Shaik Madar Saheb & Ors Vs. State of
Andhra Pradesh & Ors  INSC 348 (14 December 1971)
SIKRI, S.M. (CJ) SHELAT, J.M.
KHANNA, HANS RAJ
CITATION: 1972 AIR 1804 1972 SCR (2) 853
Andhra Pradesh Motor Vehicles Taxation Act (5
of 1963), ss.
3 and 17-Interstate routes-Enhancement of
Constitution of India, 1950, Arts. 301 and
304-Tax if should be reasonable and in public interest.
Under s. 3 of the Andhra Pradesh Motor
Vehicles Taxation Act, 1963, the State Government is empowered by notification
to direct that the tax should be levied on every motor vehicle used or kept for
use in a public place in the State, subject to the maximum specified in the
Section 17 of the Act vests in the State
Government the power to amend the Schedules in the manner prescribed.
In 1963, the State Government issued a
notification increasing the taxes and, in 1968, the State Government amended
the First Schedule and increased the maximum tax payable and issued a
notification directing the substitution of the higher rates. Both the increases
were challenged by the appellants but the High Court dismissed the petitions.
In appeal to this Court it was contended that
: (1) the restrictions imposed by the tax were unreasonable having regard to
Art. 19(1)(g) read with cl. (6) and Art. 301; (2) since part of the route lay
outside the respondent-State the levy in respect of the entire mileage could
not be of compensate nature; and (3) there was no justification for levying tax
on spare buses.
Dismissing the appeals,
HELD : (1) (a) The facts and figures
disclosed in the counter affidavits of the. State do not justify a conclusion
that the levy was a general one for augmenting the revenues of the State. Even
after the levy the total receipts from the tax fell short of expenditure on
roads and allied purposes. The enhancement was only intended to meet the
expanding requirements of maintenance of old roads and development of the road
system as a whole and is therefore only a compensatory measure. [862 G-H]
(b)Further, the impost would not result in bus operators running their business
at a loss, especially when they had been permitted to increase the fares. [862
H] (c) The figures relied upon by the appellants in the report of the Road
Transport Taxation Inquiry Committee do not give a completely accurate picture
relevant to the present case.
[860 E-G] Nazeeria Motor Services v. Andhra
Pradesh,  2 S.C.R.
(2)There were reciprocal arrangements between
the States and consequently the provisions made by the other States in regard
to the 7-L736SupCI/72 854 free movement on their roads constituted a
compensatory measure for the tax even though it was wholly levied by the
respondent State. [862 F-G] (3)It was imperative for the owner of a fleet of
buses to maintain spare vehicles to be available for substitution in case of
breakdown. Accordingly, the levy of tax on such buses which can at any time be
put on the road is justified and s. 3 empowers the State to levy such a tax on
a motor vehicle kept for use. [863 A-C]
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 932 to 934 of 1968.
Appeals from the judgment and order dated
September 6, 1963 of the Andhra Pradesh High Court in Writ Petitions Nos. 361,
430 and 706 of 1963 and Civil Appeals Nos. 1439 to 1441 of 1968.
Appeals from the judgment and order dated
April 26, 1968 of the Andhra Pradesh High Court in Writ Petitions Nos. 1792,
1818 and 1819 of 1968 and Writ Petitions Nos. 164 and 166 of 1968.
Under Article 32 of the Constitution of India
for the enforcement of the Fundamental Rights.
S.V. Gupte, K. Srinivasamurthy, Naunit Lal
and Swaranjit Sodhi, for the appellants (in all the appeals) and the
Petitioners (in both the Petitions).
P. Ram Reddy and G. Narayana Rao, for
respondents Nos. 1 and 2 (in C.A. No. 932 of 1968).
P. Ram Reddy and A. V. V. Nair, for the
respondents (in C.A. Nos. 933 and 934 of 1968).
P.Ram Reddy and K. Javaram, for the
respondents (in C.A.
