B. A. Jayaram & Ors Vs. Union of
India & Ors [1983] INSC 93 (12 August 1983)
REDDY, O. CHINNAPPA (J) REDDY, O. CHINNAPPA
(J) DESAI, D.A.
CITATION: 1983 AIR 1005 1983 SCR (3) 624 1984
SCC (1) 168 1983 SCALE (2)118
CITATOR INFO :
RF 1991 SC1650 (5)
ACT:
Constitution of India-Art. 301-Scope
of-Compensatory and regulatory taxes are outside the expanse of Art. 301.
Motor Vehicles Act, 1939-Sec. 63(7)-
Introduced by amending Act 56 of 1969-Does not affect State's power either to
impose or exempt tax on motor vehicles.
Karnataka Motor Vehicles Taxation Act, 1957-A
piece of regulatory and compensatory legislation-Read with Entries 56 and 57 of
List ll of Seventh Schedule to the Constitution- Taxes levied on motor vehicles
are regulatory and compensatory-Not within the vista of Art. 301 of the
Constitution.
HEADNOTE:
In order to promote all India and inter-state
tourist traffic, the Parliament amended the Motor Vehicles Act, 1939 by introducing
in it sec. 63(7) which enabled the State Transport Authority of every State to
grant permits - valid for the whole or any part of India, in respect of such
number of tourist vehicles as may be specified by the Central Government. Later
the Central Government notified that each State Transport Authority could issue
50 all India permits for tourist omnibuses. As each State had the right, within
its territory, to levy a tax on a motor vehicle, it was found that unless
tourist vehicles with all-India permits were exempted from tax by other States
than their home state the object of sec. 63(7) would be frustrated.
Therefore, the Central Government made a
request in this behalf to all the State Governments. In pursuance of that
request the Government of Karnataka exempted tourist vehicles holding permits
under sec. 63(7) from payment of tax, provided the tax payable to the State in
which the vehicle was registered had already been paid and provided further
that similar exemption from payment of tax was granted in respect of similar
vehicles to the State of Karnataka. Many transport operators from big and
comparatively prosperous States flocked to some small and comparatively poor
and less advanced States and after getting all-India permits from them started plying
their vehicles in other States like Karnataka and Maharashtra more or less as
regular stage carriages. Having found that the transport operators were
misusing the all India permits and indulging in certain malpractices, the
Government of Karnataka withdrew the exemption from payment of tax granted
earlier. The petitioners, who were transport operators holding all-India
permits, challenged the withdrawal of exemption as unconstitutional and bad in
law. The petitioners submitted that sec. 63(7) of the Motor Vehicles Act was
designed to promote all India and inter-state tourist traffic and thus to
advance trade, 625 commerce and inter-course throughout the territory . Of India. By withdrawing the exemption, the object of sec.
63(7) was defeated and therefore, freedom of
trade. Commerce and inter-course throughout the territory of India, guaranteed by Art. 301 of the Constitution was impaired.
Dismissing the petitions,
HELD: By withdrawing the exemption there is
no impairment of the freedom under Art. 301. [637 B] Taxes of a compensatory
and regulatory character are outside the expanse of Art. 301 of the
Constitution.
Regulatory measures and compensatory taxes
far from impeding the free flow of trade and commerce, often promote such free
flow of trade and commerce by creating agreeable conditions and providing
appropriate services. All that is necessary to uphold a tax which purports to
be or is claimed to be a compensatory tax is, the existence of a specific,
identifiable object behind the levy and a nexus between subject and the object
of a levy. Once the nexus between the levy and service is seen, the levy must be
upheld unless the compensatory character is shown to be wholly or partly a mere
mockery and in truth a design which is destructive of the freedom of
inter-state trade, commerce and inter-course.
[635 C-D, 636 A] International Tourist
Corporation v. State of Haryana, [1981] 2 S.C.R. 364. referred to.
By virtue of the power given to them by
Entries 56 or 57 of List II every one of the States has the right to make its
own legislation to compensate it for the services, benefits and facilities
provided by it for motor vehicles operating within the territory of the State.
Taxes resulting from such legislative activity are by their very nativity and
nature, cast and character, regulatory and compensatory and, are therefore, not
within the vista of Art. 301, unless the tax is a mere pretext designed to
injure the freedom of inter-state trade, commerce and inter course. The nexus
between the levy and the service is so patent in the case of such taxes that
one need say no more about it. The Karnataka Motor Vehicles Taxation Act and
the Motor Vehicles Taxation Acts of other States are without doubt regulatory
and compensatory legislation outside the range of Art. 301 of the Constitution.
