PETITIONER:
SHAIK MADAR SAHEB AND ORS. ETC.
Vs.
RESPONDENT:
STATE OF ANDHRA PRADESH & ORS.
DATE OF JUDGMENT14/12/1971
BENCH:
MITTER, G.K.
BENCH:
MITTER, G.K.
SIKRI, S.M. (CJ)
SHELAT, J.M.
DUA, I.D.
KHANNA, HANS RAJ
CITATION:
1972 AIR 1804 1972 SCR (2) 853
ACT:
Andhra Pradesh Motor Vehicles Taxation Act (5 of 1963), ss.
3 and 17-Interstate routes-Enhancement of tax-Validity.
Constitution of India, 1950, Arts. 301 and 304-Tax if should
be reasonable and in public interest.
HEADNOTE:
Under s. 3 of the Andhra Pradesh Motor Vehicles Taxation
Act, 1963, the State Government is empowered by notification
to direct that the tax should be levied on every motor
vehicle used or kept for use in a public place in the State,
subject to the maximum specified in the First Schedule.
Section 17 of the Act vests in the State Government the
power to amend the Schedules in the manner prescribed.
In 1963, the State Government issued a notification
increasing the taxes and, in 1968, the State Government
amended the First Schedule and increased the maximum tax
payable and issued a notification directing the substitution
of the higher rates. Both the increases were challenged by
the appellants but the High Court dismissed the petitions.
In appeal to this Court it was contended that : (1) the
restrictions imposed by the tax were unreasonable having
regard to Art. 19(1)(g) read with cl. (6) and Art. 301; (2)
since part of the route lay outside the respondent-State the
levy in respect of the entire mileage could not be of
compensate nature; and (3) there was no justification for
levying tax on spare buses.
Dismissing the appeals,
HELD : (1) (a) The facts and figures disclosed in the
counter affidavits of the. State do not justify a
conclusion that the levy was a general one for augmenting
the revenues of the State. Even after the levy the total
receipts from the tax fell short of expenditure on roads and
allied purposes. The enhancement was only intended to meet
the expanding requirements of maintenance of old roads and
development of the road system as a whole and is therefore
only a compensatory measure. [862 G-H]
(b)Further, the impost would not result in bus operators
running their business at a loss, especially when they had
been permitted to increase the fares. [862 H]
(c) The figures relied upon by the appellants in the report
of the Road Transport Taxation Inquiry Committee do not give
a completely accurate picture relevant to the present case.
[860 E-G]
Nazeeria Motor Services v. Andhra Pradesh, [1970] 2 S.C.R.
52. followed.
(2)There were reciprocal arrangements between the States
and consequently the provisions made by the other States in
regard to the
7-L736SupCI/72
854
free movement on their roads constituted a compensatory
measure for the tax even though it was wholly levied by the
respondent State. [862 F-G]
(3)It was imperative for the owner of a fleet of buses to
maintain spare vehicles to be available for substitution in
case of breakdown. Accordingly, the levy of tax on such
buses which can at any time be put on the road is justified
and s. 3 empowers the State to levy such a tax on a motor
vehicle kept for use. [863 A-C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 932 to 934
of 1968.
Appeals from the judgment and order dated September 6, 1963
of the Andhra Pradesh High Court in Writ Petitions Nos. 361,
430 and 706 of 1963 and Civil Appeals Nos. 1439 to 1441 of
1968.
Appeals from the judgment and order dated April 26, 1968 of
the Andhra Pradesh High Court in Writ Petitions Nos. 1792,
1818 and 1819 of 1968 and Writ Petitions Nos. 164 and 166 of
1968.
Under Article 32 of the Constitution of India for the
enforcement of the Fundamental Rights.
S.V. Gupte, K. Srinivasamurthy, Naunit Lal and Swaranjit
Sodhi, for the appellants (in all the appeals) and the
Petitioners (in both the Petitions).
P. Ram Reddy and G. Narayana Rao, for respondents Nos. 1
and 2 (in C.A. No. 932 of 1968).
