Full Judgment Text
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PETITIONER:
INTERNATIONAL TOURIST CORPORATION ETC. ETC.
Vs.
RESPONDENT:
STATE OF HARYANA & ORS.ANDMANMOHAN VIG & ORS.v.STATE OF HARY
DATE OF JUDGMENT15/12/1980
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
SARKARIA, RANJIT SINGH
CITATION:
1981 AIR 774 1981 SCR (2) 364
1981 SCC (2) 318
CITATOR INFO :
RF 1981 SC2030 (8)
RF 1983 SC 634 (16)
R 1983 SC1005 (7,8)
F 1983 SC1019 (93)
R 1983 SC1283 (5)
R 1988 SC2062 (10)
RF 1990 SC1637 (10)
RF 1991 SC1650 (4,6)
ACT:
Haryana Passengers and Goods Taxation Act, 1952-Whether
section 3(3) interferes with the freedom of Inter-state
Trade, Commerce and Intercourse and is therefore violative
of Article 301 of the Constitution-Interpretation of Entries
in the Constitution-Exclusive competence of Parliament, when
can be claimed-Levy of tax at 60% of fare, whether
regulatory and compensatory in nature-Entry 56, List II of
Seventh Schedule to the Constitution, scope of.
U.P. Motor Vehicles Taxation Act, scope of sections 4
and 5A- Section 9 of the U.P. Motor Gadi (Malkar) Adhiniyam,
1964 is not violative of Article 14 of the Constitution.
Bihar Taxation of Passengers and Goods (Carried by
Public Service Motor Vehicles) Act, 1961, section 3(6),
scope of.
HEADNOTE:
Dismissing the Appeals, S.L.Ps. and Writ Petitions the
Court
^
HELD : (1) Where the competing entries are an Entry in
List II and Entry 97 in List I the Entry in the State list
must be given a broad and plentiful interpretation. In a
Federal Constitution like ours where there is a division of
legislative subjects but the residuary power is vested in
Parliament; such residuary power cannot be so expansively
interpreted as to whittle down the power of the State
legislature. That might affect and jeopardise the very
federal principle. The federal nature of the constitution
demands that an interpretation which would allow the
exercise of legislative power by Parliament pursuant to the
residuary powers vested in it to trench upon State
legislation and which would thereby destroy or belittle
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state autonomy must be rejected. Before exclusive
legislative competence can be claimed for Parliament by
resort to the residuary power, the legislative incompetence
of the State legislative must be clearly established. Entry
97 itself is specific that a matter can be brought under
that entry only if it is not enumerated in List II or List
III and in the case of a tax if it is not mentioned in
either of those lists. [372 A-D, 373C-D]
The Haryana Passengers and Goods Taxation Act is a law
made pursuant to the power given to the State Legislature by
Entry 56 of List II. The omission of reference to National
Highways in Entry 30 and Entry 89 is of signifi-
365
cance and indicates that the subject of "passengers and
goods" carried, on National Highways is reserved for
inclusion in the State List. A consideration of Entries 22,
23, 24, 29, 30 and 89 of List I and Entry 56 of List II
makes it clear that taxes on passengers and goods carried on
National Highways also fall directly and squarely within and
are included in Entry 56 of List II.
[373 D-G & 374 C]
Attorney-General for Ontario v. Attorney-General for
the Dominion, 1896 A.C. 348 @ 360-361; A. L. S. P. L.
Subrahmanyan Chettiar v. Muttuswami Goundan, A.I.R. 1941
Federal Court 47 @ 55 and Manikkasundara Bhattar & Ors. v.
R. S. Nayudu & Ors., [1946] F.C.R. 67 @ 88, quoted with
approval.
(2) The power exercisable under Entry 56 of List II is
the power to impose taxes which are in the nature of
regulatory and compensatory measures. The Court is not bound
by any statement made by or on behalf of the Executive
Government on a question of the legislative intent or nature
of an enactment. What the legislature intended an enactment
to be need not necessarily be what the Government says it
is. It is a matter of construction, in the light of several
attendant circumstances including the source of the
legislative power under the Constitution to make the
particular law. [374 B-C, D-E]
Atiabari Tea Co. Ltd. v. State of Assam & Ors., [1961]
1 S.C.R. 809; The Automobile Transport (Rajasthan) Ltd. v.
State of Rajasthan & Ors. [1963] 1 S.C.R. 491 and Bolani
Ores Ltd. etc. v. State of Orissa etc., [1975] 2 SCR 138,
followed.
(3) To say that the nature of a tax is of a
compensatory and regulatory nature is not to say that the
measure of the tax should be proportionate to the
expenditure incurred on the regulation provided and the
services rendered. If the tax were to be proportionate to
the expenditure on regulation and service it would not be a
tax but a fee. While in the case of a fee it may be possible
to precisely identify and measure the benefits received from
the Government and levy the fee according to the benefits
received and the expenditure incurred, in the case of a
regulatory and compensatory tax 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. What is necessary to uphold a
regulatory and compensatory tax is the existence of a
specific, identifiable object behind the levy and a nexus
between the subject and the object of the 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
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should be proportionate to the expenditure. There can be no
bar to an intermingling of the revenue realised from
regulatory and compensatory taxes and from other 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. [374 F-H, 375 A-C]
The maintenance of highways other than the National
Highways is exclusively the responsibility of the State
Government. In view of the provisions of the National
Highways Act, the State Government is not altogether devoid
of responsibility in the matter of development and
maintenance of a National Highway, though the primary
responsibility is that of the Union Government.