[635 B-D] `Taxes on vehicles .. suitable for use on roads' is a State
legislative subject and it is for the State Legislature to impose a levy and to
exempt from the levy.
Entry 57 of the State List is subject to
Entry 35 of the Concurrent List and, it is therefore open to the Parliament to
lay down the principles on which taxes may be levied on mechanically propelled
vehicles. But the Parliament while enacting sec. 63(7) of the Motor Vehicles
Act refrained from indicating any such principles, either expressly or by necessary
implication. The State's power to tax and to exempt was left uninhibited. It
may be that a State Legislation, plenary or subordinate, which exempts
"non- home-state tourist vehicles" from tax would be advancing the
object of sec. 63(71, but 626 the State Legislature are not obliged to fall in
line line and to so arrange their tax laws as to advance the object of sec.
63(7), be it ever so desirable. The State is obliged neither to grant an
exemption nor to perpetuate an exemption once granted. There is no question of
impairing the freedom under Art. 301 by refusing to exempt or by withdrawing an
exemption. [636 E-637 A]
ORIGINAL JURISDICTION: Writ Petitions Nos.
1854- 60/81,2125, 2224, 2829, 3321, 3341, 3360, 3604, 4486, 3737, 3774, 4128,
4404, 4415, 4428, 4429, 4430, 4431, 4432, 4436, 4437, 6310, 7090-92, 7138,
7687, 9927, 8481-82, 6790-91182, 5356-64/83, 1868, 3929/81, 531-32, 533-534,
3957, 3975, 4574-4583, 8004, 8007-8008 and 8047/83, 5327, 5622-24, 7510- 11,
8075/83, 7490-92/82, 2008, 2328/81, 2858, 2859, 4920- 4923, 5616, 6065-73,
5818, 5193-5201/82, 8341-8343, 3149-50, 8381-8382, 9927/82, 377-378, 535/83,
8347-8348, 3560/83, 8003, 8005, 8006/83, 8787-8788/83 and 9011-13 of 1983.
Under Article 32 of the Constitution of India
WITH Special Leave Petition Nos. 11243-46 of 1983.
From the Judgment and order dated the 8th
July, 1983 of the Karanataka High Court in Writ Petition Nos. 11268 to 11271 of
lI: 1981, For The Appearing Petitioners Shanti Bhushan, Y.S. Chitale, K.K
Venugopal KN. Bhat, V.K Verma, S. Ravindra Bhat, N. Ganpathy, C.S. Vaidayanathan,
N. Nattar, R.B. Datar, A.V. Rangam, V.G. Gupta, T.V.S.N. Chari A.T.M. Sampath,
Vineet Knmar, D.P. Singh, Miss H. Wahi, B.N. Tawakley, S. Srivinasan, P.R. Ramashesh,
P.N. Ramlingam, S.R. Srivastava and Rathin Das For The Appearing Respondents
R.P. Bhatt, V.S. Desai, Harbans Lal, Swaraj Kaushal, M.N., Shroff, G.V. Subba
Rao, N.S. Das Bahl and R.N. Poddar The Judgment of the Court was delivered by
CHINNAPPA REDDY, J. Prior to 1969 there was no concept of what may be termed as
'An All India' permit which would be valid 627 for the whole of India and which
would enable the holder of the permit to ply his contract carriage throughout
India.
Section 63 (1) of the Motor Vehicles Act,
provides that, except as may be otherwise prescribed, a permit granted by the
regional transport authority of any one region shall not be valid in any other
region, unless the permit has been counter signed by the regional transport
authority of that other region, and a permit granted in any one state shall not
be valid in any other state unless counter-signed by the State Transport
Authority of that other state or by the regional transport authority concerned.