P. Ram Reddy and A. V. V. Nair, for the respondents (in
C.A. Nos. 933 and 934 of 1968).
P.Ram Reddy and K. Javaram, for the respondents (in C.A.
Nos. 1439 to 1441 of 1968 and W.Ps. Nos. 164 and 166 of
1968).
The Judgment of the Court was delivered by
Mitter, J. All these appeals and Writ Petitions are directed
against the Andhra Pradesh Motor Vehicles Taxation Act (V of
1963) and notifications issued thereunder. In the first
group of appeals, the notification challenged is G.O.Ms. No.
601 Home (Transport 11) Department dated 27th March, 1963.
In the second group of appeals Nos. 1439-1441/68 and in the
two writ petitions the impugned notification is numbered as
G.O.Ms. No. 435 Home (Transport 11) Department dated March
28, 1968.
855
The appellants and the writ petitioners carry on transport
business in the State of Andhra Pradesh tinder stage
carriage permits granted by the Transport authorities under
the Motor ‘Vehicles Act IV of 1939. Their complaint against
the ever increasing burden of taxation they are called upon
to bear which is said to have passed the breaking point. A
short history of the taxes levied in the area which came to
Andhra Pradesh from the State of Madras and the increase
thereof from stage to stage by the new State based on the
seating capacity of buses with stage carriage permits
referred to in the pleadings is recited in the judgment of
this Court in Nazeeria Motor Service v. A. P. State(1). The
latest legislation on the subject which was before this
Court in that case was Validating Act of 1961 raising the
rate to Rs. 37-50 per seat per quarter per bus effective
from April 1, 1962. The Court upheld the impost.
Thereafter, the Andhra Pradesh Motor Vehicles Taxation Act
(Act V of 1963) came into force on the 20th March of that
year after receiving the assent of the President on February
2, 1963. This is the Act now in force. It is an Act to
consolidate and amend the law relating to levy a tax on
motor vehicles in the State of Andhra Pradesh. Under s.
3(1) of the Act the State Government is empowered by
notification from time to time, to direct that a tax shall
be levied on every motor vehicle used or kept for use in a
public place in the State. Under sub-s. (2) of s. 3 the
notification is to specify the class of motor vehicles on
which, the rates for the periods of which and the date from
which, the tax is to be levied. Under the proviso to the
sub-section the rates of tax are not to exceed the maximum
specified in column (2) of the First Schedule. S. 17 of the
Act vests in the State Government power to amend the
schedules in the manner prescribed.
On March 27, 1963 a notification No. G.O.M. 601 was issued
by the State Government in its Transport Department imposing
a tax of Rs. 60 per seat per quarter on vehicles running
less than 100 miles per day and Rs. 67-50 on vehicles
covering a higher mileage. A crop t of writ petitions was
filed before the High Court in the year 1963 praying for the
issue, of a writ restraining the State, from enforcing the
provisions of the Act of 1963 and of the notification dated
March 27, 1963. By a common judgment and order dated
September 6, 1963 the High Court dismissed all the writ
petitions. The first group of appeals arises out of this
judgment.
It was contended on behalf of the petitioners before the
High Court in that case, the appellants in the first group
of appeals before us, that the statute was inconsistent with
the doctrine of freedom of trade and commerce embodied in
Part XIII of the Constitution and secondly ;that it
infringed the equality clause
(1) [1970] 2 S.C.R. 52.
856
enshrined in Art. 14. An attempt was made, on behalf of the
petitioners by reference to certain figures regarding the
income of the State from this source of tax and the
expenditure pertaining to this topic that the taxes were
levied more for purposes of general revenue of the State
than as a benefit for the facilities afforded to the
operators of transport vehicles, since the taxes were far in
excess of the requirements for the construction of new roads
and bridges and the maintenance of existing ones. The High
Court found itself unable to accept the above submission and
on a scrutiny of the budget estimates for the year 1963-64,
the receipts under the Taxation Act, the amount collected by
way of taxes on the sale of motor spirits allocable to this
head, came to the conclusion that the whole revenue would
not exceed Rs. 6 crores while the expenditure incurred would
exceed Rs. 8,54,00,000. The finding of the High Court was
that
“far from there being any surplus over the
expenditure, the taxes collected under this
head were insufficient to meet the demands in
this respect.”
