Nazeeria Motor Service Vs. State of
Andhra Pradesh & ANR  INSC 195 (21 August 1969)
21/08/1969 GROVER, A.N.
SHAH, J.C. (CJ) RAMASWAMI, V.
CITATION: 1970 AIR 1864 1970 SCR (2) 52 1969
SCC (2) 576
RF 1971 SC1705 (4) RF 1972 SC1804 (2,5,10,14)
R 1976 SC 182 (21)
Constitution of India, Arts, 301, 304(b) and
19(1)(g) and Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods)
Amendment and Validation Act XXXIV of 1961- Constitutionality of fares and
freights imposed by the Act.
The appellants, motor transport operators,
challenged the increase in surcharge of the fares and freights imposed by the
Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods) Amendment and
Validation Act, 1961. They urged:
(i) the Act was neither regulatory nor
compensatory in nature and, it fell directly within the mischief of Art. 301 of
the Constitution; (ii) the imposts exceeded the limits of permissible
reasonableness, were not in the public interest and, therefore, violated Arts.
304(b) and 19(1)(g); and (iii) the Act violated Art. 14 (a) inasmuch as it had
not been made applicable to the Telegana area although it was applicable to the
Andhra area and (b) the vehicles on inter- State routes on permits granted by
other States had not been subjected to tax.
HELD: (i) It was not the contention of the
State that the impugned Act imposed a tax by way 'of a regulatory or
compensatory measure. Therefore, it had to be seen whether the restrictions
imposed were reasonable and in the public interest within the meaning of Art.
304(b); these questions were open to examination by the court notwithstanding
the fact that the sanction of the President was obtained in compliance with the
Article. [55 E--F] Mathurai Pillay v. State of Madras, (1954) 1 M.L.J. 110,
Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan
v. State of Assam.  5 S.C.R. 975 and
Atiabari Tea Co. Ltd. v. State of Assam,  1 S.C.R. 809, referred to.
(ii) There was no material which would
justify the view that the tax which had been imposed exceeded the limit of
permissible reasonableness or was not in the public interest. The argument that
by raising the rate of tax the burden had been increased to such an extent that
the business of the appellants had been virtually annihilated had no substance.
The operators had been permitted to enhance the freights and if the freights
could be enhanced, obviously, the burden would not fall on them. If the
operators were not prepared to charge higher rates as a matter of policy or for
the purpose of business competition that could not impinge on the
reasonableness of the restrictions. This disposed of the challenge under Art.
19(1)(g) also and even on the assumption that
the profits would be diminished or greatly reduced' it could not be held that
there was any infringement of Art. 19(1)(g). [57 A--D] (iii) Under Act XVI of
1952 as amended by Act X of 1958 the Government could grant exemption from
payment of tax, by means of a notification, in respect of any motor vehicle
running in a particular area, and such an exemption was given to the operators
in the Telengana region 53 for the reason that before the extension of the Act
XVI of 1952 to this area no tax similar to the ,one levied under that Act was payable
in that area and that this exemption was granted under a different enactment.
Therefore, the challenge Under Art. 14 could not succeed. [58 A---C] No
question of discrimination arose when taxes were being imposed under two
different sets of laws in different States or geographical areas The laws in
Madras and Andhra Pradesh were different and persons having primary permits
from Madras were naturally governed by the laws operating in that State. 
& CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 69, 112 and 113 of 1968.
Appeal from the judgment and order dated
October 25, 1962 of the Andhra Pradesh High Court in Writ Petitions Nos. 1307,
1305 and 1353 of 1961.
K. Srinivasamurthy and Naunit Lal, for the
appellants (in all the appeals).
P. Ram Reddy and P. Parmeshwara Rao, for the
respondent No. 1 (in all the appeals).