The procedure prescribed for obtaining the counter-signature of the transport
authorities of other regions and states was cumbersome and was not conducive to
the development of all India or inter-state tourist traffic. In order to remedy
the situation and promote all India and inter-state tourist traffic, the
Parliament amended the Motor Vehicles Act and introduced sec. 63 (7) by
amending Act 56 of 1969. This new provision enables the State Transport
Authority of every state to grant permits valid for the whole or any part of
India, in respect of such number of tourist vehicles as the Central Government
may, in respect of that state specify in that behalf. Preference is to be
given, to applications for permits from the India Tourism Development
Corporation, a State Tourism Development Corporation, a State Tourist
Department and such operators and tourist cars or such travel agents as may be
approved in that behalf by the Central Government. This was but . The first
basic step towards encouraging all India or inter-state tourist traffic. There
were other hurdles to be cleared before any scheme for grant of all India
permits could be effectively implemented. One of the hurdles was this: Under
Entry 57 of List II of the Seventh Schedule to the Constitution, the State
Legislature is empowered to levy "Taxes on vehicles, whether mechanically
propelled or not, suitable for use on roads, including tramcars subject to the
provisions of entry 35 of list III". Entry 35 of list III reads:
"Mechanically propelled vehicles including the principles on which taxes
on such vehicles are to be levied". A coherent reading of Entry 57 of list
II and Entry 35 of list III makes it abundantly clear that the power to levy
taxes on vehicles suitable for use on roads vests solely in the State
Legislature though it may be open to the Parliament to lay down the principles
on which taxes may be levied on mechanically propelled vehicles. In other words
the Parliament may lay down the guide lines for the levy of taxes on
mechanically propelled vehicles but the right to levy such taxes vests solely
in the 628 State Legislature. Now there are twenty two States and nine Union
Territories in India, specified in the first schedule to the Constitution. Each
of the States has the right, within its territory. to levy a tax on motor
vehicles. If a tourist vehicle holding an 'All India Permit' under sec. 63 (7)
of the Motor Vehicles Act chooses to visit half a dozen states in the course of
a round trip from, say, Delhi to .
Kanyakumari or Srinagar to Hyderabad tax will
ordinarily have to be paid in all the half a dozen or so States. The burden
will surely be intolerable and the whole object of sec. 63 (7), namely
promotion of all India or-inter-state tourist traffic will be frustrated. The
Central Government was alive to the problem and referred the matter to the
Transport Development Council for its advice. The Transport Development Council
is a non-statutory body constituted by the Central Government and consists of
the representatives of the Governments of all the States. The Transport
Advisory Council advised the Central Government that there should be a single-state
taxation on tourist vehicles holding permits under sec. 63 (7), that is, tax
should be paid in the 'home state' and the vehicle should be exempted from
payment of tax in states other than the home state. This could be done by the
respective State Governments issuing notifications under their taxation
legislation exempting tourist vehicles registered in other states from payment
of tax, if tax has already been paid in the home state. The Government of India
accepted the E- suggestion and requested the State Governments and Union
Administrations to issue necessary notifications. The suggestion ran into
trouble right from the start. While the Governments of Andhra Pradesh, Bihar,
Goa, Daman and Diu, Maharashtra, Nagaland and Uttar Pradesh readily agreed to issue
such notifications on the basis of reciprocity, there was no such ready
response from some other states. The Government of Karnataka was in particular
opposed to the grant of any such exemption. Finally, the Government of
Karnataka and the Governments of other states too were persuaded to agree to
issue such notifications. In the meanwhile the Government of India, in exercise
of its power under sec. 63 (7) of the Motor Vehicles Act, issued notifications
specifying the number and class of tourist vehicles in respect of which each of
the State Transport authorities of the States could grant All India permits.
The last of the notifications specified that each State Transport authority could
issue 50 permits for tourist omnibuses.
Pursuant to the request of the Central
Government to which all the State Governments finally agreed, notifications
were issued 629 exempting tourist vehicles holding permits under sec. 63 (7)
from payment of tax, if tax had been paid in the home state.
We are particularly concerned in these cases
with the notifications issued from time to time by the Government of Karnataka,
since that is where the trouble started. The first of the notifications issued
by the Government of Karnataka was on September 18, 1972 and it exempted, from
payment of taxes payable under the Karnataka Motor Vehicles Taxation Act 1957,
tourist motor Cabs and tourist omnibuses registered in the States other than
the State of Karnataka and plying in the State of Karnataka under permits which
were valid without counter signature in the state of Karnataka, provided that
the tax payable in respect of such vehicles had been paid to the State in which
the vehicles were registered and provided further that the said State granted
similar exemption to tourist motor cabs and tourist omnibuses whose permits
were endorsed in the State of Karnataka under Rule 123-A of the Karnataka Motor
Vehicles Rules. On July IS, 1976, the Government of Karnataka issued a
notification reducing the tax payable under the Motor Vehicles Taxation Act,
1957, in respect of tourist vehicles for which permits had been issued under
sec. 63 (7) or endorsement granted under Rule 123-A of the Karnataka Motor
Vehicles Rules. On December 20, 1976, a further notification was issued in
partial modification of the earlier notification dated September 18, 1972.