366
It is under a statutory obligation to obey the directions
given by the Central Government with respect to the
development and maintenance of National Highways and may
enter into an agreement to share the expenditure. In
developing and maintaining that part of the Highway which is
within a municipal area State Government is surely
facilitating the flow of passengers and goods along the
national highway. Apart from this, other facilities provided
by the State Government along all highways including
national highways such as lighting, traffic control,
amenities for passengers, halting places for buses and
trucks are available for use by everyone including those
travelling along the national highway. [376 A, C-F]
The State Government does confer benefits and renders
service in connection with traffic moving along national
highway. Therefore, there is sufficient nexus between the
tax and passengers and goods carried on national highways to
justify the imposition. [376 G-H]
(4) It is now settled that regulatory and compensatory
taxes are outside the purview of Article 301 of the
Constitution. In the instant cases, the tax is limited to
the fare and freight for the distance within the State of
Haryana. Therefore, section 3(3) of the Haryana Passengers
and Goods Taxation Act is not violative of Article 301 of
the Constitution. [377 A, 378 B]
Automobile Transport (Rajasthan) Ltd. v. State of
Rajasthan, [1963] 1 S.C.R. 491 and M/s. Sainik Motors
Jodhpur & Ors. v. The State of Rajasthan, [1962] 1 S.C.R.
517 @ 526; applied.
(5) Under sections 4 and 5A of the Uttar Pradesh Motor
Vehicles Taxation Act, tax is levied on the basis of their
user in the State of Uttar Pradesh and not because they are
"kept" in the State of Uttar Pradesh. [378 G-H]
State of Mysore & Ors. v. S. Sundaram Motors P. Ltd.
A.I.R. 1980 S.C. 148, distinguished.
(6) The levy made on vehicles passing through Uttar
Pradesh from a place outside Uttar Pradesh is not violative
of Article 14 of the Constitution. The tax is payable
because of the user of the roads while the question of
picking up and setting down passengers and goods at wayside
stations en route is dependant on the conditions of the
permit and the reciprocal agreements between the States. One
has nothing to do with the other. [379 B-C]
(7) Entry 56 of List II cannot be read in conjunction
with Entry 26. The taxing power of the State Legislature in
regard to passengers and goods carried by roads or inland
waterways is to be found in Entry 56. Therefore, such taxing
power is not controlled by another Entry in List II which is
unrelated to taxing power. The taxable event is the carrying
of goods and passengers on roads within the State thereby
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making use of the facilities provided by the State. [379 F-
G]
(8) Section 9 of the Uttar Pradesh Motor Gadi (Malkar)
Adhiniyam, 1964 is not violative of Article 14 of the
Constitution. The rate of lump-sum tax is relatable to the
freight carried or the period of the journey or to both.
[380 A, F-G]
367
(9) Under section 3(6) of the Bihar Taxation of
Passengers and Goods (Carried by Public Service Motor
Vehicles) Act, 1961, tax can be levied where passengers or
goods are carried from any place outside the State to any
place outside the State because the vehicle passes through
the State of Bihar. A journey from a place outside the State
to another place outside the State, but through the State,
involves a journey from a place outside the State to a place
inside the State and a journey from a place inside the State
to a place outside the State. [380 G-H, 381 F-G]
Pritpal Singh v. State of U.P., (1973) U.P. Tax Cases
376, partly overruled on this question only.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 638,
656, 786 and 2632 of 1979.
Appeals by Special Leave from the Judgment and Order
dated 9-1-1979 of the Punjab & Haryana High Court in Civil
Writ Nos. 3870/77, 1564/77, 4080/77 and 3631/77.
WITH
SPECIAL LEAVE PETITION (CIVIL) Nos. 8961-62/79.
From the Judgment and Order dated 7-10-1980 of the
Allahabad High Court in Civil Writ Petition No. Nil.
AND
WRIT PETITION NOS.: 183 of 1977, 3967 of 1978, 5116 to
5143, 5151-5159 of 1980, 657, 910-913, 922-23, 1039-40,
1192, 1344, 1347 of 1979, 324, 421, 451, 820, 880, 881,
1152, 1153, 1154, 1207, 1404, 1426, 1541, 1542, 1561, 1563,
1650, 1651, 1714, 1715, 1716, 1717, 1730, 1731, 1732, 1855,
1948-49, 2032-34, 2162, 2164, 2165, 2415, 2416, 2418, 2419,
2420, 2421, 2626, 2627, 2628, 2629, 2630, 2631, 2632, 2636,
2638, 2639-2640, 2641, 3015-30, 3043-3044, 3054, 3055-3056,
3456-3457, 3703, 3704, 3705-3708, 3712-3715, 3716, 3803,
3823, 4326, 4333, 4334, 4335, 4336, 4337-38, 4532, 4534,
4682, 4683, 4684, 4685, 4708, 4709-4711, 5500, 5506, 5507,
5495-5497, 5505, 5508-9, 5426, 5416-20, 5427, 5415, 5526-27,
5536, 5333, 3289, 4347, 4348, 4753, 5629-33/80, 364, 337/72,
3822, 2160, 2164, 636, 1429, 1782-83, 2163 and 2124/80.
