Full Judgment Text
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PETITIONER:
MALWA BUS SERVICE (P) LTD.
Vs.
RESPONDENT:
STATE OF PUNJAB & OTHERS
DATE OF JUDGMENT28/04/1983
BENCH:
VENKATARAMIAH, E.S. (J)
BENCH:
VENKATARAMIAH, E.S. (J)
SEN, A.P. (J)
CITATION:
1983 SCR (2)1009 1983 SCC (3) 237
1983 SCALE (1)534
ACT:
Motor vehicles Act-Punjab Motor Vehicles Taxation Act,
1924 (as amended by the Amendment of 1981).
Section 3 and 3A-Maximum limit of tax payable on
certain types of motor vehicles raised from time to time-
Amendment Act of 1981 raised the maximum limit to Rs. 35,000
in respect of stage carrioges-Tax-Whether expro-priatory-
Whether imposes an unreasonable restriction on freedom of
trade, commerce and intercourse within the State.
HEADNOTE:
By a notification issued under section 3A of the Punjab
Motor Vehicles and Taxation (Amendment) Act, 1981 the State
Government Imposed on every stage carriage plying for hire
and use for the transport of passengers a sum of Rs. 500 per
seat subject to a maximum of Rs. 35,000 irrespective of the
distance over which it operated daily.
The petitioners, in their petitions under Article 32 of
the Constitution, contended that the tax was expropriatory
and not compensatory in character and was being collected by
the State Government for augmenting its general revenues
which is forbidden by the Constitution, and that the levy
was an unreasonable restriction on the freedom of trade,
commerce and intercourse within the State.
Dismissing the petitions,
^
HELD: The impugned tax is compensatory in nature and
does not contravene Articles 301 and 304(b) of the
Constitution. [1023 H]
The mandate of Part XIII of the Constitution is not
that trade, commerce and intercourse should be absolutely
free, i.e., subject to no law and no taxes at all. Trade,
commerce and intercourse should pay their way, that is, the
price for the facilities provided by the State in the form
of roads, bridges and many other facilities. Therefore,
there is nothing inconsistent with the conception of freedom
of trade and commerce if in truth what is collected by way
of tax is a pecuniary charge which is compensatory in
character. What is essential is that the burden should not
disproportionately exceed the cost of facilities provided by
the State. It is not unreasonable to ask the owners of the
motor vehicles to contribute towards the cost of maintenance
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of roads as they happen to belong to a class having a
special and direct benefit of the facilities provided.
Courts
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have the power to decide whether what is recovered by way of
tax is in truth and substance either a contribution towards
the construction and maintenance of roads and bridges and
other facilities necessary for smooth transport service or
an exaction in excess of what is needed for this purpose.
They cannot, however, insist upon an exact correlation
between the tax recovered and the cost so incurred because
such exact correlation is in the very nature of things
impossible to attain. In the case of fee if at least a good
and substantial portion (two-thirds or three-fourths)
collected is shown with reasonable certainly to have been
spent for rendering services to those from whom fees were
collected, the Courts have upheld the levy. In law there
cannot be much difference between this principle applicable
to fees and the principle that ought to govern the levy of
motor vehicles tax which is claimed to be of a Compensatory
character. [1020H, 1021 A-H, 1023 F-G]
Kewal Krishan Puri & Anr. v. State of Punjab &. Ors.,
[1979] 3 S.C.R 1217; referred to.
The petitioners have not placed before the Court
sufficient material to hold that the ievy suffered from the
vice of discrimination. It is well settled that a
legislature, in order to tax some need not tax all. It can
adopt a reasonable qualification of persons and things in
imposing tax liabilities. Unless a fiscal law is manifestly
discriminatory the Court should refrain from striking it
down on the ground of discrimination. [1025 B, 1024 E-F]
In the instant case stage carriages which travel on an
average about 260 Km every day with an almost assured
quantum of traffic, belong to a class distinct and separate
from public carriers which carry goods on undefined routes.
The amount of wear and tear caused to the roads by any class
of motor vehicles may not always be a determining factor in
classifying motor vehicles for the purposes of taxation.