Exemption from payment of tax was given to tourist motor cabs and tourist
omnibuses registered in States other than the State of Karnataka and plying in
the State of Karnataka under the authority of a permit granted under sec. 63
(7), provided that the tax payable in respect of the vehicle to the State in
which it was registered had already been paid and provided further that similar
exemption from payment of tax was granted in respect of similar vehicles of the
State of Karnataka. This scheme for the grant of 'All India Permits', designed
as it was to promote all India and inter-state tourist traffic. soon fell into
abuse at the hands of scheming transport operators. Within the scheme itself
lay the seeds for abuse. The scheme enabled the State Transport Authority of
each State, to issue fifty all India permits, uniformly, irrespective of the
size of the State, its resources, its accessibility, its communications, its
facilities, the availability of transport services and operators in the State
with the necessary expertise, experience and finance to operate all-India
tourist services and a host of such other factors. Apparently it was thought
undesirable to make a distinction between State and State on what were perhaps
thought to be elusive criteria and possibly the scheme 630 was expected to give
a boost to the transport business in the smaller and less advanced States. And,
of course, it was necessary to obtain the agreement and cooperation of all the
States. But, the result was that transport operators from, big and
comparatively prosperous and advanced States, well versed in the intricacies of
the transport business very soon flocked to small and comparatively poor and
less advanced States like Manipur and Nagaland to apply for and obtain
all-India permits from the State Transport Authorities of these States. It is
conceded before us that a large number of persons holding all-India permits
from some of these small States do not belong to these States at all, but are
transport operators coming from far off States.
Another factor which appears to have
influenced the flocking of transport operators from other States to States like
Nagaland and Manipur is the nationalization of contract carriage service in
States like Karnataka. Once the permits were obtained and the vehicles were
registered, these small States saw the last of the operators. Having obtained
the permits, the operators with their vehicles flocked back to the parent State
of the operators (not of the vehicles) or to a State like Karnataka where all
contract carriages having been nationalized no private contract carriage was
available and there was therefore a great opportunity to ply the vehicles as
contract carriages within the State.
States like Karnataka were swamped by tourist
vehicles from all over the country, registered in other States. These tourist
vehicles practically 'colonised' Karnataka and like States and started operating
more or less as stage carriages within the particular State, never and rarely
if ever, moving out of the State. There was no thought or Question of
undertaking all India or interstate tours, and out went the worthy object of
sec. 63(7). Quick and easy money with the least trouble and in the shortest
time, by whatever method, was the only object. In the counter-affidavit filed
on behalf of the State of Karnataka in some of the Writ Petitions, it is
stated.
"Though the vehicles were registered
outside the State of Karnataka, they have been permanently stationed in the
State of Karnataka and particularly at Bangalore, and the vehicles were all
being plied as Stage Carriages. Though All India Tourist Permits were obtained
by the residents of other states, the permits were used by taking the vehicles
and keeping them in the State of Karnataka. The operators run their tourist
buses at fixed timings 631 from particular place like the Stage carriages
operated by the Karnataka State Road Transport Corporation (hereinafter called
the K.S.R.T.C.) and other private state carriage/ operators. On checking of the
vehicles and verification of the passengers, it was found that the passengers
found in the vehicle were not genuine tourists and the drivers or the persons
incharge of the vehicles were not in a position to produce the trip sheet, name
list with whom they entered into contract. It was also found that the
passengers found in the vehicles had boarded the buses from one point without
any contract or otherwise and without they being tourists. The passengers found
in the tourist buses are regular passengers going from one place to another for
purposes other than tourism. These vehicles were found catering to the needs of
general travellers who can make use of the Stage Carriages operated by the
K.S.R.T.C., or other private stage carriage operators. The respondent produces
herewith statements as ANNEXURF.S 1 to 9 showing the clandestine operation of
the vehicles covered by All India Tourist Permits, the remarks and
irregularities noticed by the Motor Vehicles Inspectors while checking the
vehicles covered by All India Tourist permit, the frequent detection of these
vehicles running as Stage Carriages by collecting individual fares and picking
passengers from one point and setting down them at another point and bringing
different passengers in the return journey. From the statements enclosed, it is
clear that the operators of the tourist buses covered by All India Tourist
permits have misused the Tourist Buses by running them as regular stage
carriages, competing with the KSRTC buses and other private stage carriages
within the State.. As a result of indiscriminate misue of the Vehicles as Stage
Carriages even though the permits were obtained under Section 63 (7) of the
Central Act for Tourism, the State Government has suffered considerable loss in
Revenue. These buses actually made use of the passengers which would have
normally gone to the KSRTC buses and other private carriages. The very object
of obtaining permits under section 63(7) of the Central Act, which intended to
promote tourism has been misued by these operators of the Tourists buses by
plying their vehicles regularly as stage carriages. Most of the 632 permits
obtained under Section 63 (7) of the Central Act in the States other than the
State of Karnataka are made use of for the purported use of running the tourist
buses but actually the permits were misused to run the tourist vehicle either
as stage carriages or as contract carriages".