(Under Article 32 of the Constitution).
Soli J. Sorabji, B. R. Kapoor and R. A. Gupta for the
Appellant in CA 639/79.
Y. S. Chitale (Dr.) and Indra Makwana for the Appellant
in CA 656/79.
Indra Makwana and Sushil Kumar Jain for the Appellant
in CA 786/79.
368
P. R. Mridul, B. R. Kapoor, Miss Renu Gupta, R. Satish
Vig and N. N. Sharma for the Appellant in CA 2632 and
Petitioners in SLP Nos. 8961-8962/80.
K. G. Bhagat, D. Goburdhan, M. N. Shroff, Miss A.
Subhashini, M. Veerappa, S. K. Gambhir, Gijay Hansonia, R.
K. Mehta, B. D. Sharma, N. Hansonia and S. Markandeya for
the Respondent (State) in all the matters.
L. N. Sinha Att. Genl. and S. Markandeya for the
Respondent (State of Uttar Pradesh).
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B. R. Kapoor, Renu Gupta, S. R. Srivastava, N. N.
Sharma, U. S. Prasad, Mrs. M. Qamruddin, S. Markandeya and
M. P. Jha for the Petitioners.
The Judgment of the Court was delivered by
CHINNAPPA REDDY, J. Civil Appeals Nos. 638, 656, 786
and 2632 of 1979 may be dealt with first as the principal
submissions were made in these cases. The appellants are
transport operators plying stage carriages and contract
carriages between Delhi and Jammu and other places in the
State of Jammu and Kashmir. Their carriages follow National
Highways 1 and 1-A. They operate directly between Delhi and
the other terminus in the State of Jammu and Kashmir, that
is to say, they do not pick up or set down passengers or
goods en route. In the course of the journey it is necessary
for them to travel through the State of Haryana as part of
National Highway No. 1 passes through that State. The State
of Haryana levies a tax on passengers and goods carried by
motor vehicles, which we may call, for brevity’s sake,
’passengers and goods tax’. The levy is made under the
provisions of the Haryana Passengers and Goods Taxation Act
1952. Sec. 3(1) of the Act empowers the levy of a tax, to be
paid to the State Government, at such rates not exceeding
60% of the value of the fare or freight as the case may be,
on all passengers and goods carried by a motor vehicle other
than a private carrier. In the case of contract carriages
and stage carriages the State Government is authorised to
accept a lump-sum in lieu of the tax chargeable on
passengers and goods respectively, in the manner prescribed.
Sec. 3(3) deals with situations where a route lies partly
within and partly outside the State of Haryana. It reads as
follows :
"S. 3(3). When passengers and goods are carried by
a motor vehicle on a ’joint route’, the tax shall be
payable in respect of fare or freight for the distance
covered within the State at the rate laid down in this
section.
369
Explanation : For the purpose of this sub-section,
’joint route’ shall mean a route which lies partly in
the State of Haryana and partly in some other State, or
Union Territory."
The appellants question the vires of Sec. 3(3) of the
Haryana Passengers and Goods Taxation Act in so far as it
permits the levy of tax on passengers and goods carried by
their carriages plying entirely along the National Highways.
The Writ Petitions filed by them in the High Court of Punjab
& Haryana were dismissed, the High Court upholding the vires
of Sec. 3(3). Hence these appeals.
Shri Soli Sorabji and Dr. Chitale who appeared for the
appellants submitted that it was incompetent for the State
Legislature to levy the passengers and goods tax on
passengers and goods carried on National Highways. It was
said : that Parliament alone had exclusive jurisdiction
under Entry 23 read with Entry 97 of List I of the Seventh
Schedule to the Constitution to legislate in respect of
National Highways, including levy of taxes on goods and
passengers carried on National Highways. It was further
argued that Entry 56 of List II of Seventh Schedule to the
Constitution which empowered the levy of taxes on goods and
passengers carried by road merely authorised the levy of
taxes which were of regulatory and compensatory nature.
Consequently the taxing power of the State Legislature could
only be exercised in respect of passengers and goods carried
on roads maintained by the State Government and not on roads
maintained by the Union Government. Under no circumstances,
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it was emphasised, could it be said that the levy of a tax
which was as much as 60% of the fare was regulatory and
compensatory in its nature. It was also submitted that Sec.
3(3) of the Haryana Act interfered with the freedom of
Inter-state Trade, Commerce and Intercourse and was,
therefore, violative of Art. 301 of the Constitution. It was
not saved by Art. 304(b) as its provisions could not be
described as reasonable restrictions within the meaning of
Art. 304(b).
The constitutional and statutory provisions which
require to be considered may now be set out. Entry 23 and
Entry 97 of List I of the Seventh Schedule to the
Constitution are as follows :
"23. Highways declared by or under law made by
Parliament to be national highways."
"97 Any other matter not enumerated in List II or
List III including any tax not mentioned in either of
those Lists."
Entries 22, 24, 25, 29, 30 and 89 of List I also throw
light, as we will presently show and they are as follows :
370
"22. Railways."
"24. Shipping and navigation on inland waterways,
declared by Parliament by law to be national waterways,
as regards mechanically propelled vessels; the rule of
the road on such waterways."
"25. Maritime shipping and navigation, including
shipping and navigation on tidal waters; provision of
education and training for the mercantile marine and
regulation of such education and training provided by
State and other agencies."