[1024 G-H, 1025 A]
Merely because a business becomes uneconomical as a
consequence of a new levy, it cannot be said that it would
amount to an unreasonable restriction on the fundamental
right to carry on the business. [1025 H, 1026 A]
JUDGMENT:
ORIGINAL JURISDICTION: Writ Petitions NOS. 2617, 3837,
3973-3981, 3982-3998, 3962- 3972,4011-4015,4016-4019,4054-
4058, 4136-4143, 4148, 4216, 4217, 4219-4226,4287-4291,
4317-4321, 4408, 4542, 3518-3529, 3739-42, 4365-81,8997-9017
and 9639-50 of 1982
(Under article 32 of the Constitution of India)
Mohan Pandey for the Petitioners in WP. NOS. 3974-
81,3062 72, 4011-15,4016-19, 4136-43, 4287-91, 4365-81,
9639-50,3518-29 and 3739-42/1982.
1011
Shanti Bhushan, Baldev Kapoor and Mohan Pandey with him
for the Petitioner in W. P. No. 3973 of 1982.
Baldev Kapoor and Mohan Pandey for the Petitioner in
WP. No. 3982-98 of 1982.
Y. S. Chitale and Mohan Pandey for the Petitioner in
W.P. No. 2617 of 1982.
A. K. Goel for the Petitioner in W. P. No. 3837/82.
Arvind Minocha for the Petitioner in W.P. No. 4054-
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58/82.
S. K. Bagga for the Petitioner in W.P. No. 3148/82.
Vimal Dave for the Petitioner in W.P. No. 4216 &
4217/82.
Sarva Mitter for the Petitioner in W.P. 4219-26 & 4317-
21/83.
R. C. Kohli for the Petitioner in W.P. 4408/82.
L. N. Sinha, Attorney General, D. D. Sharma and P. P.
Singh with him for the Respondents in all W.Ps.
The Judgment of the Court was delivered by
VENKATARAMIAH, J. In these writ petitions filed under
Article 32 of the Constitution, the petitioners have
challenged the constitutional validity of section 3 of the
Punjab Motor Vehicles Taxation Act, 1924 (Act No. 4 of 1924)
(hereinafter referred to as ’the Act’) as amended by the
Punjab Motor Vehicles Taxation (Amendment) Act, 1981 (Punjab
Act No. 13 of 1981) and the Notification dated March 19,
1981 issued by the Government of the State of Punjab under
section 3(1) of the Act.
The petitioners are owners of motor vehicles and are
carrying on the business of running stage carriages in the
State of Punjab. While the operation of the stage carriage
services run by the petitioners is controlled by the
provisions of the Motor Vehicles Act, 1939, which is a
Central Act, they are liable to pay taxes on the motor
vehicles owned by them under the Act. The Act is a pre-
Constitutional one. After the Constitution came into force,
the
1012
power to levy taxes on goods and passengers carried by road
or on Inland waterways and the power 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 of the Seventh Schedule to the
Constitution are assigned to the States respectively by
Entries 56 and 57 of List II of the Seventh Schedule to the
Constitution. While the Act is traceable to Entry 57, the
Punjab Passengers and Goods Taxation Act, 1952 is enacted by
the State Legislature in exercise of its legislative power
granted under Entry 56. Before the commencement of the
Constitution, section 3(1) of the Act which is the charging
section read as follows:
"3. (1) A tax shall be leviable on every
motor vehicle in equal instalments for quarterly
periods commencing on the first day of April, 1st
day of July, first day of October and the first
day of January at the rate specified in the
schedule to this Act."
The above provision was amended in 1954 by providing
that the rates of tax levied under the Act were those
specified by the State Government in a Notification to be
issued by it, subject however to the maximum limit fixed by
the Act, instead of the rates of tax specified by the State
Legislature itself in the Schedule to the Act. After that
amendment, section 3(4) read thus:
"3. (1) A tax shall be leviable on every
motor vehicle in equal instalments for quarterly
periods commencing on the first day of April,
first day of July, first day of October, and the
first day of January at such rates not exceeding
Rs. 2200 per vehicle for a period of one year as
the State Government may by notification direct.’.
Emphasis added
The maximum limit of Rs. 2200 mentioned in section 3(1)
was increased by successive legislative amendments to Rs.