Nos. 1439 to 1441 of 1968 and W.Ps. Nos. 164
and 166 of 1968).
The Judgment of the Court was delivered by
Mitter, J. All these appeals and Writ Petitions are directed against the Andhra
Pradesh Motor Vehicles Taxation Act (V of 1963) and notifications issued there
under. In the first group of appeals, the notification challenged is G.O.Ms.
No. 601 Home (Transport 11) Department dated 27th March, 1963.
In the second group of appeals Nos.
1439-1441/68 and in the two writ petitions the impugned notification is
numbered as G.O.Ms. No. 435 Home (Transport 11) Department dated March 28,
855 The appellants and the writ petitioners
carry on transport business in the State of Andhra Pradesh tinder stage
carriage permits granted by the Transport authorities under the Motor 'Vehicles
Act IV of 1939. Their complaint against the ever increasing burden of taxation
they are called upon to bear which is said to have passed the breaking point. A
short history of the taxes levied in the area which came to Andhra Pradesh from
the State of Madras and the increase thereof from stage to stage by the new
State based on the seating capacity of buses with stage carriage permits
referred to in the pleadings is recited in the judgment of this Court in
Nazeeria Motor Service v. A. P. State(1). The latest legislation on the subject
which was before this Court in that case was Validating Act of 1961 raising the
rate to Rs. 37-50 per seat per quarter per bus effective from April 1, 1962.
The Court upheld the impost.
Thereafter, the Andhra Pradesh Motor Vehicles
Taxation Act (Act V of 1963) came into force on the 20th March of that year
after receiving the assent of the President on February 2, 1963. This is the
Act now in force. It is an Act to consolidate and amend the law relating to
levy a tax on motor vehicles in the State of Andhra Pradesh. Under s. 3(1) of
the Act the State Government is empowered by notification from time to time, to
direct that a tax shall be levied on every motor vehicle used or kept for use
in a public place in the State. Under sub-s. (2) of s. 3 the notification is to
specify the class of motor vehicles on which, the rates for the periods of
which and the date from which, the tax is to be levied. Under the proviso to
the sub-section the rates of tax are not to exceed the maximum specified in
column (2) of the First Schedule. S. 17 of the Act vests in the State
Government power to amend the schedules in the manner prescribed.
On March 27, 1963 a notification No. G.O.M.
601 was issued by the State Government in its Transport Department imposing a
tax of Rs. 60 per seat per quarter on vehicles running less than 100 miles per
day and Rs. 67-50 on vehicles covering a higher mileage. A crop t of writ
petitions was filed before the High Court in the year 1963 praying for the
issue, of a writ restraining the State, from enforcing the provisions of the
Act of 1963 and of the notification dated March 27, 1963. By a common judgment
and order dated September 6, 1963 the High Court dismissed all the writ
petitions. The first group of appeals arises out of this judgment.
It was contended on behalf of the petitioners
before the High Court in that case, the appellants in the first group of
appeals before us, that the statute was inconsistent with the doctrine of
freedom of trade and commerce embodied in Part XIII of the Constitution and
secondly ;that it infringed the equality clause (1)  2 S.C.R. 52.
856 enshrined in Art. 14. An attempt was
made, on behalf of the petitioners by reference to certain figures regarding
the income of the State from this source of tax and the expenditure pertaining
to this topic that the taxes were levied more for purposes of general revenue
of the State than as a benefit for the facilities afforded to the operators of
transport vehicles, since the taxes were far in excess of the requirements for
the construction of new roads and bridges and the maintenance of existing ones.
The High Court found itself unable to accept the above submission and on a
scrutiny of the budget estimates for the year 1963-64, the receipts under the
Taxation Act, the amount collected by way of taxes on the sale of motor spirits
allocable to this head, came to the conclusion that the whole revenue would not
exceed Rs. 6 crores while the expenditure incurred would exceed Rs.