"29. Airways; aircraft and air navigation;
provision of aerodromes; regulation and organisation of
air traffic and of aerodromes; provision for
aeronautical education and training and regulation of
such education and training provided by States and
other agencies."
"30. Carriage of passengers and goods by railway,
sea or air, or by national waterways in mechanically
propelled vessels."
"89. Terminal taxes on goods or passengers,
carried by railway, sea or air, taxes on railway fares
and freights."
Entry 13, Entry 56 and Entry 57 of List II are as follows :
"13. Communications, that is to say, roads,
bridges, ferries, and other means of communication not
specified in List I; municipal tramways; ropeways;
inland waterways and traffic thereon subject to the
provisions of List I and List III with regard to such
waterways; vehicles other than mechanically propelled
vehicles."
"56. Taxes on goods and passengers carried by road
or on inland waterways."
"57. 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."
The National Highways Act 1956 provides for the
declaration of certain highways to be National Highways.
Sec. 2(1) of the Act declares the Highways specified in the
Schedule ’except such parts thereof as are situated within
any municipal area’ to be National Highways. Sec. 3 defines
’municipal area’ as meaning "any municipal area with a
population of 20,000 or more, the control or management of
which is entrusted to a Municipal Committee, a Town Area
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Committee, a Town Committee or any other authority". Sec. 4
vests all National
371
Highways in the Union. Sec. 5 makes it the responsibility of
the Central Government "to develop and maintain in proper
repair all National Highways", but empowers the Central
Government to direct that any function in relation to the
development or maintenance of any national highway shall,
subject to such conditions as may be specified, also be
exercisable by the concerned State Government. Section 6
further empowers the Central Government to give directions
to the Government of any State as to the carrying out in the
State of any of the provisions of the Act or of any rule,
notification or order made thereunder. Sec. 8 authorises the
Central Government to enter into an agreement with the
Government of any State or with any municipal authority in
relation to the development or maintenance of the whole or
any part of a National Highway situated within the State or
within a municipal area, and any such agreement it is said,
may provide for the sharing of expenditure by the respective
parties thereto.
We have already extracted Sec. 3(3) of the Haryana
Passengers and Goods Taxation Act 1952. It is not necessary
to refer to the other provisions of the Act.
The submission of Shri Sorabji relying on Union of
India v. H. S. Dhillon and Satpal & Co. etc. v. Lt. Governor
of Delhi & Ors., was that there was nothing in the
Constitution to prevent Parliament from combining its power
to legislate with respect to any matters enumerated in
Entries 1 to 96 of List I with its power to legislate under
Entry 97 of List I and, so, if Entries 23 and 97 were read
together, the power to legislate with respect to taxes on
passengers and goods carried on National Highways was within
the exclusive legislative competence of Parliament. The
observation in Union of India v. H. S. Dhillon(1) on which
reliance was placed by the learned counsel was :
"However, assuming that the Wealth Tax Act, as
originally enacted, is held to be legislation under
entry 86 List I, there is nothing in the Constitution
to prevent Parliament from combining its powers under
entry 86. List I with its powers under entry 97. There
is no principle that we know of which debars Parliament
from relying on the powers under specified entries 1 to
96, List I, and supplement them with the powers under
entry 97 List I and art. 248, and for that matter
powers under entries in the Concurrent List."
The observation in Dhillon’s case was quoted with approval
in Satpal & Co. etc. v. Lt. Governor of Delhi & Ors., and a
criticism that
372
Dhillon’s case was no longer good law in the light of His
Holiness Kesavananda Bharathi Sripadagalavaru v. State of
Kerala, based on the commentary of Mr. Seeravai was
repelled.
There is a patent fallacy in the submission of Shri
Sorabji. Before exclusive legislative competence can be
claimed for Parliament by resort to the residuary power, the
legislative incompetence of the State legislative must be
clearly established. Entry 97 itself is specific that a
matter can be brought under that entry only if it is not
enumerated in List II or List III and in the case of a tax
if it is not mentioned in either of those lists. In a
Federal Constitution like ours where there is a division of
legislative subjects but the residuary power is vested in
Parliament, such residuary power cannot be so expansively
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interpreted as to whittle down the power of the State
legislature. That might affect and jeopardize the very
federal principle. The federal nature of the constitution
demands that an interpretation which would allow the
exercise of legislative power by Parliament pursuant to the
residuary powers vested in it to trench upon State
legislation and which would thereby destroy or belittle
state autonomy must be rejected. In Attorney-General for
Ontario v. Attorney-General for the Dominion, it was
observed by House of Lords at p. 360-361 :
"....the exercise of legislative power by the
Parliament of Canada, in regard to all matters not
enumerated in s. 91, ought to be strictly confined to
such matters as are unquestionably of Canadian interest
and importance, and ought not to trench upon provincial
legislation with respect to any of the classes of
subjects enumerated in s. 92. To attach any other
construction to the general power which, in supplement
of its enumerated powers, is conferred upon the
Parliament of Canada by s. 91, would, in their
Lordships’ opinion, not only be contrary to the
intendment of the Act, but would practically destroy
the autonomy of the provinces".
In A. L. S. P. P. L. Subrahmanyan Chettiar v. Muttuswami
Goundan the Federal Court said at (p. 55) :
"But resort to that residual power should be the
very last refuge. It is only when all the categories in
the three Lists are absolutely exhausted that one can
think of falling back upon a nondescript."
