K. A. SWAMI, J. ( 1 ) IN these petitions under Articles 226 and 227 of the Constitution, the petitioners have sought for the following reliefs : "issue a Writ in the nature of certiorari to quash the Order of assessment No. RTO (w) NT. II/ meq 5849 and 5850/ 85-86 dated 24-7-1985 (Annexure-A); Demand Notice No. NT. II MEQ 5849 and 5850/85-86 dated 24-7-1985 (Annexure-B) passed by respondent-1 and the order passed by respondent-2 in No. TAX. Apl. 52/85-86 and No. TAX. Apl. 53/85-86 dated 29-8-1987 (Annexure-C ). " ( 2 ) ANNEXURE-A is the order passed by the Assistant Regional Transport Officer and the Taxation authority Respondent-1) holding that each of the petitioners in W. P. No. 15726/87 and W. P. No. 15725/87 is liable to pay motor vehicles tax under the Karnataka Motor Vehicles Taxation Act, 1957 (hereinafter referred to as the 'act') in a sum of Rs. 1,10,891/- in respect of use of each of vehicles bearing registration Nos. MEQ 5859 and MEQ 5850 respectively as a contract carriage, though registered as omnibus. The amount demanded in each one of these cases is the balance found due after deducting the amounts already paid in a sum of Rs. 1,19,187/- by each of the petitioners. Pursuant to the aforesaid order, a demand notice was issued on 24-7-1985 as per annexure-B by the first respondent. ( 3 ) THE petitioners preferred appeals against the aforesaid demands before the Deputy commissioner for Transport, Bangalore Division, Bangalore (respondent-2), who, by the impugned order dated 29-8-1987 (Annexure-C) has confirmed the demand. The 2nd respondent has held that the vehicles in question have been used as contract carriages for the period from 1-2-1980 to 30-11-1984. It has been held that the tax as per the use of the vehicle has to be paid at the rate of Rs. 216/- per seat per quarter for the period 1 -2-1980 to 31-3-1984 and for the remaining period at the rate of Rs. 234/- per seat per quarter as per entry in the relevant Schedule to the Act pertaining to contract carriage. The second respondent has also further held that these cases squarely fall under the rule laid down by a Division Bench of this Court in NOORULLA khan AND ORS. v. R. T. O. BANGALORE AND ORS. , ILR1985 kar 2711. 234/- per seat per quarter as per entry in the relevant Schedule to the Act pertaining to contract carriage. The second respondent has also further held that these cases squarely fall under the rule laid down by a Division Bench of this Court in NOORULLA khan AND ORS. v. R. T. O. BANGALORE AND ORS. , ILR1985 kar 2711. It is the validity of these orders that is challenged in these Writ Petitions. ( 4 ) SRI R. N. Narasimhamurthy, learned Senior Counsel appearing for the petitioners contends that for the tax to be demanded, there should be an appropriate entry in the Schedule to the Act in addition to the charging provision in the Act which merely states that the tax at the rates specified in Part-A of the schedule shall be levied on all motor vehicles suitable for use on roads; that in the absence of relevant entry, the tax demanded is unauthorised. The learned Counsel has placed reliance on a decision of the Supreme Court in M. NARASIMHAIAH v. DEPUTY commissioner FOR TRANSPORT, BANGALORE AND ANR. , ILR 1988 KAR 565. ( 5 ) ON the contrary it is contended on behalf of the respondents by learned High Court government Pleader Sri P. R. Ramesh, that it is the use of the vehicle that determines the rate of tax payable; that in the instant case, the vehicles in question have been undisputedly used as contract carriages even though the same were registered as omnibuses; that the tax payable in respect of contract carriages has to be paid by the petitioners. It is further submitted by learned government Pleader that notices were issued to the petitioners in this connection. They were heard, before the amount of tax payable by them according to the use of the vehicles was determined ; that as per entry No. 5 of Part-A of the Schedule to the Act, as it stood from time to time, the tax has been demanded after deducting the tax paid by the petitioners in respect of the vehicles in question registered as omnibuses. Therefore, it is submitted by learned High Court government Pleader that the decision in M. Narasimhaiah's case, ILR 1988 KAR 565 has no application to the facts of the present case. Therefore, it is submitted by learned High Court government Pleader that the decision in M. Narasimhaiah's case, ILR 1988 KAR 565 has no application to the facts of the present case. It is also further submitted that no doubt the second respondent has placed reliance on Noorulla Khan's case, ILR1985 KAR 2711 which has been over ruled by the Supreme Court in the aforesaid M. Narasimhaiah's case, ilr 1988 KAR 565 nevertheless on the undisputed facts, these cases fall outside the rule laid down by the Supreme Court in the aforesaid M. Narasimhaiah's case, ILR 1988 KAR 565. Learned High Court Government Pleader has placed reliance on the decisions of the Supreme court reported in THE STATE OF MYSORE v. SYED IBRAHIM, AIR1967 SC 1424 , 1967 Crilj1215 , [1967 ]2 SCR361 DALBIR SINGH AND ORS. v. STATE of PUNJAB, AIR 1979 SC 1384 and MUNICIPAL COMMITTEE, AMRITSAR v. HAZARA singh, AIR1975 SC 1087 , 1975 (0 )KLT275 (SC ), (1975 )1 SCC794 , [1975 ]3 SCR914 , 1975 (7 )UJ366 (SC ). ( 6 ) HAVING regard to the aforesaid contentions, the following points arise for consideration : 1) Whether the decision in M. Narasimhaiah's case covers the cases in question? 