The Judgment of the Court was delivered by
Grover, J. These appeals by certificate from a judgment of the Andhra Pradesh
High Court which disposed of several petitions under Art. 226 of the
Constitution including the petitions filed by the appellants involve the
question of the constitutionality of the Andhra Pradesh Motor Vehicles
(Taxation of Passengers and Goods Amendment and Validation) Act, 1961, Andhra
Pradesh Act XXXIV of 19 61.
The appellants hold permits either for stage
carriage or for public. carriers issued under the Motor Vehicles Act, 1939.
They ply these vehicles on different routes in the State as also on some of the
inter-State routes. They were subject to tax levied under the Madras Motor
Vehicle Taxation Act, 1931.
1952 the Madras Motor Vehicles (Taxation of
Passengers and Goods) Act, 1952 (Act XVI of 1952) was enacted by which every
operator had to pay Rs. 12.50 per seat per quarter or 37 naye paise per seat
per mile over and above the tax payable under the Madras Motor Vehicles
Taxation Act, 1931.
Under that Act the operators were paying tax
of Rs. 30 per seat per quarter. The validity of Act 16 of 1952 was challenged
before the Madras High Court. In Mathurai Pillai v. The State of Madras(1) its
validity was upheld except as to. the proviso to s. 3 of the Act. After the formation
of Andhra Pradesh State the Governor promulgated an Ordinance amending Madras
Act 16 of 1952 in the light of the (1) (1954) I.M.L.J. 110.
54 above judgment. The provisions contained
in the Ordinance were subsequently reenacted as President's Act 11 of 1954.
The operators, therefore, paid taxes imposed
under Act 16 of 1952 as amended in the State of Andhra Pradesh. By means of Act
21 of 1959 the legislature of Andhra Pradesh amended Act 16 of 1952. Section 3
of Act 16 of 1952 as amended read as follows:
"In cl. (a) of sub-rule (i) of rule 1 in
the schedule to the Principal Act, for the words 37 np. per seat per year per
mile the words Rs. 1.48 np. per seat per year per mile and for the words Rs.
12.50 np. per seat per quarter the word Rs. 50/- per seat, per quarter shall be
substituted and cl. (b) of the said Sub-rule for the words Rs. 22.50 np. per
month the words Rs. 45/- per month shall be substituted." The validity of
the Amending Act 21 of 1959 was challenged by means of writ petitions before the
High Court. A Division Bench. struck down the impugned provisions as
unconstitutional and ultra vires on the ground that since that Act imposed a
restriction on the operators' freedom of trade and commerce under Art. 301 of
the Constitution the previous sanction of the President was necessary under the
proviso to Art. 304(b) and because that had not been obtained the Act was
legally inoperative: Venson Transport v. The State of Andhra Pradesh(1).
Subsequently Act 34 of 1961 was enacted after the sanction of the President was
obtained to the Bill under the proviso to Art. 304(b). It validated two acts,
namely, Act 21 of 1959 and Act 22 of 1959 and also amended Act 16 of 1952 and
substituted sub-s. (3) of s. 3 of that Act by a new sub-section. It further validated
the realisation of the tax paid or payable and the fee paid or payable and
other action taken under Act 21 of 1959 and Act 22 of 1959. It empowered the
Government to levy additional tax at the rate of Rs. 50/- per seat per quarter
from May 8, 1959 to January 16, 1961. Thereafter from January 17, 1961 to
November 3, 1961 the rate was fixed at Rs. 12.50 per seat per quarter. After
the commencement of the Validating Act 34 of 1961 the rate was to be Rs.
37.50 per seat per quarter. This was to be
operative till April 1, 1962 when the Act would cease to have any effect.
The validity and constitutionality of
Validating Act 34 of 1961 were challenged by means of various petitions under
Art. 226 of the Constitution. It was sought to be contended before the High
Court that the impugned legislation was not regulatory in character. The sole
object was to augment the revenues of the State. This brought the statute
within the mischief of Art.
(1)  I. An. W.R. 351.