8,54,00,000. The finding of the High Court was that "far from there being
any surplus over the expenditure, the taxes collected under this head were
insufficient to meet the demands in this respect." According to the High
Court the object of the Act being only to raise the money required to afford facilities
to the operators of the transport vehicles, the tax levied answered the
description of compensatory tax and did not interfere with the freedom of trade
and commerce. As such the taxes were held not to offend Art. 301 of the
Constitution. The High Court further took the view that it had not been shown
that "the power ceded to the State Government by this legislative measure
was in any way detrimental to the public good or that it was opposed to the
well recognised principles underlying taxation." The High Court turned
down the contention that the taxes in question were arbitrary or oppressive or
that they constituted an unbearable burden so as to destroy the very business
of the writ petitioners. On the facts before the court as disclosed in the affidavits
it did not feel disposed to hold that the operators were doing business at a
loss. It also took the view that the increase in the fares sanctioned
simultaneously with the raising of the taxes had proved beneficial to the
operators. Reference was made to the fact that even subsequent to the
enhancement of the tax there had been considerable competition for securing
permits whenever any proposal was mooted by the transport authorities which
according to the court went to show that the operators themselves considered
that it would be a profitable business. In the opinion of the High Court, the
increase in the taxes was more than offset by the sanctioned increase in the
fares and the grievance of the operators that the taxes were an unreasonable
restriction was negative. Finally the High Court held that the impugned Act had
survived the test laid down by Art. 304(b) of the Constitution and had not
transgressed the limits of reasonableness.
857 It is not necessary for the disposal of
these appeals and writ petitions to go into the question of violation of Art.
14 as that point was not canvassed in view of
the decision of this Court in Nazeeria Motor Service case(1).
On March 22, 1968 the Government of Andhra
Pradesh purported to amend the First Schedule to the Act by ,notification No.
434 by increasing the maximum quarterly tax
in respect of sub items (iii) and (iv) of item 4 to Rs. 121 in respect of buses
Plying exclusively within municipal limits and to Rs. 135 in the case of other
buses. On the same day the State Government issued notification No. 435 in
exercise of the powers conferred by sub-s. (1) of s. 9 of the Act directing the
substitution of higher taxes in respect of buses covered by the aforementioned
sub items of item 4 of the First Schedule. The new notification No. 435
provided for different rates according to mileage; at the lower end of the
scale i.e. for a distance of 50 miles per day the rate was Rs. 40 per quarter
per seat while in the case where the distance exceeded 200 miles the tax was
raised to Rs. II 0 per seat per quarter. In effect, the petitioners contended,
the incidence of tax was increased by about 50 per cent. It was also claimed
that the procedure adopted for the levy of the tax had been changed and instead
of a flat rate of levy on the basis of the number of seats it was now made to
relate to the actual mileage per day covered by the vehicles. A challenge was
made to the additional impost on spare buses which bus operators running more
than a certain number of buses per day were obliged to reserve for use in the
event of any break-down. It was asserted that even for these buses, no matter
whether they were actually used or not, tax was levied at the rate of Rs. 30
per seat per quarter.
The points of law raised by this set of writ
petitioners before the High Court were (a)that prior sanction of the President
as required under Art. 304(b) was not obtained in respect of the levy inasmuch
as such sanction was given in February and the levy was made towards the end of
March. As such it was said G.O.M. 435 was unconstitutional and void.
(b)the proposed increase in the rate of tax
was not in public interest but only a revenue yielding measure. Since it did
not company with the provisions of Part III and Part XIII of the Constitution
it was illegal and unconstitutional. and (c) the levy of tax on spare buses was
By a common judgment and order dated April
26, 1968 the High Court rejected the contentions raised and dismissed this
group of writ petitions. This had led to the filing of the second group of
appeals before us.
(1)  2 S.C.R. 52 858 The two writ
petitions filed in this Court under Art. 32 raise identical questions.