2) Whether the demands made by the respondents are sustainable in law? point No. 1 : ( 7 ) THE facts necessary for the purpose of deciding the two points raised for determination are not in dispute. These two vehicles in question were originally owned by the third respondent. These vehicles during the relevant period were classified and registered as omni-buses. On 10-11-1978 the petitioners entered into an agreement with the third respondent for conveying its staff members by using the vehicles in question. The agreement was for Rs. 2. 70 per K. M. The wear and tear, fuel and the vehicle tax were to be borne by the petitioners. This position continued upto 25-2-1980. On 25-2-1980 the petitioners purchased the vehicles in question. However, the vehicles were actually transferred in the names of the petitioners on 20-9-1984, by accepting the compounding fee; Even after the petitioners purchased the vehicles in question on 25-2-1980, the agreement to convey the staff members of the third respondent was continued and performed by the petitioners by use of the vehicles in question till 30-11-1984. However, the vehicles were actually transferred in the names of the petitioners on 20-9-1984, by accepting the compounding fee; Even after the petitioners purchased the vehicles in question on 25-2-1980, the agreement to convey the staff members of the third respondent was continued and performed by the petitioners by use of the vehicles in question till 30-11-1984. Thus, they continued to use the vehicles for conveying the staff members of the 3rd respondent on the agreed terms. When the third respondent was the owner, the vehicles were registered as omni bus and they continued as such even thereafter during the entire relevant period. ( 8 ) THUS, it is not in dispute and it is not disputed before me that from 1-2-1980 to 30-11-1984, the period for which the balance of the tax is demanded, the vehicles were used as contract carriages and the petitioners were the registered owners of the vehicles. Nevertheless the vehicles continued to be registered as omni bus. The vehicle tax was paid as omni-bus. ( 9 ) THEREFORE, the question for consideration is when undisputedly the vehicles are registered as omni bus but used as contract carriage thereby attracting the provisions contained in Section 8 of the Act, whether the additional tax in conformity with the use of the vehicle, is liable to be paid. ( 10 ) IN M. Narasimhaiah's case, ILR 1988 KAR 565, the vehicle was registered as a stage carriage. It was used as a stage carriage. However, the passengers conveyed in the vehicle were more than the permitted number. Additional tax was demanded as per Section 8 of the Act on the basis of the number of passengers carried in the stage carriage. It was upheld by this Court following a Division Bench decision in Noorulla Khan and ors. v. State of Karnataka, ILR1985 KAR 2711. However, the passengers conveyed in the vehicle were more than the permitted number. Additional tax was demanded as per Section 8 of the Act on the basis of the number of passengers carried in the stage carriage. It was upheld by this Court following a Division Bench decision in Noorulla Khan and ors. v. State of Karnataka, ILR1985 KAR 2711. The Supreme Court while reversing the decision under appeal and overruling the decision in Noorulla Khan's case, ILR1985 KAR 2711 has held thus : "the payment of additional tax a rises, therefore, only on two occasions; ( (1) when the motor vehicle is altered in such a manner as to cause the vehicle to become a vehicle in respect of which a higher rate of tax is payable; or (2) when any motor vehicle is proposed to be used in such a manner as to cause the vehicle to become a vehicle in respect of which a higher rate of tax is payable. Admittedly, the vehicle in question has not been altered. The question which remains to be considered is whether in the given case the vehicle is proposed to be used in such a manner as to cause the vehicle to become a vehicle in respect of which a higher rate of tax is payable. The vehicle in question has been used only as a stage carriage even when two or five extra passengers have been carried. There is no other provision in Part A of the Schedule to the Act which requires a higher rate of tax to be paid in respect of a vehicle which is being used as a stage carriage on the basis of a larger number of passengers that are carried in it. In order to bring the case within the scope of Section 8 of the Act it must be first shown that there