55 301 of the Constitution. The High Court
was of the view that the question whether the statute was regulatory or
compensatory was relevant in the context of Part XIII of the Constitution only
in the event of non-compliance with the proviso to Art. 304(b) of the
Constitution. As the previous sanction of the President had been obtained in
terms of the proviso such points could no longer be canvassed. The challenge on
the ground of Art. 14 before the High Court also failed. An argument was
addressed that the impugned Act was repugnant to Art. 19(1)(g) of the
Constitution. The reasonableness of the restriction within the meaning of Art.
304(b) also came up for consideration. The
High Court, in the light of the facts and figures placed before it, held that
the increase in surcharge of the fares and freights contemplated by the
impugned Act did not constitute an impediment to the trade of the transporters
and that the restriction in the shape of additional imposts was not
unreasonable. It is unnecessary to refer to the other points agitated before and
decided by the High Court.
Counsel for the, appellant has urged the
following points before us:
(1) The impugned Act imposed a tax for
augmenting the revenues of the State. It was neither regulatory nor
compensatory in nature and it fell directly within the mischief of Art. 301 of
(2) Even though there had been compliance
with the proviso to Art. 304(b) in the matter of obtaining the requisite
sanction it was open to the court to go into the question of reasonableness
both with reference to the aforesaid provision and Art. 19(1)(g) read with
clause (6) of that Article. The court was equally entitled to determine whether
the imposition was in the public interest.
(3) The impugned Act violated Art. 14 of the
Constitution and was discriminatory inasmuch as (a) it had not been made
applicable to the Telengana area although it was applicable to the Andhra area
and (b) the vehicles on inter-State routes on 'permits granted by other States
had not been subjected to tax.
In order to decide these points the
principles which have been settled by this Court with regard to Art. 301 and
Art. 304(b) may be noticed. According to the majority view in Automobile
Transport (Rajasthan Ltd. v. The State of Rajasthan & Others(1) if a tax is
compensatory in character it cannot be said to fall within the mischief of Art.
Subba Rao J., (as he then was) (1)  1
56 who concurred in the majority decision but
delivered a separate judgment preferred to rest his view on the regulatory
nature of such taxing statute as would escape the mischief of Art. 301. In
Khyerbari Tea Co. Ltd. & Anr. v. The State of Assam(1) the difference
between the view expressed in the Automobile Transport (Rajasthan) case(2) and
an earlier decision in Atiabari Tea Co. Ltd. v. The State of Assam &
Others(3) with regard to the scope and effect of the provisions of Art. 304(b)
was noticed . It was observed that according to the majority view expressed in
Atiabari Tea Co. case(3) if the Act is passed under Art.
304(b) and its validity is impeached the
State may seek to justify the Act on the ground that the restrictions imposed
by it are reasonable and in public interest and in doing so it may rely on the
fact that the taxes levied by the impugned Act are compensatory in character.
On the other hand, according to the majority decision in the Automobile
Transport (Rajasthan)(2) case compensatory taxation would be outside Art. 301
and cannot fall under Art. 304(b).
since it was not urged that the tax was of a
compensatory nature in Khyerbari Tea Co. Ltd.(1) case this Court proceeded to
examine whether the restrictions imposed by the statute impugned in that case
were reasonable and in public interest within the meaning of Art. 304(b). The
effect of compliance with the provisions of the proviso to Art. 304(b) by
obtaining the previous sanction of the President to the Bill was also
considered and it has been laid down that notwithstanding the sanction the
question of the restrictions. being reasonable and in public interest is op.en
to examination by the court. The Act can be held to.
be valid only if it is shown that the
restrictions imposed by it are reasonable and in public interest.
It has not been contended on behalf of the
State that the impugned Validating Act imposes a tax which is by way of a
regulatory or compensatory measure. It has, therefore, to be seen whether the
restrictions imposed are reasonable and in public interest within the meaning
of Art. 304(b). Before the High Court an attempt was made on behalf of the appellants
to show that by raising the rate of tax the burden had been increased to such
an extent that the business of the appellants had been virtually annihilated.
