8. The relevant portions of Item 4 in Part A of the Schedule to the Taxation Act, as it stood prior to 1-7-72, read as follows:
SCHEDULE
PART'A'
Motor Tax Vehicle
Classes of'Vehicles
Quartery
Vehicles fitted with pneumatic Tyres
Other Vehicles
1
2
3
* * * * *
4.
Motor vehicles plying for hire and used for the Transport ofpassengers and in, respect of which permits have been issued under the MotorVehicles Act, 1939
* * * * *
(2)
Vehicles permitted to carry more than five persons and the totalmileage of which does not exceed 97 kilometres per day :-
(a)
for every seated passenger (other than the driver and conductor)which the vehicle is permitted to carry.
30-0045-00 (b)
For every passenger (other than a seated passenger, the driverand the conductor) which the vehicle is permitted to carry.
5-75 8-50 (3)
vehicles plying on routes other than those mentioned at (1) and (2) above :-
(a)
For every seated passenger (other than the driver and theconductor) which the vehicle is permitted to carry.
35-00 52-50 (b)
For every passenger (other than a seated passenger, the driverand the conductor) which the vehicle is permitted to carry.10-00 15-00
9. Item 4-A in Part 'A' of the Schedule to the Taxation Act, inserted by the Mysore (Karnataka) Motor Vehicles Taxation (Amendment) Act, 1972, which came into force on 1-7-1972, reads:
4A.
Motorvehicles plying for hire or re-ward used for transport of passengers in respectof which contract carriage permits have been issued under the Motor Vehicles Act,1939 and permitted to carry more than five personsexcluding the driver, for every passenger which the vehicle is permitted to carry.
100-00
150-00
10. Item 7 in Part 'A' of the Schedule, to the Taxation Act, reads:
7.
Omnibuses (other than those liable to tax under theforegoing provisions of this schedule) for every person (other than the driver)which the vehicle is constructed or adapted to carry.
10-00
15-00
11. Clause (j) of Sub-section (1) of Section 2 of the Taxation Act provides that the words and expressions used but not defined in that Act shall have the meaning assigned to them in the Motor Vehicles Act, 1939.
12. We shall now set out the relevant definitions in the Motor Vehicles Act.
13. Sub-section (18-A) of Section 2 of the Motor Vehicles Act defines 'omnibus' as any motor vehicle constructed or adapted to carry more than six persons excluding the driver.
14. Sub-section (25) of Section 2 of the Motor Vehicles Act defines 'public service vehicle' as any motor vehicle used or permitted to be used for the carriage of passengers for hire or reward. Contract carriage and stage carriages are included in that definition of public service vehicle.
15. Sub-section (3) of Section 2 of the Motor Vehicles Act which defines 'contract carriage' reads :
(3) 'contract carriage' means a motor vehicle which carries a passenger or passengers for hire or reward under a contract expressed or implied for the use of the vehicle as a whole at or for a fixed or agreed rate or sum--
(i) on a time basis whether or not with reference to any route or distance, or
(ii) from one point to another, and in either case without stopping to pick up or set down along the line of route passengers not included in the contract; and includes a motor cab notwithstanding that the passengers may pay separate fares.
16. Sub-section (29) of Section 2 of the Motor Vehicles Act defines 'stage carriage' as a motor vehicle carrying or adapted to carry more than six persons excluding the driver which carries passengers for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stages of the journey.
17. In Roshanlal Goutham v. State of U. P., : [1965]1SCR841 , the Supreme Court explained the distinction between a contract carriage and a stage carriage thus :
'The distinction between the two is this : the contract carriage is engaged for the whole of the journey between two points for carriage of a person or persons hiring it but it has not the right to pick up other passengers en route. The stage carriage on the other hand, runs between two points irrespective of any prior contract and it is boarded by passengers en route who pay the fare for the distance they propose to travel.'