In Nazeeria Motor Service case(1) the central
question was the constitutionality of the Andhra Pradesh Motor Vehicles
(Taxation of' Passengers; and Goods) Amendment and Validation Act XXXIV of
1961. The points urged in that case before this Court were :1.The Act imposed a
tax for augmenting revenues of the State. It was neither regulatory nor
compensatory in nature and fell directly within the ban of Art. 301 of the
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
regard to the said provision as also Art. 19(1)(g) read with cl. (6) of that
article. The Court was entitled to determine whether the imposition was in
3.The Act violated Art. 14 of the
Constitution inasmuch as it was not made applicable to all the areas under the
State and vehicles on inter-State routes on permits granted by other States had
not been subjected to tax in the same way.
In deciding that appeal this Court referred
to the views expressed in Automobile Transport (Rajasthan) Ltd. v. State of
Rajasthan & Ors. (2), Khyerbari Tea Co. Ltd. & Anr. v. State of
Assam(2) and Atiabari Tea Co. Ltd. v. State of Assam (4 ) and held that
notwithstanding compliance with the provisions of the proviso to Art. 304(b) by
obtaining the previous sanction of the President to the Bill an Act of this
nature could be held to be valid only if it was shown that the restrictions
imposed were reasonable and in public interest.
It was not contended on behalf of the State
in that case that the impugned Validating Act imposed a tax which was by way of
regulatory or compensatory measure. The Court therefore addressed itself to the
question whether the restrictions imposed were reasonable and in public
interest within the meaning of Art. 304(b). Taking into consideration the
finding of the High Court that the computation of income by the Income-tax
Department of some of the transporters, the income in regard to each bus was of
the order of Rs. 7,000 per annum as well as the fact that although permitted to
charge higher rates the bus operators had not either a& a matter of policy
or for purpose of business competition done so, the Court took the view that
the restriction imposed was not unreasonable. Nothing was shown either before
the High Court (1)  2 S.C.R. 52 (3)  5 S.C.R. 975.
(2)  1 S.C.R. 491.
(4)  1 S.C.R. 809.
859 or before this Court to establish that
the impugned Validating Act with regard to imposition of tax was not in public
interest. The utmost according to this Court "that could be said was that
it would result in the diminution of profits." The Court also turned down
the contention based on the violation of Art. 14.
In the first set of appeals now before us
learned counsel for the appellants submitted that in view of the, earlier
decision of this Court the only question left for consideration was whether the
restriction imposed by the tax was reasonable and permissible having regard to
19(1)(g) read with cl. (6) and Art. 301.
According to counsel the rate of tax fixed at Rs. 67.50 per seat per quarter
was an unreasonable burden and not a restriction which could be said to be
reasonable either in terms of Art.
19 or Part XIII of the Constitution. It was
urged that s. 3 of the Act empowering the levy of such, an unreasonable impost
would be ultra vires the aforementioned provisions of the Constitution. Attempt
was made to show that the impost was purely for the purpose of making revenue
and was not a compensatory measure. Reliance was placed on the fact that before
the raising of the impost to Rs. 67.50 per _quarter the rate of tax was Rs. 50
per seat per quarter. Our attention was drawn to annexure 'A' attached to the
counter affidavit of Writ Petition No. 361 of 1963 out of which appeal No. 932
has arisen, giving a chart of quarterly taxes payable per seat per quarter on
the basis of mileage done prior to 1-4-1963 and subsequent to the said date.
But this chart hardly helps the appellants cause. The chart shows the motor
vehicle tax and the surcharge per seat per year per mile on the total daily
mileages from 50 miles to 130 miles and the tax under Andhra Pradesh Motor
Vehicle Taxation Act, 1963. It is clear that the rise in the rate of impost
excepting in the case of buses with a permitted daily mileage of 50 was not
considerable and in the higher mileage groups the increase was slight.
According to the counter affidavit of the State, there were few, if any, buses
covering less than 50 miles per day. In that view of the matter there is no
case of distinction so far as the first group of appeals is concerned from the
decision of this Court in Nazeeria Motor Company's case. Besides nothing was
shown to induce us to disregard the figures in the budget estimates referred to
by the High Court in its judgment and order dated September 6, 1963, namely,
that whereas the whole revenue from this source was not likely to exceed Rs. 6
crores, the expenditure proposed to be incurred on road making, road repairing
etc. was expected to overtop Rs. 8,54,00,000.