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2750 in 1963, to Rs. 4,200 in 1965, to Rs 10,000 in 1970 and
to Rs. 20,000 in 1978. In exercise of the power conferred on
it, the State Government fixed the rate of tax in the case
of stage carriages at Rs. 75 per seat in 1965, at Rs. 100
per seat in 1970 and at Rs. 200 per seat in 1974, subject to
the maximum prescribed by the Act. On March 31, 1978, the
State Government issued a Notification providing that on and
after April 1, 1978, every stage carriage plying in the
State of
1013
Punjab should pay tax at Rs. 275 per seat where it operated
upto 125 kilometres a day and Rs. 300 per seat where it
operated for more than 125 kilometres subject to a maximum
of Rs. 20,000 per year in both the cases. Then came the
Amending Act in 1981 by which the maximum limit prescribed
in section 3(1) of the Act was raised to Rs. 35,000
retrospectively with effect from October 1, 1980. Section 3
of the Amending Act inserted a new section in the Act being
section 3-A of the Act which authorised the State Government
to issue a Notification under section 3(1) raising the rates
of tax retrospectively with effect from October 1, 1980.
After the amendment in 1981, section 3(1) of the Act reads
thus:
"3. (1) A tax shall be leviable on every
motor vehicle in equal instalments for quarterly
periods commencing on the first day of April,
First day of July, first day of October and the
First day of January at such rates not exceeding
Rs. 35,009 per vehicle for a period of one year,
as the State Government may by notification
direct."
Pursuant to the above section, as amended in 1981, and
the newly inserted section 3-A of the Act which conferred
power on it to raise the rates of tax under the Act with
effect from October 1, 1980, the State Government issued the
following Notification on March 19, 1981:
"DEPARTMENT OF TRANSPORT
NOTlFICATION
The 19th March, 1981
No. S.O. 15/P.A. 4/24/S 3/Amd/81-In exercise
of the powers conferred by sub-section (1) of
section 3 read with section 3-A of the Punjab
Motor Vehicles Taxation Act, 1924 (Punjab Act No.
4 1924) and all other powers enabling him in this
behalf, the Governor of Punjab is pleased to make
the following amendment in the schedule appended
to the Punjab Government, Transport Department
Notification no. S.O./50/P.A 4/24/S. 3/71 dated
10th November, 1971 with effect from the 1st
October, 1980 namely:-
1014
AMENDMENT
In the said schedule, against serial No. 5
for item (i) and entries relating thereto, the
following item and entries shall be substituted,
namely:
"(1) Stage carriages for hire Rs.500 per seat
and used for the transport subject to a
of passengers, excluding maximum of
the driver and conductor. Rs. 35,000."
SADA NAND
Secretary to Government, Punjab
Department of Transport."
The final position that emerged after the above
Notification was that every stage carriage plying for hire
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and used for the transport of passengers (excluding the
driver and conductor) had to pay per year Rs. 500 per seat
subject to a maximum of Rs. 35,000 irrespective of the
distance over which it operated daily.
The petitioners have challenged in these petitions the
amendment made in 1981 increasing the maximum limit of the
tax to Rs. 35,000 per year and the Notification dated March
19, 1981 raising the tax to Rs. 500 per seat on various
grounds. The petitioners inter alia contend that the levy of
tax of Rs. 500 per seat imposed by the impugned Notification
is violative of Article 14, Article 19(1)(g) and Article
304(b) of the Constitution. They have also pleaded that the
tax now levied is outside the scope of Entries 56 and 57 of
List II of the Seventh Schedule to the Constitution. The
principal point urged by them is that the tax now levied is
expropriatory and not compensatory in character and is being
collected by the State Government for the purpose of
augmenting its general revenues which is forbidden by the
Constitution. In support of their case the petitioners have
furnished the following figures contained in the budget
presented to the State Legislature in the year 1981-82:
"Receipts
Taxes on vehicles Rs. 13,86,00,000
Taxes on goods and
passengers Rs. 35,45,00,000
----------------
Total Rs. 49,31,00,000
1015
Expenditure
On roads and bridges Rs. 34,03,00,000
----------------
Excess of receipts over
expenditure: Rs. 15,28,00,000"
It is contended by the petitioners that in view of the
above figures, furnished by the State Government itself,
there was no justification for increasing the rate of tax by
the impugned Notification. The petitioners have further
pleaded that the impugned levy imposes an unreasonable
restriction on the freedom of trade, commerce and
intercourse within the State of Punjab.