A survey made by the Transport Commissioner
of Maharashtra revealed a similar state of affairs. The Transport Commissioner
submitted a report to the Government of Maharashtra, a copy of which has been
made available to us.
It is stated in the report, "Our
estimate is that out of these 1300 permits anything between 300 to 400 buses
are operating in Maharashtra with Bombay as the main centre. Most of these
buses for all practical purposes operate as stage carriage services
masquerading as contract carriages. In Maharashtra the ordinary passenger
transport by stage carriages and contract carriages has been completely
nationalised. The All India Tourist Buses on the other hand are exploiting the
loopholes available in the law and operate point to point passenger services on
routes where the volume of traffic is heavy viz. routes like Bombay Kolhapur,
Bombay Mangalore (Mangalore), Bombay Panaji, Bombay-Belgaum, Bombay-Ahmedabad
and Bombay-Indore ...................................
...............................................
".
"On 9/10th April 1983, the Transport
Commissioner had personally visited the Charoti Check Naka which is our border
check post bordering Gujarat on the Bombay Ahmadabad road. From the records of
the check post he found that as many as 115 All India Tourist Buses are
regularly playing on this route. After making an analysis of these 115 All
India Tourist Buses,' he found that 41 permits had been issued by the State
Transport Authority of Manipur. 17 had been issued by State Transport Authority
Nagar Haveli, 8 by the State Transport Authority, Meghalaya and 5 by the State
Transport Authority Nagaland. A large number of All India Tourist Buses
operating with their base in Bombay appear to have been issued by Manipur
Nagaland and the Union Territory of Dadra Nagar Haveli".
633 The petitioners, who are transport
operators holding all- India permits, deny that any of them was guilty of any
malpractice or misuse of the permits held by them. But, notwithstanding the
petitioners' denial we do not have the slightest doubt that the allegations of
misuse and malpractice made in the counter-affidavit, filed on behalf of the
Karnataka Government, are generally and substantially correct. Complaints about
the abuse of the scheme appear to have been made to the Central Government and
the Transport Advisory Council also. We are also told that the question of
meeting the challenge posed by these abuses is receiving the attention of the
Central Government.
The Government of Karnataka, apparently the
worst sufferer, reacted sharply. The concession given to the holders of all
India permits by way of exempting the all India tourist Vehicles, registered in
other States, from payment of the Karnataka Tax, if tax had already been paid
in the home State was withdrawn by a notification dated 31st March, 81. It is
this notification and the consequences of the notification that are in question
in these several Writ Petitions. We are informed that the State of Andhra
Pradesh has also issued a notification similar to that of the State of Karnataka
withdrawing the exemption which it had granted earlier to vehicles operating on
permits issued under sec.
63 (7) and registered in other States. Other
states have not withdrawn the exemption previously granted by them to vehicles
registered in other states and operating on permits issued under sec. 63(7).
But as the exemption granted by most of them is on a reciprocal basis, the
withdrawal of exemption by the States of Karnataka and Andhra Pradesh has the
effect of making vehicles registered in Karnataka and Andhra Pradesh,
immediately subject to payment of tax in every one of those States through
which they pass. The collection of tax by the other States is also resisted in
these writ petitions. The power of the State Legislature to levy the particular
tax, the power of the State Government to grant exemption from payment of tax
under the authority delegated to it by the Legislature and the implied power of
the State Government to withdraw an exemption granted by it are conceded. Yet a
number of ingenious and platitudinous submissions have been though we must
confess that many of them have only to be stated to be rejected. Some of them
served no better purpose than occupy the time of the Court, time which has
become dear and precious because of the mountainous arrears of cases awaiting
the decision of this Court. We do wish it is remembered that the Supreme Court
is the highest Court in the land and its time is not to be frittered away in
634 listening to hopeless arguments advanced just for the sake of argument. The
time has come for judges and lawyers to make a determined effort to chop
certain arguments and prone certain others-judgments following suit. In
fairness to the counsel who appeared - in the cases before us, we must say that
everyone was brief and none over stated his case.