18. It is common ground that the Companies' omnibuses cannot be regarded as stage carriages. As stated earlier, these vehicles are used exclusively for transporting the Companies' employees only between their houses and the respective factories. No member of the public other than such employees, can travel in these vehicles even if he is prepared to pay fare for travelling in them. As stated earlier, one of the conditions endorsed on the permits granted to them, is that only employees of the factory and none else should be carried in them. If these vehicles cannot be regarded as contract carriages, it is common ground that they can be taxed as omnibuses under Item 7 of the Schedule to the Taxation Act. Hence, the real question is whether or not these vehicles can be regarded as contract carriages.
19. From the definition in Section 2 (3) of the Motor Vehicles Act, the following ingredients are necessary for a motor vehicle being regarded as contract carriage :
(i) It should carry passengers;
(ii) Such carrying should be for hire or reward;
(iii) Such carrying should be under a contract, express or implied;
(iv) SUCH contract should be for the use of the vehicle as a whole;
(v) Such hire or reward should be at fixed or agreed rate or sum--
(a) on a time basis whether or not with reference to any route or distance; or
(b) from one point to another; and (vi) The vehicle should not pick up or set down along the line or route, passengers not included in the contract.
20. As regards the first of the above ingredients, learned Counsel for the Companies contended that the employees of the Companies who travel in these vehicles, cannot be regarded as 'passengers' travelling in a public service vehicle. On the other hand, the learned Government Advocate contended that as those employees are not transported in these vehicles in the course of their work, but in order to reach the factories and to return therefrom to their houses, there is no reason why they should not be regarded as passengers.
21. As regards the second ingredient, learned Counsel for the Companies argued that fares charged by the Companies to their employees, cannot be regarded as hire or reward, firstly because there is no soliciting or waiting to secure passengers nor any general invitation to the public to travel in these vehicles, secondly because such fares arc insufficient to meet even the cost of fuel and other consumable articles in operating these vehicles, and thirdly because the Companies have no profit or business motive and do not earn any profit, but incur losses in operating those services. It was explained by learned Counsel for the Companies that these vehicles arc run to enable their employees to come to the factories in time and to return home after the factory hours without having to queue up at bus stops and to wait for long period without being certain of getting accommodation in public buses.
22. On the other hand, the learned Government Advocate contended that so long as the Companies do not carry their employees gratuitously, the fares charged by the Companies to them should be regarded as hire or reward, that the fares being low and inadequate to meet the expenses of the services, is irrelevant and that the existence of the profit or business motive is equally irrelevant. It was also contended by the learned Government Advocate that even if there is no invitation to the public to travel in these vehicles, there is no reason why fares charged to the Companies' employees should not be regarded as hire or reward.
23. As regards the third ingredient, learned Counsel for the Companies contended that there is no contract between each Company and its employees for such transport and that there is no legal obligation on the Companies to provide such transport, nor have the employees any right to insist upon such transport facility being provided by the Companies.
24. The rival contention of the learned Government Advocate was that though there was no express contract between each Company and its employees, when an employee travels in a vehicle run by the Company and the fare payable by him is deducted from his salary or wages, there is an implied contract between him and the Company in regard to such transport facility.
25. As regards the fourth ingredient, learned Counsel for the Companies contended that assuming that there is a contract under which the employees of a Company are provided such transport facility, such contract is distinct and separate as between each of the employees travelling in such vehicle and the Company and that there is no contract as between the Company and the entire body of its employees or even the entire body of employees travelling in each vehicle, for the use of the vehicle as a whole.
26. The learned Government Advocate sought to meet the above contention by arguing that a contract between each of these Companies and the entire body of its employees using such transport services or at any rate between the Company and the body of employees using each of such vehicles, must be implied and that such contract is for the use of the vehicle as a whole.
27. It has not been shown that the entire body of employees of each of the Companies, represented by the trade union or any other association, has entered into a contract with that Company and has been paying the Company a consolidated fare for the use of each vehicle as a whole. Nor has it been shown that the entire body of employees using each of such vehicles have been paying such consolidated fare. On the other hand, each of the employees who avails himself of such transport facility pays to the Company the fare for himself only, such payment being made by deduction from his salary or wages. Hence, the implied contract in between the company and each individual employee who avails himself of such transport facility, and there is no contract between the Company and the entire body of employees travelling in a vehicle for the use of that vehicle as a whole.