is a provision in the Act which makes a stage carriage vehicle which carries a larger number of passengers than what is permitted under the permit issued in respect of it is subject to a higher rate of tax. The highest rate of tax in respect of a stage carriage that can be levied under the Act is incorporated in Clause (2) of Item No. 4. The highest rate of tax in respect of a stage carriage that can be levied under the Act is incorporated in Clause (2) of Item No. 4. Sub-clause (a) of Clause (2) of Item 4 of the schedule to the Act provides that for every seated passenger (other than the driver and the conductor) which the vehicle is permitted to carry the registered owner is liable to pay Rs. 60/and for every passenger (other than the seated passenger, the driver and the conductor) which the vehicle is permitted to carry has to pay Rs. 45/- per passenger per quarter. In both the "sub-clauses the liability of the registered owner is governed by the number of passengers that he is permitted to carry under the permit issued in his favour under the Motor Vehicles Act, 1939 and thus he is limited by the Condition incorporated in the permit. It would have been possible to levy higher tax on the appellant only if the words 'which the vehicle is permitted to carry' in Item 4 (2) of Part A to the Schedule to the Act had been omitted. The Court cannot ignore those words while construing the said item since it relates to the levy of a tax. Moreover the provision in Section 8 is specific. It says that the additional tax shall be equal to the difference between the tax already paid and the tax which is payable in respect of such vehicle for the period for which the higher rate of tax is payable in consequence of its being altered or so proposed to be used in such a manner as to cause the vehicle to become a vehicle in respect of which a higher rate of tax is payable," xxx xxx xxx there is another important circumstance which persuades us to disagree with the construction placed by the High Court on the relevant provision of taxation in the Act. The rate of taxation in this case is not based on the number of passengers actually carried during any period in a motor vehicle used as a stage carriage but it is related to the number of passengers which the motor vehicle is permitted to carry under the permit. If the number of the passengers carried during any period is less than what is permitted, the registered owner of the motor vehicle does not get any rebate. If the number of the passengers carried during any period is less than what is permitted, the registered owner of the motor vehicle does not get any rebate. He has to pay the tax at the rate determined by the number of maximum passengers mentioned in the permit even when the stage carriage is run with out any passengers. When that is the position there appears to be no justification to hold that the registered owner or whoever is liable to pay the tax should be made to pay the additional tax merely because on some stray occasions the motor vehicle is found to have carried a few more passengers than the number permitted under the permit since the tax is not levied on the basis of the number of passengers actually carried. The decision in Payne v. Allock (Supra) is clearly distinguishable from the present case. In that case the appellant had paid the duty under para 6 of the Schedule II to the Finance Act, 1922 which was a residuary clause under which he had to pay (sic) 16 for taking out the licence for using his motor vehicle as a private motor car, But he was found to be using the vehicle for the purpose of carrying goods for a fairly long period which brought the vehicle under 5th para of that Schedule which levied a higher rate of tax. ln the case before us as we have already pointed out the vehicle could not be subjected to a higher rate of tax under any item in Part A to the schedule to the Act. The argument urged on behalf of the State Government that the liability of the registered owner to pay tax in respect of a stage carriage depends upon the number of passengers carried in a vehicle on a given date does not appeal to us because in that event the words 'which the vehicle is permitted to carry' in Item 4 (2) become meaning less and ineffective. The High Court in noorulla Khan's case (supra) overlooked the presence of the words 'which the vehicle is permitted to carry' which are found in Clause (b) of Item 7 of the Act also. The High Court in noorulla Khan's case (supra) overlooked the presence of the words 'which the vehicle is permitted to carry' which are found in Clause (b) of Item 7 of the Act also. It is no doubt true that it is not in the public interest that a registered owner of a motor vehicle should be allowed to carry more passengers than the maximum number of passengers that he is allowed to carry under his permit and such a tendency on the part of any registered owner should be checked. That fact, however, cannot be relied upon for the purpose of construing