The State Government has justified the impugned levy in
the counter affidavit filed in the case, the deponent of
which is a Joint Secretary . to the Government of Punjab,
Transport Department. It is contended by the State
Government inter alia that the plea of the petitioners that
the revenue raised by the impugned Notification ’must be
used only for the purpose of providing facilities pertaining
to roads and bridges and or facilities connected with the
transportation of goods and passengers’ was misconceived
having regard to the various other responsibilities of the
State Government which it has to bear in connection with
road transports and if the expenditure incurred on all items
of relevant expenditure is taken into consideration, it
would become clear that the levy in question is not
excessive. It is urged that the levy is compensatory in
character and is, therefore, not hit by Article 301 or
Article 304 (b) of the Constitution. The State Government
has also furnished certain figures relating to the
expenditure incurred by it to show that the levy is neither
arbitrary nor violative of Article 19 (1) (g) of the
Constitution.
We shall now proceed to examine the relevant
constitutional provisions. Article 301 and Article 304 (b)
which are in Part XIII of the Constitution read thus: -
"301. Subject to the other provisions of this
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Part, trade, commerce and intercourse throughout
the territory of India shall be free.
304. Notwithstanding anything in article 301
or article 303, the Legislature of a State may by
law-
1016
(a) .........
(b) impose such reasonable restrictions on
the freedom of trade, commerce or
intercourse with or within that State as
may be required in the public interest:
Provided that no Bill or amendment for the
purposes of clause (b) shall be introduced or
moved in the Legislature of a State without the
previous sanction of the President."
These provisions of the Constitution came up for
consideration before a Constitution Bench consisting of five
learned Judges of this Court in Atiabari Tea Co. Ltd. v. The
State of Assam and Ors.(1) and the main point which arose
for decision in that case was whether the taxing provisions
in the Seventh Schedule to the Constitution were subject to
Articles 301 to 304 and, if so, what would be their effect
on taxes levied under Entry 56 of List II of the Seventh
Schedule to the Constitution. Gajenderagadkar, J. (as he
then was) who pronounced the judgment on behalf of himself,
Wanchoo and Das Gupta, JJ. with whom Shah, J. (as he than
was) agreed though by assigning a wider meaning to the
freedom of trade, commerce and intercourse dealt with by
Article 301 of the Constitution, observed at page 861 thus:.
"Our conclusion, therefore, is that when Art.
301 provides that trade shall be free throughout
the territory of India it means that the flow of
trade shall run smooth and unhampered by any
restriction either at the boundaries of the States
or at any other points inside the States
themselves. It is the free movement or the
transport of goods from one part of the country to
the other that is intended to be saved, and if any
Act imposes any direct restrictions on the very
movement of such goods it attracts the provisions
of Art. 301 and its validity can be sustained only
if it satisfies the requirements of Art. 302 or
Art. 304 of Part XIII. At this stage we think it
is necessary to repeat that when it is said that
the freedom of the movement of trade cannot be
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subject to any restrictions in the form of taxes
imposed on the carriage of goods or their movement
all that is meant is that the said restrictions
can be imposed by the State Legislatures only
after satisfying the requirements of Art. 304 (b).
It is not as if no restrictions at all can be
imposed on the free movement of trade."
The same question arose later on very sharply in The
Automobile Transport (Rajasthan) Ltd. v. The State of
Rajasthan and Ors.(1) before a bench of seven learned Judges
of this Court in which the correctness of the decision in
the case of Atiabari Tea Co. Ltd. (supra) was questioned. In
this case, the effect of Articles 301 to 304 of the
Constitution on the power of the State Legislature to levy
tax under Entry 57 of List II of the Seventh schedule to the
Constitution arose for determination. There were three
judgments in that case. The judgment of Das, Kapur and
Sarkar, JJ. was delivered by Das, J. with whom Subba Rao, J.
