D.A.DESAI - (1.) NEXT only to liquor licencees but almost comparable with them are the transport operators who have flooded this Court complaining of some imaginary or untenable grievances, the sole purpose being to snatch some interim relief under one or the other pretext.
(2.) PETITIONERS and appellants in this group of appeals and special leave petitions are either operators of omnibuses, mini buses or stage carriages in the State of Karnataka. They have a grievance against the enhancement of tax on their vehicles levied under the Karnataka Taxation and Certain Other Laws (Amendment) Act, 1979 ('Taxation Amendment Act' for short). They filed writ petitions in the High Court of Karnataka challenging the Taxation Amendment Act on diverse grounds but the central point of attack was that the collection of the tax since prior to its impugned enhancement was sufficient to meet the construction and maintenance of roads and bridges in the State and hence the tax imposed at the enhanced rate under the Taxation Amendment Act, 1979 is violative of freedom of trade, commerce and intercourse guaranteed by Article 301 of the Constitution and the enhanced tax is not shown to be compensatory in character and hence not saved. The second contention was that the impugned Taxation Amendment Act was brought into force with effect from March 31, 1979, yet the petitioners were made liable to pay tax from 1/03/1979 and this limited retrospectivity given to the impugned legislation is impermissible and must be struck down. The Division Bench of the High Court while partly allowing all the petitions held that the enhanced tax under the impugned legislation was compensatory in character and was not violative of Art, 301 of the Constitution. The second, contention of the petitioners found favour with the High Court and it was held that as the impugned Act came into force from 31/03/1979, the petitioners did not incur any liability to pay enhanced tax under Sec. 4 of the Act from 1/03/1979 and if any such demand is made the same is without the authority of law and the authority under the taxing statute was restrained from demanding such enhanced tax under the Taxation Amendment Act for the period from 1/03/1979 to Marc 31/03/1979 and to this limited extent, the rule was made absolute. The High Court declined to grant certificate under Art. 134 of the Constitution and hence these appeals by special leave. Mr. Shanti Bhusan who led on behalf of the appellants canvassed three contentions in support of these appeals. They are: (i) the total tax that would be realised at the enhanced rate levied under Taxation Amendment Act, would be far in excess of the requirement for smooth and unhampered transport and therefore the enhanced tax has ceased to be compensatory in character and is accordingly violative of Article 301 of the Constitution and cannot be sustained; (d) if the tax at the enhanced rate is to be treated as compensatory, the burden of enhanced tax must be equitably distributed on owners of different classes of transport vehicles so that the liability to pay enhanced tax has a nexus to the facility enjoyed by that class of vehicle on which higher tax is levied and should not be disproportionate to the quantum of facility enjoyed by the owners of different classes of transport vehicles; and (iii) in the case of passenger vehicles, the fare structure is subject to stastatutory regulation under Motor Vehicles Act 1939 and therefore, there must be direct nexus between the tax structure and the fare structure, otherwise, the passenger transport business would become uneconomic. As the fare structure has not been proportionately raised keeping in view the rise in tax and other operational costs from 1966 to 1979, the unilateral enhancement of tax without proportionate increase in fare is arbitrary and therefore, violative of Art. 14 and would impose an unreasonable restriction on the fundamental freedom to carry on business guaranteed by Article 19 (1) (g).