373
Again in Manikkasundara Bhattar & Ors. v. R. S. Nayudu &
Ors., the Federal Court observed (at p.88) :
"In the Indian Constitution Act, s. 104 has been
inserted for the very purpose of enabling legislation
to be enacted in respect of subjects omitted from the
three Lists in the Seventh Schedule. There is not
therefore the same necessity for Courts in India to
find that a subject must be comprised within the
entries in the Lists. But when there is a choice
between two possible constructions of an entry or
entries, one of which will result in legislative power
being conferred by some entry or entries in the Lists
and the other in a finding of no existing power, but if
legislation is required that recourse must be had to s.
104, the first construction should on principles
analogous to those applied to the Canadian Constitution
be preferred".
It is, therefore, but proper that where the competing
entries are an entry in List II and entry 97 of List I, the
entry in the State list must be given a broad and plentiful
interpretation.
Entry 56 of List II refers to taxes and goods on
passengers carried by road or on inland waterways. It does
not except National Highways and National Waterways, so
declared by law made pursuant to Entry 23 and Entry 24 of
List I. While it is to be noticed that Entries 22, 23, 24,
25 and 29 specify Railways, National Highways, National
Waterways and Maritime Shipping, Navigation and Airways
respectively, Entry 30 which refers to carriage of
passengers and goods specifies Railways, Sea, Air and
National Waterways only but not National Highways. Again
entry 89 which refers to Terminal Taxes on goods or
passengers specifies Railways, Sea or Air but not National
Highways. The omission of reference to National Highways in
Entry 30 and entry 89 is of significance and indicates that
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the subject of ’passengers and goods’ carried on National
Highways is reserved for inclusion in the State List. A
consideration of these several entries appears to us to make
it clear that taxes on passengers and goods carried on
National Highways also fall directly and squarely within and
are included in entry 56 of List II.
We proceed to the next submission of the learned
counsel for the appellants that the legislative power to
impose taxes under entry 56 of List II was of a regulatory
and compensatory nature and consequently the taxing power of
the State Legislature could only be
374
exercised with respect to goods and passengers carried on
roads, maintained by the State Government and not on
National Highways which were maintained by the Union
Government. In the counter affidavit filed by Shri Rajender
Singh, Taxation Commissioner, on behalf of the State of
Haryana, it was claimed that the tax was not of a regulatory
and compensatory nature but that it was a general revenue
measure. This position was abandoned during the course of
argument and Shri Bhagat learned counsel for the State of
Haryana conceded that the tax was of a regulatory and
compensatory nature. Nor, of course, is the Court bound by
any statement made by or on behalf of the Executive
Government on a question of the legislative intent or nature
of an enactment, what the legislature intended an enactment
to be need not necessarily be what the Government says it
is. It is a matter of construction, in the light of several
attendant circumstances including the source of the
legislative power under the Constitution to make the
particular law. We have held that the Haryana Passengers and
Goods Taxation Act is a law made pursuant to the power given
to the State Legislature by entry 56 of List II. Having
regard to Atiabari Tea Co. Ltd., v. State of Assam & Ors.,
The Automobile Transport (Rajasthan) Ltd. v. State of
Rajasthan & Ors., and Bolani Ores Ltd. etc. v. State of
Orissa etc., it has to be held that the power exercisable
under entry 56 of List II is the power to impose taxes which
are in the nature of regulatory and compensatory measures.
In the last of the cases mentioned it was said by the Court,
"Entry 57 of List II empowers legislation in respect of
taxes on vehicles ......... suitable for use on roads
.......... the power exercisable under Entry 57 is the power
to impose taxes which are in the nature of compensatory and
regulatory measures". What was said about entry 57 is true
of entry 56 too. But to say that the nature of a tax is of a
compensatory and regulatory nature is not to say that the
measure of the tax should be proportionate to the
expenditure incurred on the regulation provided and the
services rendered. If the tax were to be proportionate to
the expenditure on regulation and service it would not be a
tax but a fee.
While in the case of a fee it may be possible to
precisely identify and measure the benefits received from
the Government and levy the fee according to the benefits
received and the expenditure incurred, in the case of a
regulatory and compensatory tax 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
375
according to the benefits received and the expenditure
incurred. What is necessary to uphold a regulatory and
compensatory tax is the existence of a specific,
identifiable object behind the levy and a nexus between the
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subject and the object of the 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 there 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. In the
Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan
& Ors., (Supra) this Court observed (at p.536-537) :
"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 compensatory 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 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 ..........We were addressed at some length on
the distinction between a tax a fee and an 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 are compensatory taxes or not. We must consider
the substance of the matter".
There cannot be the slightest doubt that the State of
Haryana incurs considerable expenditure for the maintenance
of roads and providing
376
facilities for the transport of goods and passengers within
the State of Haryana. The maintenance of highways other than
the National Highways is exclusively the responsibility of
the State Government. While the maintenance of National
Highways is the responsibility of the Union Government,
under Sec. 5 of the National Highways Act, that very
provision empowers the Central Government to direct that any
function in relation to the development and maintenance of a
National Highway shall also be exercisable by the concerned
State Government. Sec. 6 further empowers the Central
Government to give directions to the State Government as to
the carrying out of the provisions of the Act and Sec. 8
authorises the Central Government to enter into an agreement
with the State Government in relation to the development and
maintenance of the whole or part of a National Highway
situated within the State including a provision for the
sharing of expenditure. Therefore, the State Government is
not altogether devoid of responsibility in the matter of
development and maintenance of a national highway, though
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the primary responsibility is that of the Union Government.