agreed in his concurring judgment. The minority judgment of
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Hidayatullah, Rajagopala Ayyangar and Mudholkar, JJ. was
delivered by Hidayatullah, J. In that case, the contention
of the appellant was that the tax levied under section 4 of
the Rajasthan Motor Vehicles Taxation Act, 1951 read with
its Schedules constituted a direct and immediate restriction
on the movement of trade and commerce with and within the
State of Rajasthan inasmuch as motor vehicles which carried
passengers and goods within or through that State had to pay
the tax which imposed a pecuniary burden on a commercial
activity and was, therefore, hit by Article 301 of the
Constitution and was not saved by Article 304 (b) inasmuch
as neither the proviso to Article 304 (b) had been complied
with nor was that Act assented to by the President as
provided in Article 255 of the Constitution. On behalf of
the State of Rajasthan, it was inter alia urged that a
fiscal legislation enacted for the purpose of raising
revenue for the maintenance of roads etc. was not hit by
Article 301 and that the impugned levy which was intended
for providing facilities to motor vehicles traffic did not
constitute an immediate or direct impediment on the movement
of trade and commerce. In the course of the hearing of that
case, it was canvassed that the impugned tax being
compensatory was outside the purview of Article 301 and
Article 304(b). After
1018
examining all the views expressed in the Atiabari Tea Co.’s
case (supra) Das, J. Observed at pages 532-533 thus:
"We have, therefore, come to the conclusion
that neither the widest interpretation nor the
narrow interpretations canvassed before us are
acceptable. The interpretation which was accepted
by the majority in the Atiabari Tea Co. case
(1961) 1 SCR 809 is correct, but subject to this
clarification. Regulatory measures or measures
imposing compensatory taxes for the use of trading
facilities do not come within the purview of the
restrictions contemplated by Art. 301 and such
measures need not comply with the requirements of
the proviso to Art. 304(b) of the Constitution."
Subba Rao, J. who agreed with the judgment of Das, J.
observed at pages 564-565 thus:
"The foregoing discussion may be summarized
in the following propositions: (1) Art. 301
declares a right of free movement of trade without
any obstructions by way of barriers? inter-State,
or intra-State or other impediments operating as
such barriers. (2) The said freedom is not
impeded, but, on the other hand, promoted, by
regulations creating conditions for the free
movement of trade, such as, police regulations,
provision for ser vices, maintenance of roads,
provision for aerodromes, wharfs etc.; with or
without compensation. (3) Parliament may by law
impose restrictions on such freedom in the public
interest; and the said law can be made by virtue
of any entry with respect where of Parliament has
power to make a law. (4) The State also, in
exercise of its legislative power, may impose
similar restrictions, subject to the two
conditions laid down in Art. 304(b) and subject to
the proviso mentioned therein. (5) Neither
Parliament nor the State Legislature can make a
law giving preference to one State over another or
making discrimination between one State and
another, by virtue of any entry in the Lists,
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infringing the said freedom. (6) This ban is
lifted in the case of Parliament for the purpose
of dealing with situations arising out of scarcity
of goods in any part of the territory of India and
also
1019
in the case of a State under Art. 304(b), subject
to the conditions mentioned therein. And (7) the
State can impose a non-discriminatory tax on goods
imported from other States or the Union territory
to which similar goods manufactured or produced in
that State are subject."
It is not necessary to refer here to the views
expressed in the minority judgment. The gist of the majority
decision in the case of the Automobile Transport (Rajasthan)
Ltd. (supra) is that as long as taxes levied under Entries
56 and 57 of List lI of the Seventh Schedule to the
Constitution are compensatory, they would fall outside the
scope of Article 301 of the Constitution. But if they are
not compensatory, then being a restriction on the freedom of
trade, commerce or intercourse, they have to satisfy the
requirements of clause (b) of Article 304. In all cases
falling under Article 304(b) no bill or amendment can be
introduced or moved in the Legislature of a State without
the previous sanction of the President. If for any reason
the requirement is not complied with, in order to be valid
such law should receive the assent of the President as
provided in Article 255 of the Constitution.
The main question which arises for determination now,
therefore, is whether on the facts and in the circumstances
of the case, the levy in question is for any reason not
compensatory. In the case of the Automobile Transport
(Rajasthan) Ltd. (supra) the circumstances when a tax on
motor vehicles can be characterised as compensatory were
discussed. Das, J. Observed at pages 536-537-thus:
"The taxes are compensatory taxes which
instead of hindering trade, commerce and
intercourse facilitate them by providing roads and
maintaining the roads in a good state of repairs.