(3.) ARTICLE 301 guarantees freedom of trade, commerce and intercourse throughout the territory of India. This is subject to the other provisions of Part XIII of the Constitution. Petitioners contend that levy of tax on transport vehicle use for carriage of passengers at an usually high rate interferes with the freedom of trade, commerce and intercourse throughout the territory of India. Whether levy of a tax computed according to sitting capacity of a transport vehicle used for carriage of passengers by itself without anything more restricts or thwarts freedom of trade, commerce and intercourse throughout the territory of India guaranteed by Art. 301 is no more res integra? It was in fact conceded that revenue collected by such tax if employed for purposes which would not only not restrict or impede but facilitate smooth and unhampered trade, commerce and intercourse throughout the territory of India, such tax would not be violative of Art. 301 of the Constitution. Thus regulatory measures or measurers imposing compensatory taxes for the use of trading facility are outside the purview of ARTICLE 301 of the Constitution. This in fact was not disputed and could not be disputed in view of the decisions of this Court in Atiabari Tea Co. Ltd. v. State of Assam. (1961) 1 SCR 869 : (AIR 1961 SC 232), M/s. Sainik Motors, Jodhpur v. State of Rajasthan, (1962) 1 SCR 517 : (AIR 1961 SC 1480). The Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, (1963) 1 SCR 491 : (AIR 1962,SC 1406) and Malwa Bus Service (Pvt.) Ltd. v. State of Punjab AIR 1993 SC 634. Expanding the concept of what are called compensatory taxes as to be outside the purview of Art. 301, it can be said that the augmentation of revenue by such taxes which would be available for laying of new roads and maintenance of existing roads in proper shape and form, setting up of terminal facility for passengers, bus stands, other facility which make travel more comfortable and enjoyable, encourage and facilitate travel in its various elements, easy and unimpeded transport of goods by road transport world be comprehended within what are styled as compensatory taxes. Simultaneously, it is necessary to administer a caution that in order to justify the tax on goods and passengers vehicles as being compensatory, it is not necessary for the authority leving the tax that the entire revenue collected from the levy of tax is spent or is expendable only on construction and maintenance of roads and providing other facilities for making free Row of traffic smooth and enjoyable. If quid pro quo is to be established from the receipt of the tax and the expenses on maintenance and construction of roads, the tax would take the nature of a fee and this was expressly rejected by this Court in International Tourist Corporation v. State of Haryana, (1981) 2 SCR 364 : (AIR 1981 SC 774). This Court speaking through one of us (Chinnappa Reddy, J.) observed as under : "But to say that the nature of a tax is of a compensatory and regulatory nature is not to say that the measure at the tax should be proportionate to the expenditure incurred on the regulation provided arid the services rendered. It the tax were to be proportionate to the expenditure on regulation and service it would not be a tax but a fee." At another stage, it was observed as under (Para 10 of AIR) : "'What is necessary to up-hold 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 should be proportionate to the expenditure." Petitioners contend that the object behind the Taxation Amendment Act was not to collect more revenue for the purpose of facilitating trade, commerce and intercourse inter-State as well as inter-State but the objects and the reasons while introducing the Taxation Amendment Act would clearly reveal the motivation behind the amendment which was to augment the general revenue which suffered depiction an account of abolition of octroi. While publishing the Karnataka Motor Vehicles Taxation (Amendment) Bill, 1980, simultaneously the Statement of Objects and Reasons was published which may be extracted : "Statement of Objects and Reasons In view of the abolition of octroi in the State, Government increased the Motor Vehicles Tax in respect of goods vehicles by the Karnataka Motor Vehicles Taxation (Second Amendment) Act, 1979 Aggrieved by this enhancement, the lorry owners in the State went on strike an 27/09/1979 to protest against the hike in the Motor Vehicles Tax. The entire issue was reconsidered and it is decided to reduce the tax under the above Act to the previous level with effect from 1/10/1979 up to 31/03/1980." After referring to the Statement of Objects and Reasons hereinabove extracted, it was urged that the motivation behind enhancement of tax only on transport vehicles used for carriage of passengers war. the subjugation of the Government against the combined action of this owners and players of transport vehicles used for carriage of goods and the loss of revenue on account of abolition of octroi. Says Mr. Shanti Bhushan that to replenish the loss in revenuer of the State suffered on account of set back in. the attempt to raise tax on goods vehicles and abolition of octroi, under the Taxation Amendment Act passenger tat was raised to Rs. 130 per quarter per seat in every vehicle and to Rs. 45 per passenger other than seated passenger. It was pointed out that paying the tax at this rate, the owner of the omnibus having a sitting capacity of 50 persons and standing capacity of 10 persons plus driver and conductor has to pay Rupees 8,340/- per quarter against the tax payable at Rs. 3,554.00 per quarter in the year 1966. It was therefore contended that if the object behind levy of enhanced tax was to compensate for the loss suffered on account of abolition of octroi as well as the inability to equitably distribute the tax burden on different kinds of transport vehicles in face of stubborn opposition by owners of goods vehicles the enhanced tax could not qualify for being treated as regulatory or compensatory. ;