It was submitted that see. 63 (7) of the Motor
Vehicles Act was designed to promote All India and inter-state tourist traffic
and thus to advance trade, Commerce and inter-course throughout the territory
of India. It was implicit in sec. 63 (7) that the States would exercise their
power of taxation in such a way as not to impose an additional burden on
tourist Vehicles registered in other states and plying on permits issued under
sec. 63(7), over and above the tax paid in the home State. In other words, it
was implicit that all the States would exempt from taxation tourist vehicles registered
in other States and plying on permits issued under sec. 67 (7) was withdrawing
the exemption, the object of sec. 63 (7) was defeated and therefore, freedom of
trade, Commerce and inter-course throughout the territory of India, guaranteed
by Art. 301 of the Constitution was impaired. The withdrawal of exemption was,
therefore, unconstitutional and bad in law. The transport operators of
Karnataka who were not directly hit by the withdrawal of the exemption by the
Government of Karnataka advanced a subtler argument and suggested that they
were in fact the worst hit. The argument was that though despite the withdrawal
of the exemption, they were paying no more tax to the State of Karnataka than
they were paying hitherto, the withdrawal of the exemption had created a
situation which denied them the benefit of exemption granted by the Governments
of all others States, since those exemptions were reciprocal in condition. The
situation indirectly created by the action of the Government of Karnataka
imposed an intolerable burden on them by compelling them to pay taxes in every
State other than Karnataka through which their vehicles passed and thus
virtually denied to them the freedom of trade, Commerce and inter-course
throughout the territory of India guaranteed by Art. 301 of the Constitution.
We are wholly unable to see any force in
these submissions, The learned counsel for the parties on either side invited
our atten- 635 tion to the Automobile Transport (Rajasthan) Ltd. v. The State
of Rajasthan & Ors Bolani Ores Ltd. v. State of Orissa(2), G.K. Krishnan v.
State of Tamil Nadu(9) International Tourist Corporation v. State of Haryana(4)
and Malwa Bus Service Pvt. Ltd. v. State of Punjab(5) to explain the extent and
the limits of the freedom of trade, commerce and intercourse throughout the
territory of India proclaimed by Art. 301 of the Constitution. We do not
propose to refer to any of these cases since the law appears to us to be
well-settled:
Taxes of a compensatory and regulatory
character are outside the expanse of Art. 301 of the Constitution.
Regulatory measures and compensatory taxes
far from impeding the free flow of trade and commerce, often promote such free
flow of trade and commerce by creating agreeable conditions and providing
appropriate services. All that is necessary to uphold a tax which purports to
be or is claimed to be a compensatory tax is "the existence of a specific,
identifiable object behind the levy and a nexus between subject and the object
of a levy".(') "If the object behind the levy is identifiable and if
there is sufficient nexus between the subject and the object of the levy, it is
not necessary that the money realised by the levy should be put into a separate
fund or that the levy should be proportionate to the expenditure. There can be
no bar to an inter-mingling of the revenue realised from regulatory and
compensatory taxes and from the taxes of a general nature nor can there be any
objection to more or less expenditure being incurred on the object behind the
compensatory and regulatory levy than the realisation from the levy".(6)
It should be patent that "it would ordinarily be well-nigh impossible to
identify and measure with any exactitude the benefits received and the
expenditure incurred and levy the tax according to the benefits received and
the expenditure incurred". Nor is the court to interpose itself by
assuming the role of a cost accountant and attempt to balance meticulously the
cost of the services, benefits and facilities against the realisation from the
levy. And, if the levy as a whole is justified by the need generally, it does
not have to be separately justified with reference to every group of persons
claiming 636 to require and receive less service than others. Once the nexus
between the levy and service is seen, the levy must be upheld unless the
compensatory character is shown to be wholly or partly, a mere mockery and in
truth a design which is destructive of the freedom of inter-state trade,
commerce and inter-course.