Whether a tax is compensatory or not cannot be
made to depend on the preamble of the statute
imposing it. Nor do we think that it would be
right to say that a tax is not compensatory
because the precise or specific amount collected
is not actually used to providing any facilities
......... actual user would often be unknown to
tradesmen and such user may at some time be com-
pensatory and at others not so. It seems to us
that a working test for deciding whether a tax is
compensatory or not is to enquire whether the
trades people are having
1020
the use of certain facilities for the better
conduct of their business and paying not patently
much more than what is required for providing the
facilities. It would be impossible to judge the
compensatory nature of a tax by a meticulous test,
and in the nature of things that cannot be done.
Nor do we think that it will make any
difference that the money collected from the tax
is not put into a separate fund so long as
facilities for the trades people who pay the tax
are provided and the expenses incurred in
providing them are borne by the State out of
whatever source it may be
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We were addressed at some length on the
distinction between a tax, a fee and excise duty.
It was also pointed out to us that the taxes
raised under the Act were not specially ear-marked
for the building or maintenance of roads. We do
not think that these considerations necessarily
determine whether the taxes arc compensatory taxes
are not. We must consider the substance of the
matter."
The same principle is followed and reiterated in G. K
Krishnan etc. etc. v The State of Tamil Nadu & Anr. etc.(1)
and in International Tourist Corporation etc. etc. v. State
of Haryana & Ors.(2)
It is undeniable that there have been vast changes in
the road systems of all the States in India during recent
years and the State of Punjab is no exception. The roads
themselves have very greatly increased in extent. There is
also a like increase in road traffic. The number of motor
vehicles, both passengers vehicles and goods vehicles which
use the road has gone up. The cost of maintenance of roads
has gone up correspondingly. The spiralling inflation has
added to the mounting costs. Naturally the rates of taxes on
motor vehicles have also constantly and inevitably risen in
every part of the country. As mentioned earlier the mandate
of the provisions in part XIII of the Constitution is not
that trade, commerce and intercourse should be
1021
’absolutely free’ i.e. subject to no law and no taxes at
all. Trade, commerce and intercourse should pay their way,
that is, the price for the facilities provided by the State
in the form of roads, bridges, check posts, the departmental
organisations intended for regulation of transport, law and
order etc.. In modern communities the exercise of any trade
and the conduct of any business must involve many kinds of
fiscal liabilities. Merely because certain taxes are levied
on them it cannot be said that trade or commerce has become
unfree. Without the repair upkeep, maintenance and provision
for depreciation of roads, transportation would itself
become impossible. Motor vehicles which stand in direct
relation to such roads should as held by this Court earlier,
contribute towards the cost incurred for the aforesaid
purposes. There is nothing inconsistent with the conception
of freedom of trade and commerce if, in truth, what is
collected by way of tax is a pecuniary charge which is
compensatory in character. What is essential is that the
burden should not disproportionately exceed the cost of the
facilities provided by the State. It is not at all
unreasonable to ask the owners of motor vehicles to
contribute towards the cost of maintenance of roads etc. as
they happen to belong to a class having a special and direct
benefit of the facilities so provided. When they are taxed,
they are paying a price for something which makes their
movement safer, easier and more convenient. If a road falls
into disrepair, the extent of loss they suffer will be very
heavy indeed resulting in damage to their vehicles and
inconvenience to the passengers and the owners of the goods
they carry. There is, however, no doubt that the Courts do
have the ultimate power to decide whether what is re-covered
by way of tax is in truth and substance either a
contribution towards the construction and maintenance of the
roads, bridges and other facilities that are necessary for
providing a smooth transport service or an exaction far in
excess of what is needed for providing such facilities.
Courts, however, cannot insist upon an exact correlation
between the tax recovered and the cost so incurred because
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such exact correlation is in the very nature of things
impossible to attain. There may be in some cases a little
excess recovery by way of taxes. That by itself should not
result in the nullification of the law imposing the tax if
the extent of such excess is marginal having regard to the
total cost involved.
