Full Judgment Text
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PETITIONER:
B. A. JAYARAM AND OTHERS ETC.
Vs.
RESPONDENT:
UNION OF INDIA AND OTHERS.
DATE OF JUDGMENT12/08/1983
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
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
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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 cf
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-
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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]
JUDGMENT:
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
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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
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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
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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
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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 Ahmedabad road. From the records of
the check post he found that as many as 115 All
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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
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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
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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
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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
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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 unequals
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.
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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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