According to some of the affidavits filed on
behalf of the writ petitioners, profits derived in recent years did not exceed
an average of Rs. 2,000/- per stage carriage even without the additional burden
which had been imposed and the transporters would suffer heavy losses if the
tax as increased by the impugned legislation were to be realized.
The High Court referred to the computation of
the income by the Income tax department of some (1)  5 S.C.R.975. (2)
 2' S.C.R. 491.
(3)  1 S.C.R. 809.
57 of the transporters in whose assessments
the income in regard to each bus had been calculated at a figure of Rs. 7,000/-
annually, which showed that the profits were much higher than Rs 2,000/-. It
was not disputed before the High Court that the transporters had been permitted
to enhance the fares. If the fares could be enhanced it was obvious that the
burden would not fail on the transporters. It was urged that owing to
competition from the railways and from operators whose vehicles had been
registered in the Madras State and who could charge lower rates the appellants
were not in a position to collect extra fares which they had been permitted to
do. This argument also cannot hold and was rightly repelled by the High Court
on the ground that if the operators were not prepared to charge higher rates as
a matter of policy or for the purpose of business competition that could not
impinge on the reasonableness of the restriction. Apart from a faint attempt to
repeat some of the arguments which were addressed before the High Court on this
point nothing new has been brought to our notice which would justify the view
that the tax which has been imposed exceeds the limits of permissible
reasonableness. As regards public interest we are unable to find nor has any
attempt been made to satisfy us that the provisions of the impugned Validating Act
with regard to imposition of tax are not in public interest.
This is sufficient to dispose of the
challenge under Art. 19(1)(g), as well. We may in this connection refer briefly
to the conclusion of the High Court which was reached on a consideration of the
affidavits filed before it. It has been found that there is no material which
would warrant the conclusion that the increase in the surcharge of the fares
and freight contemplated by the impugned Validating Act would constitute an
impediment to the trade.
The utmost that could be said was that it
would result in the diminution of profits. Even on the assumption that the
profits would be diminished or greatly reduced it cannot be held that there is
any infringement of Art. 19(1)(g).
Coming to the attack on the ground of
violation of Art.
reference may be made to the background
relating to taxation of passengers and goods carried in motor vehicles in the
State prior to the formation of Andhra Pradesh. It appears that there was no
law in the erstwhile Hyderabad State imposing any tax on passengers and goods.
After the merger of Telengana and Andhra areas the laws in operation in the
Telengana region continued to remain in force by virtue of the provisions of s.
119 of the States Reorganization Act, 1956. By Act X of 1958 the State of
Andhra Pradesh amended Act XVI of 1952 inter alia extending that to the
Telengana area. This Act (Act X of 1958) also amended the Principal Act by
adding s. 19 according to which the 1 sup. CI/70--5 Government could grant an exemption
by means of a notification in respect of any motor vehicle running in a
particular area. On November 4, 1961 a notification was issued exempting
passengers, luggage and goods carried in stage carriages from payment of tax
under the aforesaid Act within the Telengana area. There -can be no manner of
doubt that this exemption was given to the operators in the Telengana region
for the reason that before the extension of the parent Act to this area no tax
similar to the one levied under the parent Act was payable in that area and
that this exemption was granted under a different enactment. It is apparent
that for these reasons the challenge under Art. 14 cannot succeed. The same is
the position with regard to the tax payable by the appellants and that which
the transporters having permits for inter-State routes have to pay. As has been
pointed out in the affidavits filed on behalf of the State the laws in the two
States, Madras and Andhra Pradesh are different and persons having primary
permits from Madras are naturally governed by the laws operating in that State.
No question of discrimination can arise when taxes are being imposed under two
different sets of laws in different States or geographical areas.
The appeals, therefore, fail and are
dismissed with costs. One hearing fee.
R.K.P.S. Appeals dismissed.