According to the High Court the object of the Act being only
to raise the money required to afford facilities to the
operators of the transport vehicles, the tax levied answered
the description of compensatory tax and did not interfere
with the freedom of trade and commerce. As such the taxes
were held not to offend Art. 301 of the Constitution. The
High Court further took the view that it had not been shown
that “the power ceded to the State Government by this
legislative measure was in any way detrimental to the public
good or that it was opposed to the well recognised
principles underlying taxation.” The High Court turned down
the contention that the taxes in question were arbitrary or
oppressive or that they constituted an unbearable burden so
as to destroy the very business of the writ petitioners. On
the facts before the court as disclosed in the affidavits it
did not feel disposed to hold that the operators were doing
business at a loss. It also took the view that the increase
in the fares sanctioned simultaneously with the raising of
the taxes had proved beneficial to the operators. Reference
was made to the fact that even subsequent to the enhancement
of the tax there had been considerable competition for
securing permits whenever any proposal was mooted by the
transport authorities which according to the court went to
show that the operators themselves considered that it would
be a profitable business. In the opinion of the High Court,
the increase in the taxes was more than offset by the sanc-
tioned increase in the fares and the grievance of the
operators that the taxes were an unreasonable restriction
was negatived. Finally the High Court held that the-
impugned Act had survived the test laid down by Art. 304(b)
of the Constitution and had not transgressed the limits of
reasonableness.
857
It is not necessary for the disposal of these appeals and
writ petitions to go into the question of violation of Art.
14 as that point was not canvassed in view of the decision
of this Court in Nazeeria Motor Service case(1).
On March 22, 1968 the Government of Andhra Pradesh purported
to amend the First Schedule to the Act by ,notification No.
434 by increasing the maximum quarterly tax in respect of
subitems (iii) and (iv) of item 4 to Rs. 121 in respect of
buses Plying exclusively within municipal limits and to Rs.
135 in the case of other buses. On the same day the State
Government issued notification No. 435 in exercise of the
powers conferred by sub-s. (1) of s. 9 of the Act directing
the substitution of higher taxes in respect of buses covered
by the aforementioned subitems of item 4 of the First
Schedule. The new notification No. 435 provided for
different rates according to mileage; at the lower end of
the scale i.e. for a distance of 50 miles per day the rate
was Rs. 40 per quarter per seat while in the case where the
distance exceeded 200 miles the tax was raised to Rs. II 0
per seat per quarter. In effect, the petitioners contended,
the incidence of tax was increased by about 50 per cent. It
was also claimed that the procedure adopted for the levy of
the tax had been changed and instead of a flat rate of levy
on the basis of the number of seats it was now made to
relate to the actual mileage per day covered by the
vehicles. A challenge was made to the additional impost on
spare buses which bus operators running more than a certain
number of buses per day were obliged to reserve for use in
the event of any break-down. It was asserted that even for
these buses, no matter whether they were actually used or
not, tax was levied at the rate of Rs. 30 per seat per
quarter.
The points of law raised by this set of writ petitioners
before the High Court were
(a)that prior sanction of the President as required under
Art. 304(b) was not obtained in respect of the levy inasmuch
as such sanction was given in February and the levy was made
towards the end of March. As such it was said G.O.M. 435
was unconstitutional and void.
(b)the proposed increase in the rate of tax was not in
public interest but only a revenue yielding measure. Since
it did not company with the provisions of Part III and Part
XIII of the Constitution it was illegal and
unconstitutional. and
(c) the levy of tax on spare buses was illegal.
By a common judgment and order dated April 26, 1968 the High
Court rejected the contentions raised and dismissed this
group of writ petitions. This had led to the filing of the
second group of appeals before us.
(1) [1970] 2 S.C.R. 52
858
The two writ petitions filed in this Court under Art. 32
raise identical questions.