Mr:Gupte however tried to draw a picture
different from the above in the second set of appeals. I referred us to a
report of an Enquiry Committee styled the Road Transport Taxation 860 Enquiry
Committee constituted by the Government of India published in November 1967 purporting
to show a huge surplus of revenue over expenditure on roads etc. in 'the State
of Andhra Pradesh during the years 1964-67. The relevant portion of the report
is given below :
"Statement showing the expenditure on
Roads by Andhra Pradesh State during the years 196467." "State
Revenue from Road Transport and Expenditure on Roads by Andhra Pradesh State
during the years 1964-67.
Expenditure *Figures in lakhs of Rupees Year
Revenue Original Maintenance Total Surplus works 1964-65 744.35 200.51 439.50
694.01 50.34 page 206 1965-66 1059.60 225.98 490 .25 716.23 343.37 page208
1966-67 1170.00 186.98 398 .14 585.12 548.88page 208 NOTE : Figures of
expenditure relate to those which are spent directly by the State Government
and do not include grants given to local bodies for road construction and
Estimated figures do not include amounts
given to local bodies." Apparently the figures in the end column purport
to show considerable surplus in the revenue from road transport over
expenditure on roads by the State of Andhra Pradesh during the years mentioned.
Our attention was however drawn to the additional counter affidavit of the
State affirmed before the High Court on April 24, 1968 wherein it was said that
the report relied on was misleading and the chart which was taken from the
annexures to the report of the Road Transport Taxation Enquiry Committee
showing surplus was contrary to the prevalent state of affairs. It was
categorically stated that.
"the figures given in the annexures to
the Report are incorrect and the Government of Andhra Pradesh was not
responsible for the misstatements relating to the State of Andhra Pradesh found
in the said annexures to the said Report of the said Taxation Enquiry
Committee." It was also asserted in the said affidavit that the
questionnaire sent to the Government of Andhra Pradesh which was dated
3-12-1965 did not ask and could not have asked for 'information regarding the
year 1966-67. It was also said that in the reply dated 12-1-1966 by the, State
Government the estimated figure for the construction of roads was Rs.
2,49,45,200/and the cost of maintenance was
Rs. 6 crores and the total expenditure was thus of the order of Rs'
8,50,00,000/-. It wag. reiterated that the Taxation Enquiry Committee did not ask
for the figures for 1966-67.
861 The High Court went into this question in
some detail and found that as per the budget estimates of 1967-68 the yield
under the said head 'taxes on motor vehicles under the Motor Vehicles Act',
receipts under the Provincial Motor Vehicles Taxation Act and other receipts
was estimated to add up to Rs. 9,55,53,396/while the details of the expenditure
under the several heads was of the order of Rs. 9,81,65,411/-.
With regard to the budgetary figures for
1968-69 the aggregate of the items including works on repairs and maintenance
expenditure on States Highways, road development fund works, capital outlay on
roads works came to Rs.8,75,87,900/and taking into account the figures on the
receipt side in the budget estimates, the court was of the view that the total
receipts would fall short of the anticipated expenditure by about Rs. 50 lakhs.