By virtue of the power given to them by
Entries 56 and 57 of List II every one of the States has the right to make its
own legislation to compensate it for the services, benefits and facilities
provided by it for motor vehicles operating within the territory of the State.
Taxes resulting from such legislative activity are by their very nativity and
nature, cast and character, regulatory and compensatory and, are therefore, not
within the vista of Art. 301, unless, as we said, the tax is a mere pretext
designed to injure the freedom of interstate trade, commerce and intercourse.
The nexus between the levy and the service is so patent in the case of such
taxes that we need say no more about it. The Karnataka Motor Vehicles Taxation
Act and the Motor Vehicles Taxation Acts of other States are without doubt
regulatory and compensatory legislations outside the range of Art. 301 of the
Constitution.
It is true that the object of enacting sec.
63 (7) by the Parliament was to promote all-India and inter-state tourist
traffic. But 'taxes on vehicles .. suitable for use on roads' is a State
legislative subject and it is for the State Legislature to impose a levy and to
exempt from the levy. True again, Entry 57 of the State List is subject to
Entry 35 of the Concurrent List and, as explained by us at the outset, it is
therefore open to the Parliament to lay down the 17 principles on which taxes
may be levied on mechanically propelled vehicles. But the Parliament while
enacting S. 63 (7) of the Motor Vehicles Act refrained from indicating any such
principles, either expressly or by necessary implication. The State's power to
tax and to exempt was left uninhibited. It may be that a a State legislation,
plenary or subordinate, which exempts "non- home-state tourist
vehicles" from tax would be advancing the object of sec. 63 (7) of the Motor
Vehicles Act and accelerating inter-state trade, commerce and intercourse.
But merely by Parliament legislating sec. 63
(7), the State Legislatures are not obliged to fall in line and to so arrange
their tax laws as to advance the object of sec. 63 (7), be it ever so
desirable. The State is obliged neither to grant an exemption nor to perpetuate
an exemption once granted. There is no question of impairing the freedom under
Art. 301 by refusing to 637 exempt or by withdrawing an exemption. Not to pat
on the back is not to stab in the back. True, straw by straw, the burden of
taxation on tourist vehicles increases as each State adds its bit of straw,
but, then, each State is concerned with its coffers and has the right to tax
vehicles using its roads; and, the contribution which a tourist carriage is
required to make to its treasury is no more than what other contract carriages
are required to make. We are firmly of the view that there is no impairment of
the freedom under Art. 301. The special submission on behalf of the 'Karnataka
operators' that the withdrawal by the Karnataka Government of the exemption
granted to 'outsiders' has resulted in the Karnataka operators having to pay
tax in every State in the country and, therefore, the withdrawal has impaired
the freedom under Art. 301 is but the same general sub- mission, seen through glasses
of a different tint. It does not even have the merit that the withdrawal of the
Karnataka exemption affects them directly. The submission is rejected.
One of the submissions made to us was that if
there was a misuse of the all-India permits, the remedy was to punish the wrong
doers by taking appropriate action against the wrong-doers by cancelling the
permit, if necessary, but not to withdraw the benefit of the exemption
altogether, even in the case of honest operators. That is a matter for the Legislature
and its delegate to decide but not for the court. If the situation had become
so malignant that drastic action was called for, it is not for the court to
substitute its judgment to say that the object could perhaps be well achieved
by adopting a less drastic procedure.
It was submitted that all-India tourist
vehicles do not use the roads of the State as much as the contract carriages
operating in the State and therefore, the State was wrong in treating them
alike. It was said that treatment of un-equals as equals had resulted in an
infringement of Art. 14 of the Constitution. It was also submitted that
vehicles holding inter-State permits under inter-state agreements were still
exempt from tax and this was also a violation of Art. 14 of the Constitution.
Another contention raised was that there was some sort of promissory estoppel
which prevented the State Government from withdrawing the exemption. Yet
another argument was that the withdrawal of the exemption was arbitrary and
therefore, judicial review was necessary.
These and other like submissions which were
made to us in our opinion, fall in the category of arguments which.
638 we mentioned earlier, have only to be
stated to be rejected.
The answers are self-evident., The
submissions are totally without merit and we see no justification for
increasing the length of our judgment by further futile discussion. All the
Writ petitions are dismissed with costs and the interim orders are vacated.
H.S.K. Petitions dismissed.
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