It is under a statutory obligation to obey the directions
given by the Central Government with respect to the
development and maintenance of national highways and may
enter into an agreement to share the expenditure. That part
of the highway which is within a municipal area is excluded
from the definition of a national highway and therefore, the
responsibility for the development and maintenance of that
part of the highway is certainly on the State Government and
the Municipal Committee concerned. Since the development and
maintenance of that part of the highway which is within a
municipal area is equally important for the smooth flow of
passengers and goods along the national highway it has to be
said that in developing and maintaining the highway which is
within a municipal area, the State Government is surely
facilitating the flow of passengers and goods along the
national highway. Apart from this, other facilities provided
by the State Government along all highways including
national highways, such as lighting, traffic control,
amenities for passengers, halting places for buses and
trucks are available for use by everyone including those
travelling along the national highways. It cannot therefore,
be said that the State Government confers no benefits and
renders no service in connection with traffic moving along
national highways and is, therefore, not entitled to levy a
compensatory and regulatory tax on passengers and goods
carried on national highways. We are satisfied that there is
sufficient nexus between the tax and passengers and goods
carried on national highways to justify the imposition.
The last of the submissions was that the levy of tax on
passengers and goods passing through the State of Haryana
from a place outside
377
the State to a place outside the State interfered with the
freedom of trade, commerce and intercourse throughout the
territory of India and so Sec. 3(3) of the Haryana Act was
violative of Art. 301 of the Constitution. We are unable to
accept this submission. It is now well settled that
regulatory and compensatory taxes are outside the purview of
Art. 301 of the Constitution. In Automobile Transport
(Rajasthan) Ltd. v. State of Rajasthan & Ors., (Supra) the
question arose whether the provision of the Rajasthan Motor
Vehicles Taxation which authorised the levy of tax even on
stage carriages which ran for the most part on a route
within the State of Ajmer but had necessarily to pass
through a small strip of territory in the State of Rajasthan
could be said to contravene Art. 301 of the Constitution.
The Court, by a majority, upheld the validity of the
Rajasthan Statutory provision and observed :
"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".
The identical question was considered in M/s. Sainik Motors,
Jodhpur & Ors. v. The State of Rajasthan, in connection with
a similar provision in the Rajasthan Passengers and Goods
Taxation Act which provided that where passengers and goods
were carried by motor vehicle from any place outside the
State to any place within the State or from any place within
the State to any place outside the State, tax was leviable
on the fare or freight at a rate proportionate to the
distance covered in the State when compared with the total
distance of the journey. The Constitution Bench of the Court
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holding that there was no violation of Art. 301, observed :
(at p. 526)
"We are also of opinion that no inter-State trade,
commerce or intercourse is affected. The tax is for
purposes of State, and falls upon passengers and goods
carried by motor vehicles within the State. No doubt,
it falls upon passengers and goods proceeding to or
from an extra-State point but it is limited only to the
fare and freight proportionate to the route within the
State. For this purpose, there is an elaborate scheme
in R. 8-A to avoid a charge of tax on that portion of
the route which lies outside the State. There is thus
no tax on fares and freights attributable to routes
outside the State except in one instance which is
contemplated by the proviso to sub-s. (3) of s. 3 and
to which reference will be made
378
separately. In our opinion, the levy of tax cannot be
said to offend Arts. 301 and 304 of the Constitution".
As in the case of M/s. Sainik Motors, Jodhpur & Ors. v. The
State of Rajasthan, (supra) in the cases before us also the
tax is limited to the fare and freight for the distance
within the State of Haryana. We, therefore, hold that S.
3(3) of the Haryana Passengers and Goods Taxation Act is not
violative of Art. 301 of the Constitution. As a result of
our discussion Civil Appeals Nos. 638, 656, 786 and 2632 of
1979 are dismissed with costs.
In the remaining cases, apart from the principal points
which we have discussed above some other points also were
raised which we shall now proceed to consider. One of the
submissions of Shri Mridul who appeared in the Special Leave
Petitions was that Sections 4 and 5A of the Uttar Pradesh
Motor Vehicles Taxation Act stipulated two cumulative
taxable events both of which had to be satisfied before tax
could be levied on a vehicle plying under a permit granted
by an authority having jurisdiction outside Uttar Pradesh.
The two taxable events according to Shri Mridul were (1)
user within the territories of Uttar Pradesh and (2) user in
any public place in Uttar Pradesh. The argument was that
since the vehicles did not pick up or set down passengers or
goods at any place within the State of Uttar Pradesh there
was no user as contemplated by Sections 4 and 5A and
therefore, the taxable events had not taken place. Reliance
was placed by the learned counsel on our decision in State
of Mysore & Ors. v. S. Sundaram Motors P. Ltd. We do not
think that the case relied on by Shri Mridul is of any
assistance to him. The question there was whether a motor
vehicle passing through the territory of the State of Mysore
and making short halts for rest, food etc. during transit on
the way from Bombay to its destination in Tamil Nadu was a
motor vehicle ’kept’ in the State of Mysore. Our answer
depended on the meaning to be given to the word ’kept’,
since under the Mysore Motor Vehicles Taxation Act motor
vehicles had to be ’kept in the State of Mysore’ if tax was
to be levied. We held that the vehicles which merely passed
through the State of Mysore were not "kept in the State of
Mysore". The language of Sections 4 and 5A of the Uttar
Pradesh Motor Vehicles Taxation Act is entirely different
from the language of the Mysore Act. The Uttar Pradesh tax
is levied on the vehicles on the basis of their user in the
State of U.P. and not because they are ’kept’ in the State
of Uttar Pradesh. There is no force in this submission of
Shri Mridul.