The petioners have relied on certain figures furnished
in the budget estimates for the year 1981-82 in support of
their case that
1022
the State of Punjab was raising in all Rs. 49,31,00,000 from
taxes on motor vehicles levied under the Act and taxes on
passengers and goods levied under the Punjab Passengers and
Goods Taxation Act, 1952 while the State was spending only
Rs. 34,03,00,000 on roads and bridges. It is apparent that
the amount of expenditure referred to above does not include
the expenditure incurred by the State Government on other
heads connected with road transport such as the Directorate
of Transport, the transport authorities, provision of bus
stands, lighting, traffic police, cost of maintenance of
roads within the jurisdiction of local bodies such as
Corporations, Municipalities and Gram Panchayats which are
recipients of Government grants for the aforesaid purposes
and other incidental items. If these items are also taken
into consideration, the gap, if any, between the receipts
and the expenditure on the transport would become very
insignificant. The State Government has set out in detail
the expenditure incurred by it for the aforesaid purposes in
the affidavit sworn to by Shri Karl Reddy, I.A.S., Joint
Secretary to the Government of Punjab. It has also produced
the book containing the budget estimates presented to the
State Legislature for the year 1983-84. It shows that the
State Government has actually incurred in the year 1981-82
an expenditure of Rs. 23,32,88,000 on the maintenance of
roads and bridges and Rs. 10,23,53,000 as capital out lay on
roads and bridges. The total sum spent on roads and bridges
alone thus came to Rs. 33,56,41,000. The actual receipts
from taxes realised during the year 1981-82 both under the
Act and under the Punjab Passengers and Goods Taxation Act,
1952 were, according to the State Government, Rs.
48,82,00,000. The budget estimates for the year 1983-84 show
that the State Government proposes to spend during the year
1983-84 about 42 crores on roads and bridges alone though
there is no expectation of any significant increase in the
receipts by way of motor vehicles taxes. Even if the whole
of the capital out-lay incurred by the State Government
incurred during the year in connection with the construction
of new roads is not included in the expenditure for the year
for the purpose of deter- mining the compensatory character
of the levy (although there can be no serious objection to
doing so as observed in G. K Krishnan’s case (supra) but
only a part of it is taken into account alongwith other
items of expenditure which can legitimately be taken into
consideration, it is obvious that a substantial part of the
levy on motor vehicles under the Act as well as under the
Punjab Passengers and Goods Taxation Act, 1952 is being
spent annually on providing
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facilities to motor vehicles operators. Moreover when once
the principle of carrying forward to future year or years a
part of the capital out lay on roads and bridges during any
financial year is adopted in calculating the total
expenditure incurred on roads and bridges during that year,
it becomes inevitable that a part of the unabsorbed capital
out lay on roads and bridges in the previous year or years
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would have to be added to the expenditure on roads and
bridges during the year in question. The arithmetical result
in the case before us cannot, therefore, be much different.
It may also be stated that a comparison between the
total revenue from taxation on motor vehicles and the
expenditure incurred on providing facilities such as roads
and bridges etc. in a single year may sometimes present a
distorted picture. The figures furnished by the State
Government in respect of nine years i.e. 1973-74 to 1981-82
(both inclusive) show that the total receipts from the taxes
levied under the Act and the taxes levied under the Punjab
Passengers and Goods Taxation Act, 1952 is in the order of
Rs. 2,52,26,83,000 and the total expenditure during the same
period on roads and bridges alone is Rs. 2,35,66,89,000. The
other relevant items of expenditure incurred in connection
with road traffic are not included in the above expenditure.
If they are included, the total expenditure is likely to be
more than the receipts.
In Kewal Krishan Puri & Anr. v. State of Punjab &
Ors.(1) where the question of a fee was involved, this Court
said that if at least a good and substantial portion of
amount collected on account of fees, (may be in the
neighbourhood of two-thirds or three-fourths) was shown with
reasonable certainty to have been spent for rendering
services to those from whom the fees were collected, the
levy of fees could be upheld. In law there cannot be much
difference between the above principle applicable to fees
and the principle that ought to govern the levy of motor
vehicles tax which is claimed to be of a compensatory
character. We are satisfied that the State Government has
substantiated its case that the impugned tax is truly
compensatory in nature. It has, therefore, to be held that
it does not contravene Article 301 and Article 304(b) of the
Constitution.