the items in Part A of the Schedule to the Act liberally and in favour of the State Government. It is needless to say that a law which imposes a tax should be construed strictly. If the action on the part of the registered owner is contrary to the provisions of the Motor Vehicles Act, 1939, there is sufficient provision in that act to take appropriate action against him and either to cancel the permit or to suspend it. " ( 11 ) THUS the Supreme Court has specifically held that the payment of additional tax arises only on two occasions, (1) when the vehicle is altered in such a manner as to cause the vehicle to become a vehicle in respect of which higher rate of tax is payable or (2) when any motor vehicle is proposed to be used in such a manner as to cause the vehicle to become a vehicle in respect of which higher rate of tax is payable. It has also been further held that in order that higher rate of tax to become payable, it must fall in one of the entries in the schedule. It is not sufficient if the case falls under Section 8 of the Act. In addition to this, the use of the vehicle must fall in one of the entries in the schedule. It has also been further held that there will be no change in the use of a stage carriage merely because more than the permitted number of passengers are carried in it and carrying of more than the permitted number of passengers in a stage carriage does not attract any of the entry in the relevant schedule other than the one intended for a stage carriage. The supreme Court has specifically considered Noorulla Khan's case, ILR1985 KAR 2711 and over ruled it. ( 12 ) IN Noorulla Khan's case, ILR1985 KAR 2711 the decision in payne v. ALLOCK, 1982 (2) K. B. 413 was followed. Regarding Payne's case, 1982 (2) K. B. 413 the Supreme Court has observed that the appellant therein had paid the duty under para 6 of the Schedule II to Finance Act, 1922 which was a residuary clause but he was found to be using the vehicle for the purpose of carrying goods for a fairly long period which brought the vehicle under the 5th para of that schedule which levied a higher rate of tax. Therefore, Payne's case, 1982 (2) K. B. 413 is also of no assistance as in that case also the use of the vehicle fell in one of the paras of Schedule II of the Finance Act, 1922. ( 13 ) IN the instant case, the vehicles continued to be classified as omni-bus. There is no change in the registration of the vehicle. Additional tax is demanded on the basis of the change in the use of the vehicle which undoubtedly falls under Section 8 of the Act because during the relevant period, the vehicles are undisputedly and continuously used as contract carriages. Thus there is change in the use of the vehicles in as much as the vehicles are not used as omnibus but the same are used as contract carriages. In order to demand the vehicle tax on the basis that the vehicles are used as contract carriages, entry No. 5 in Part A to the Schedule has to be satisfied. Apart from this, there is no other entry which can be applied to the use of the vehicles in question. The entry No. 5 reads thus: class of Vehicles. Motor vehicles plying for hire or reward used for transport of passengers in respect of which contract carriage permits have been issued under the Motor Vehicles Act. 1939 and Rs. 180-00 permitted to carry more than six passengers excluding the driver, for every passenger which the vehicle is permitted to carry. " as per this entry, in order to demand tax in respect of a vehicle used as a contract carriage there should have been issued contract carriage permit under the Motor Vehicles Act, 1939, permitting to carry more than six passengers excluding the driver. " as per this entry, in order to demand tax in respect of a vehicle used as a contract carriage there should have been issued contract carriage permit under the Motor Vehicles Act, 1939, permitting to carry more than six passengers excluding the driver. There is no such contract carriage permit issued in this case. On the contrary, it is the case of the respondents that the vehicles are used unauthorisedly as contract carriages, even though they are registered only as omnibuses. Thus the position that emerges is that even though the vehicles are used as contract carriages even though they were registered as omnibus but without a contract carriage permit for demanding tax on the basis of such use, there is no relevant entry in the schedule to the Act enabling the State to levy and demand the tax. Therefore, these cases squarely fall within the ratio of M. Narasimhaiah's case, ILR 1988 KAR 565. 