379
Shri Mridul’s second submission was that the levy made
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on vehicles passing through Uttar Pradesh from a place
outside, to a place outside Uttar Pradesh was violative of
Art. 14 since these vehicles were not allowed to pick up or
set down passengers or goods at any place within Uttar
Pradesh, unlike vehicles holding permits granted by
authorities having jurisdiction within Uttar Pradesh which
were permitted to pick up and set down passengers,
notwithstanding the fact that the tax payable by all of them
was the same. Thus it was said unequals were treated alike
for the purpose of payment of tax. We see no force in this
submission. The tax is payable because of the user of the
roads while the question of picking up and setting down
passengers and goods at wayside stations en route is
dependant on the conditions of the permit and the reciprocal
agreements between the States. The one has nothing to do
with the other and we are unable to see any violation of
Art. 14.
Shri Kapoor appearing for the petitioners in a large
majority of Writ Petitions raised a number of contentions.
One of the submissions was that entry 56 of List pursuant to
which the various passengers and Goods Taxation Acts were
made should not be read in isolation but should be read
alongside other entries in List II particularly along with
entry 26 which was "trade and commerce within the State
subject to the provisions of entry 33 of List III". Shri
Kapoor also suggested that entry 23 of List I should be read
with entry 42 of List I which was: "Inter-state trade and
commerce". The submission of Shri Kapoor was that if entries
26 and 56 of List II were read together and if entries 23
and 42 were similarly read together separately, it would
atone become clear that the power to levy tax on passengers
and goods under entry 56 was to be confined to passengers
and goods carried within the State. We do not agree with the
submission. There is no justification for reading entry 56
of List II in conjunction with entry 26. The taxing power of
the State legislature in regard to passengers and goods
carried by roads or on inland waterways is to be found in
entry 56 and there is no warrant for holding that such
taxing power is controlled by another entry in List II which
is unrelated to taxing power. Shri Kapoor suggested that no
taxable event occurred within the State when goods were
merely transported through the State in the course of inter-
state trade and commerce. The obvious answer is that the
taxable event is the carrying of goods and passengers on
roads within the State thereby making use of the facilities
provided by the State.
One of the submissions of Shri Kapoor was that Sec. 9
of the Uttar Pradesh Motor Gadi (Mal-Kar) Adhiniyam 1964
which
380
provided for the payment of a lump-sum in lieu of the amount
of tax that might be payable was hit by Art. 14 of the
Constitution. He relied on a full bench decision of the High
Court of Himachal Pradesh in M/s. Gainda Mal Charanji Lal v.
The State of Himachal Pradesh & Ors. That was a case where
the Act provided for the payment of a flat lump-sum of Rs.
1500/- per annum in lieu of tax, irrespective of the freight
carried or the period during which the vehicle was operated
within the State. The lump-sum levy was held to be violative
of Art. 14. We are not concerned with such a situation under
the Uttar Pradesh Motor Gadi Mal-Kar Adhiniyam. Under Sec. 9
of the Uttar Pradesh Adhiniyam the State Government is
empowered to accept a lump-sum in lieu of the amount of tax
that may be payable for such period as may be agreed upon by
the operator. Rule 5 of the Uttar Pradesh Motor Gadi Mal-Kar
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Rules 1964 provides that the lump-sum in lieu of tax shall
be determined in accordance with the rates specified in the
third schedule. The second item of the third schedule
prescribes the rate of lump-sum tax for ’public goods
vehicles’, the permits in respect of which have been granted
by a Regional or State Transport authority of the State
including vehicles of other States authorised to ply under
counter-signatures granted by a Regional or State Transport
Authority of the State for any of the Hill roads, as Rs.
3.50 per month per quintal of authorised carrying capacity
of the vehicles in respect of agricultural produce, minerals
and petroleum goods, and Rs. 5.60 per month per quintal of
the authorised carrying capacity of the vehicle in the case
of other goods. The third item of third schedule deals with
goods vehicles of other States authorised to ply under
temporary permits granted by a Regional or State Transport
authority of another State for an inter-state route partly
lying in the State for a period not exceeding 15 days. The
lump-sum to paid in the case of public goods vehicles is Rs.
4 per day for the number of days covered by the journeys to
be performed within the State in respect of agricultural
produce, minerals and petroleum goods and Rs. 6.40 per day
in respect of other goods. The rate of lump-sum tax is thus
seen to be relatable to the freight carried or the period of
the journey or to both. There is no violation of Art. 14.
In the Bihar cases Shri Kapoor learned counsel for the
petitioners raised the contention that on the terms of Sec.