The High Court also scrutinised the statistical data available in the report of
the Road Transport Enquiry Committee and the explanation put forward by the
State and observed :
"the figures given in the report of the
Road Transport Taxation Enquiry Committee do not give a completely accurate
picture which is relevant to the present discussion." The High Court
concluded that the petitioners had not been able to give any statistical data
or adduce any sound reasons to persuade it to reject the data furnished by the
budgetary estimates and the analysis thereof given on behalf of the State and
accordingly held that the proposed enhancement of tax was not designed to
augment the general revenues of the State but was intended to meet the
expending requirements of maintenance of old roads and development of the road
system as a whole. On these facts the High Court concluded that there was no
warrant for the charge that the increased levy ceased to be a compensatory
In the second group of petitions, the High
Court also negatived the contention raised on behalf of the petitioners that
the increase in taxation would virtually throw them out of the transport
business. It was argued before the High Court that the increase in the tax
being of the order of 50% over the pre-existing levy there was bound to be an
enormous addition to the total revenues of the State and this addition could
not be said to be for the purpose of providing additional amenities to motor
operators in particular but was one for adding to the general revenues of the
As against this it was submitted on behalf of
the State before the High Court that to meet the increase in the operational
cost of the operators Government had permitted an increase in fares to be
charged by the operators by another order bearing the same date as that of the
impugned order.' Reliance was also placed on the 862 fact that on previous
occasions the operators bad no been slow in utilising similar permission to
raise the fare structure. It was further submitted on behalf of the.
State before, the High Court that "the
Motor Vehicles Taxation had undergone changes to make it confirm to and sub serve
the development of improved means of communication, by the development of roads
and control of transport etc." The Court also noted the submission on
behalf of the State that the general condition of roads in the State was poor
and it the St-ate were to provide facilities for trade and commerce equal to or
comparable with the facilities for easy communication available in other
States, a large outlay for construction of new roads as also the improvement of
the existing road system was inevitable. The High Court thus found
justification for the additional levy in the conditions obtaining in the State.
It was submitted before us, as was done
before the High Court, that taxation by reference to mileage specially in
regard to bus operators who had to ply their vehicles in other States where the
rate of taxation was much lower was an anachronism and an unreasonable
restriction. Our attention was drawn to Annexure 2 to the Writ Petition No. 1792
of 1968 where the total mileage covered by various bills operators including
the break-up thereof showing the mileage in Andhra area, in Madras and Mysore
were given and it was said :
"While the buses used by the petitioners
are taxed on the basis of the total mileage covered by them, the actual user in
the State of Andhra Pradesh, is much less and in some cases it constitutes so
low a fraction as one third of the total mileage;" It was therefore
contended that the levy. in respect of the entire mileage was incompatible with
the compensatory nature of the tax. The High Court accepted the explanation on
behalf-of the State that "there were reciprocal arrangements between the
States and consequently the provisions made by the other States in regard to
the free movement on their roads, constituted a compensator measure for the tax
even though it is wholly levied by the State of Andhra Pradesh".
We see no reason to take a view different
from the above.
The facts and figures disclosed do not
justify us in coming to the conclusion that the levy was a general one for
augmenting the revenues of the State. On the other hand the figures disclosed
show that the total receipts from the tax even now fall short of the
expenditure on roads and allied purposes. We axe also not satisfied on the
material before us that the impost has resulted in bus operators running their
business at a loss.
863 The only question. left. is whether there
was justification for levy (I an impost at the rate of Rs. 30/per quarter per
seat on spare buses. While it is true that the spare buses are not allowed to
be run regularly we see no reason to hold that because of this the levy is
unjustified, or ceases to be a compensatory tax. As was pointed out by the High
Court, under S. 3 of the Act the State Government was empowered by notification
to direct that a tax shall be levied on every motor vehicle used or kept for
use in a public place in the State and a vehicle kept for use as a standby was
therefore subject to levy under the taxing provisions. It was absolutely
imperative for the owner of a fleet of buses to maintain some spare vehicles to
be available for substitution in the case of a break-down.
Every owner having five buses is required to
maintain one spare bus and operators having more than ten buses are to keep two
such buses available. Although they cannot be allowed to run regularly it is
essential for the proper regulation of the transport business that some spare
buses should be available to avoid inconvenience or hardship to passengers.
Accordingly the levy of a tax on such buses which can at any time be put on the
road is justified in like manner as in the case of regular buses as a
In the result, the appeals and the writ
petitions fail and are dismissed with costs. One set of hearing fee.
V. P. S. Appeals and petitions dismissed.