15. However, learned High Court Government Pleader tried to sustain the demand on the ground that in M. Narasimhaiah's case, ILR 1988 KAR 565, only additional number of passengers were carried for few days; therefore there was no provision for levying and collecting the tax for such type of use whereas in the instant case, undisputedly the vehicles in question were used as contract carriages during the period for which the tax is now demanded. Therefore, whether a contract carriage permit was issued or not, vehicles became taxable on the basis of the use. Hence, the demand of tax, according to learned High Court Government Pleader, is justified and these cases are distinguishable. Learned Government Pleader placed reliance on a decision of the supreme Court in State of Mysore v. Sayed Ibrahim. , AIR1967 SC 1424 , 1967 Crilj1215 , [1967 ]2 SCR361 No doubt it has been held therein that it is the use of the vehicle that determines the nature of the vehicle. The other two decisions (referred to in para 5 supra) are on the scope of Article 141 of the Constitution. The aforesaid decision in State of Mysore v. Sayed Ibrahim is of no assistance to the learned government Pleader having regard to the fact that there is no entry in the schedule to the Act enabling the State to levy and demand tax on the basis of the use the vehicles in question without a contract carnage permit. 16. The aforesaid decision in State of Mysore v. Sayed Ibrahim is of no assistance to the learned government Pleader having regard to the fact that there is no entry in the schedule to the Act enabling the State to levy and demand tax on the basis of the use the vehicles in question without a contract carnage permit. 16. Section 3 (1) of the Act provides that the tax at the rates specified in Part A of the Schedule shall be levied on all motor vehicles suitable for use on roads. In this case, we are not concerned with Section 3 (2) of the Act. Therefore, unless there is an entry in part A of the Schedule covering unauthorised use of the vehicle as contract carnage, the tax can not at all be demanded. This is exactly the ratio of the decision in M. Narasimhaiah's case, ILR 1988 KAR 565. That being so, the decision of the Supreme Court in State of Mysore v. Syed Ibrahim which only helps the learned Government Pleader to determine the classification on the basts of the use of the vehicle, but does not enable him to sustain the order demanding the tax in the absence of an entry in Part A of Schedule to the Act covering such use. As far as the other two decisions are concerned, it is laid down therein that it is the ratio of the decision that binds all the Courts subordinate to the Supreme Court. As I have already held that the ratio of the decision in M. Narasimhaiah's case, ILR 1988 KAR 565 is that even though the vehicle might have been used for a different purpose than the one for which it is registered, but such use cannot be taxed unless it falls under any one of the entries in Part A of the Schedule to the Act. That being the position, it is not possible to a accept the contention of the learned Government Pleader. 17. For the reasons stated above, Point No. 1 is answered in the affirmative. Consequently, Point no. 2 is answered in the negative. 18. In the result, the Writ Petitions are allowed. The impugned orders and the demand notices are quashed. There will be no order as to costs. 19. 17. For the reasons stated above, Point No. 1 is answered in the affirmative. Consequently, Point no. 2 is answered in the negative. 18. In the result, the Writ Petitions are allowed. The impugned orders and the demand notices are quashed. There will be no order as to costs. 19. It hardly requires to be observed that the situation brought about by the decision in M. Narasimhaiah's case brooks no delay. In the interest of its finance the State has to take immediate steps to plug the loop-hole in the Act by appropriate amendment to the Act and the Schedule, as otherwise it will continue to lose good part of its revenue. After the order is pronounced, it is submitted by the learned High Court Government Pleader Sri ramesh that the State wants to go up in appeal either by way of Writ Appeal, or directly to the supreme Court as may be advised and as there was an interim order passed in the Writ Petitions, the status quo may be maintained. As a consequences of the order just now pronounced, the vehicle bearing registration No. MEO 5849 which was seized and was allowed to remain in the custody of the respondents, will have to be released. In that event, there will not be any security for the amount of tax in the event the demands are upheld in the appeal. On the contrary it is submitted on behalf of the petitioners that as the vehicle has been in the custody of the respondents for a long time, the condition of the vehicle is deteriorating and as such the petitioner in W. P. No. 1 5726/87 is put to a great loss. As the respondents have a right of appeal, it appears to. me that it is just and appropriate to safeguard their interest. Accordingly, the order in so far it relates to the petitioner in W. P. 15726/87 is stayed for a period of six weeks on a condition that if the petitioner in 15726/ 87 furnishes security of immovable property to the satisfaction of the first respondent covering the amount of tax demanded from him, the vehicle bearing registration No. MEQ 5849 shall be released.