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The next submission urged on behalf of the petitioners
is based on Article 14 of the Constitution. It is contended
by the petitioners that the Act by levying Rs. 35,000 as the
annual tax on a motor vehicle used as a stage carriage but
only Rs. 1,500 per year on a motor vehicle used as a goods
carrier suffers from the vice of hostile discrimination and
is, therefore, liable to be struck down. There is no dispute
that even a fiscal legislation is subject to Article 14 of
the Constitution. But it is well settled that a legislature
in order to tax some need not tax all. It can adopt a
reasonable classification of persons and things in imposing
tax liabilities. A law of taxation cannot be termed as being
discriminatory because different rates of taxation are
prescribed in respect of different items provided it is
impossible to hold that the said items belong to distinct
and separate groups and that there is a reasonable nexus
between the classification and the object to be achieved by
the imposition of different rates of taxation. The mere fact
that a tax falls more heavily on certain goods or persons
may not result in its invalidity. As observed by this Court
in Khandige Sham Bhat and Ors. v. The Agricultural Income
Tax officer(1) in respect of taxation laws, the power of
legislature to classify goods, things or persons are
necessarily wide and flexible so as to enable it do adjust
its system of taxation in all proper and reasonable ways.
The courts lean more readily in favour of upholding the
constitutionality of a taxing law in view of the
complexities involved in the social and economic life of the
community. It is one of the duties of a modern legislature
to utilise the measures of taxation introduced by it for the
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purpose of achieving maximum social goods and one has to
trust the wisdom of the legislature in this regard. Unless
the fiscal law in question is manifestly discriminatory the
Court should refrain from striking it down on the grounds of
discrimination. These are some of the broad principles laid
down by this Court in several of its decisions and it is
unnecessary to burden this judgment with citations. Applying
these principles it is seen that stage carriages which
travel on an average about 260 kilometers every day on a
specified route or routes with an almost assured quantum of
traffic which invariably is over crowded belong to a class
distinct and separate from public carriers which carry goods
on undefined routes. Moreover the public carriers may not be
operating every day in the State. There are also other
economic considerations which distinguish stage carriages
and public carriers from each
1025
other. The amount of wear and tear caused to the roads by
any class of motor vehicles may not always be a determining
factor in classifying motor vehicles for purposes of
taxation. The reasons given by this Court in G.K.Krishnan’s
case (supra) for upholding the classification made between
stage carriages and contract carriages both of which are
engaged in carrying passengers are not relevant to the case
of a classification made between stage carriages which carry
passengers and public carriers which transport goods. The
petitioners have not placed before the Court sufficient
material to hold that the impugned levy suffers from the
vice of discrimination on the above ground.
It was lastly urged that the levy is almost
confiscatory in character and the petitioners would have to
close down their business as stage carriage operators. It is
stated that the passenger fares were permitted to be raised
by about 43 per cent just before the levy was increased in
this case and it is even now open to the operators to move
the State Government to increase the rates if they feel that
there is a case for doing so. But on the facts and in the
circumstances of the case, we feel that it is not possible
to hold that the impugned levy imposes an unreasonable
restriction on the freedom of the petitioners to carry on
business. The considerations similar to those which weighed
with this Court in upholding the Mustard Oil Price Control
Order, 1977 in Prag Ice and Oil Mills and Anr. etc. v. Union
of India(1) ought to be applied in this case also. Though
patent injustice to the operators of stage carriages in
fixing lower returns on the tickets issued to passengers
should not be encouraged, a reasonable return on investment
or a reasonable rate of profit can not be the sine qua non
of the validity of the order of the Government fixing the
maximum fares which the operators may collect from their
passengers. It cannot also be said that merely because a
business becomes uneconomical as a consequence of a new
levy, the new levy would amount to an unreasonable
restriction on the fundamental right to carry on the said
business. It is, however, open to the State Government to
make any modifications in the fares if it feels that there
is a need to do so. But the impugned levy cannot be struck
down on the ground that the operation of the stage carriages
has become uneconomical after the
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introduction of the impugned levy. Moreover the material
placed by the petitioners is not also sufficient to decide
whether the business has really become uneconomical or not.
We do not, therefore, find any merit in this ground also.
In the result these petitions fail and they are
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dismissed. No costs.
P.B.R. Petitions dismissed.
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