28. Thus, one of the essential ingredients of the definition of contract carriage,namely, that the contract should be for the use of the vehicle as a whole, is absent in the cases of these vehicles run by the Companies. It follows that these vehicles cannot be regarded as a contract carriage as defined in Section 2 (3) of the Motor Vehicles Act. In this view, it becomes unnecessary to pronounce upon the rival contentions of learned Counsel as to the first three of the aforesaid ingredients. It is also unnecessary to decide whether the 5th and the 6th of the aforesaid ingredients, are present in these cases.
29. However, the learned Government Advocate urged that the Companies themselves applied for contract carriage permits which were granted by the Regional Transport Authority, that since the Companies were operating these vehicles under those contract carriage permits, they came within the ambit of Item 4-A of the Schedule to the Taxation Act and that as long as these vehicles arc operated under such permits, they cannot escape liability to tax at the rates provided in that Item.
30. The relevant words in Item 4-A, of the Schedule to the Taxation Act are 'Motor Vehicle plying for hire or reward and used for transportation of passengers and in respect of which contract carriage permits have been issued under the Motor Vehicles Act, 1939.' Though the Companies applied for contract carriage permits and the Regional Transport Officer purported to grant such permits, can those permits be regarded as contract carriage permits? We should not be carried away by the label attached to these permits, but we should ascertain the true nature of the permits. As stated earlier, the Regional Transport Authority had endorsed on the permits issued in respect of each of these vehicles a condition that only the Company's employees and none else should be carried in it. There is nothing in the definition of contract carriage which warrants such a restriction. When such a restriction is imposed and the permit holder is prohibited from carrying the public who may desire to travel therein under a contract for the use of the vehicle as a whole, it cannot be said that the permit granted to any of these vehicles, is a contract carriage permit. Hence such permits cannot be said to fall within the ambit of Item 4-A of the Schedule to the Taxation Act to attract levy at the rates mentioned in that Item.
31. The learned single Judge has overlooked the aspect that none of these vehicles operates under a contract for the use of the vehicle as a whole and that unless this requirement is satisfied, these vehicles cannot be regarded as contract carriages. Hence, we are unable to uphold his decision.
32. If these vehicles cannot be taxed either as contract carriages or stage carriages, they can only be taxed as omnibuses under Item 7 of the Schedule to the Taxation Act. Hence, the relief claimed by the Companies should be granted.
33. The next question is from what date such relief should be granted. The Companies had addressed letter to the Commissioner of Transport or the Regional Transport Authority asking for reclassification of their vehicles as omnibuses. Those authorities rejected the request for reclassification of those vehicles. The Companies had not pursued proper proceedings for redness of their grievance until they presented the writ petitions. Hence, the relief should, he granted to them only from the respective dates on which they presented the writ petitions.
34. In the result, we allow these appeals, reverse the common order of the learned single Judge and issue writs in the nature of mandamus directing the respondents to treat the Companies' motor vehicles used for transporting their employees, as omnibuses and not as contract carriages for the purpose of tax under the Taxation Act. If the respondents have collected from these Companies tax on these vehicles as contract carriages subsequent to the respective dates on which the writ petitions were presented, the excess tax so collected shall be refunded to the respective Companies. We disallow the claims of the Companies in respect of the period prior to the respective dates of presenting the writ petitions.
35. In the circumstances of these cases, we direct the parties to bear their own costs in these appeals as well as in the writ petitions.
36. Before concluding, we wish to point out that there is need for amendment of the Motor Vehicles Act and the Karnataka Motor Vehicles Taxation Act so as to introduce a separate classification of motor vehicles which are used by employers for providing transport facility to their employees exclusively. When the Motor Vehicles Act was enacted in the year 1939 this class of motor vehicles were negligible as our country was still in its infancy in industrialisation. With establishment of large industries and rapid growth of cities, this class of vehicles have assumed importance. It is desirable to provide for issue of a separate category of permits for such vehicles. It is for the State Legislature to consider whether such vehicles should be taxed as a separate class and if so, at what rate.
37. Petition allowed.