3(6) of the Bihar Taxation of Passengers and Goods (Carried
by Public Service Motor Vehicles) Act 1961, no tax was
leviable on passengers or goods carried by a public vehicle
from any place outside the State of Bihar to any place
outside the State merely because the vehicle happened
381
to pass through Bihar in the course of its journey. S. 3(6)
reads as follows:
"Where passengers or goods are carried by a public
service motor vehicle from any place outside the State
to any place within the State, or from any place within
the State to any place outside the State, the tax shall
be payable in respect of the distance covered within
the State at the rate provided in sub-section (1) ..."
The learned counsel contrasted the language of Sec. 3(6) of
the Bihar Act with the language of the Explanation to Sec.
3(1) of the Uttar Pradesh Motor Gadi (Mal-Kar) Adhiniyam,
1964, which is as follows:
"Explanation I-Where goods are carried by a public
goods vehicle-
(a) from any place outside the State to any place
outside the State; or
(b) from any place within the State to any place
outside the State; or
(c) from any place outside the State to any place
within the State; an amount bearing the same
proportion ....................... ".
The omission of a clause similar to clause (a) of
Explanation I to Sec. 3(1) of the Uttar Pradesh Motor Gadi
(Mal-Kar) Adhiniyam, 1964, according to the learned counsel,
made it clear that tax was not leviable where passengers or
goods were carried from any place outside the State to any
place outside the State merely because the vehicle passed
through the State of Bihar. Reliance was placed by the
learned counsel on a decision of the Allahabad High Court in
Pritpal Singh v. State of U.P. We do not agree with the
submission. A journey from a place outside the State to
another place outside the State, but through the State,
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involves a journey from a place outside the State to a place
inside the State and a journey from a place inside, the
State to a place outside the State. Clauses (b) and (c) of
Explanation I to Sec. 3(1) of the Uttar Pradesh Act
together, cover, of their own force, the situation
contemplated by clause (a) also. Clause (a) however, appears
to have been added by way of caution and because of the
decision of the Allahabad High Court in the case on
382
which the learned counsel relied. The Allahabad High Court
was dealing with a provision which at that time was
analogous to the present Bihar provision. We do not agree
with the view expressed by the Allahabad High Court in that
case on this question only.
Based on our judgment in State of Mysore & Ors. V.
Sundaram Motors P. Ltd. (supra), it was argued in some of
the cases that where the motor vehicle merely passed through
the State, no taxable event occurred and therefore, tax
could not be levied. In the Motor Vehicle Taxation Acts of
several States the charging section generally runs as
follows : "There shall be levied and collected on all motor
vehicles used or kept for use in the State a tax at the rate
fixed by the State Governments........... ". In these cases
the taxable event is ’keeping for use’ and alternately user
within the State. Once the motor vehicle is used within the
State the taxable event occurs and the tax is attracted. The
decision in State of Mysore & Ors. v. Sundaram Motors P.
Ltd., (supra) has no application to such cases as already
pointed out by us while dealing with a similar submission of
Shri Mridul in the Uttar Pradesh cases.
In some States, the Motor Vehicles Taxation Acts
provide for payment of tax in the event only of vehicles
being "kept for use in the State" and provide for no other
alternative taxable event. In such cases the principle of
our decision in State of Mysore & Ors. v. Sundaram Motors P.
Ltd., (supra) may be attracted. It will depend on an
interpretation of the provisions of the relevant statutes.
But we do not propose to say anything more about such cases
as we cannot give any relief, even if we agree with the
petitioners, in applications under Art. 32 of the
Constitution.
In the other cases from the States of Gujarat,
Maharashtra, West Bengal, Punjab, Haryana, Karnataka, Bihar,
Madhya Pradesh, Rajathan, Orissa, no other points were
raised but the relevant provisions of the Motor, Vehicles
Taxation Acts and the Taxation on Passengers and Goods Acts
in force in the several States were brought to our notice
and similar submissions as those discussed by us were made.
In the result all the Civil Appeals, Special Leave Petitions
and Writ Petitions are dismissed with costs. In some of the
Writ Petitions proper Court fee has not been paid. However,
we are not dismissing the Writ Petitions on that ground.
The Order of the Court in W.P. No. 5845 of 1980 was
delivered on 13th January, 1981 by
CHINNAPPA REDDY, J. This Writ Petition is really
covered by the judgment pronounced by us on December 15,
1980, in M/s. Inter-
383
national Tourist Corporation etc. etc. v. The State of
Haryana & Ors. Shri S. N. Kacker, learned counsel, however,
urged that there was no material before us in that case to
justify a conclusion that the State Government incurred any
expenditure in connection with the National Highways to
justify imposition of a tax of a compensatory and regulatory
nature. He invited our attention to the budget of the
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Haryana Government to show that no expenditure was incurred
in connection with the development, construction,
improvement and maintenance of National Highways in the
State of Haryana. There is no substance in the submission.
We have pointed out in our judgment that the State
Government incurs expenditure in connection with National
Highways not by directly constructing or maintaining
National Highways but by facilitating the transport of goods
and passengers along the National Highways in various other
ways such as lighting, traffic control, amenities for
passengers, halting places for buses and trucks etc. etc.
And not by eastern windows only,
When daylight comes, comes in the light;
In front the sun climbs slow, how slowly !
But westward, look, the land is bright !
The petition is therefore, dismissed.
S.R. Appeals & Petitions dismissed.
384