In Nazeeria Motor Service case(1) the central question was
the constitutionality of the Andhra Pradesh Motor Vehicles
(Taxation of’ Passengers; and Goods) Amendment and
Validation Act XXXIV of 1961. The points urged in that case
before this Court were :-
1.The Act imposed a tax for augmenting revenues of the
State. It was neither regulatory nor compensatory in nature
and fell directly within the ban of Art. 301 of the
Constitution.
2.Even though there had been compliance with the proviso
to Art. 304(b) in the matter of obtaining the requisite
sanction, it was open to the Court to go into the question
of reasonableness both with regard to the said provision as
also Art. 19(1)(g) read with cl. (6) of that article. The
Court was entitled to determine whether the imposition was
in public interest.
3.The Act violated Art. 14 of the Constitution inasmuch
as it was not made applicable to all the areas under the
State and vehicles on inter-State routes on permits granted
by other States had not been subjected to tax in the same
way.
In deciding that appeal this Court referred to the views
expressed in Automobile Transport (Rajasthan) Ltd. v. State
of Rajasthan & Ors. (2), Khyerbari Tea Co. Ltd. & Anr. v.
State of Assam(2) and Atiabari Tea Co. Ltd. v. State of
Assam (4 ) and held that notwithstanding compliance with the
provisions of the proviso to Art. 304(b) by obtaining the
previous sanction of the President to the Bill an Act of
this nature could be held to be valid only if it was shown
that the restrictions imposed were reasonable and in public
interest.
It was not contended on behalf of the State in that case
that the impugned Validating Act imposed a tax which was by
way of regulatory or compensatory measure. The Court
therefore addressed itself to the question whether the
restrictions imposed were reasonable and in public interest
within the meaning of Art. 304(b). Taking into
consideration the finding of the High Court that the
computation of income by the Income-tax Department of some
of the transporters, the income in regard to each bus was of
the order of Rs. 7,000 per annum as well as the fact that
although permitted to charge higher rates the bus operators
had not either a& a matter of policy or for purpose of
business competition done so, the Court took the view that
the restriction imposed was not unreasonable. Nothing was
shown either before the High Court
(1) [1970] 2 S.C.R. 52
(3) [1964] 5 S.C.R. 975.
(2) [1963] 1 S.C.R. 491.
(4) [1961] 1 S.C.R. 809.
859
or before this Court to establish that the impugned
Validating Act with regard to imposition of tax was not in
public interest. The utmost according to this Court “that
could be said was that it would result in the diminution of
profits.”
The Court also turned down the contention based on the vio-
lation of Art. 14.
In the first set of appeals now before us learned counsel
for the appellants submitted that in view of the, earlier
decision of this Court the only question left for
consideration was whether the restriction imposed by the tax
was reasonable and permissible having regard to Art.
19(1)(g) read with cl. (6) and Art. 301. According to
counsel the rate of tax fixed at Rs. 67.50 per seat per
quarter was an unreasonable burden and not a restriction
which could be said to be reasonable either in terms of Art.
19 or Part XIII of the Constitution. It was urged that s. 3
of the Act empowering the levy of such, an unreasonable
impost would be ultra vires the aforementioned provisions of
the Constitution. Attempt was made to show that the impost
was purely for the purpose of making revenue and was not a
compensatory measure. Reliance was placed on the fact that
before the raising of the impost to Rs. 67.50 per _quarter
the rate of tax was Rs. 50 per seat per quarter. Our
attention was drawn to annexure ‘A’ attached to the counter
affidavit of Writ Petition No. 361 of 1963 out of which
appeal No. 932 has arisen, giving a chart of quarterly taxes
payable per seat per quarter on the basis of mileage done
prior to 1-4-1963 and subsequent to the said date. But this
chart hardly helps the appellants cause. The chart shows
the motor vehicle tax and the surcharge per seat per year
per mile on the total daily mileages from 50 miles to 130
miles and the tax under Andhra Pradesh Motor Vehicle
Taxation Act, 1963. It is clear that the rise in the rate
of impost excepting in the case of buses with a permitted
daily mileage of 50 was not considerable and in the higher
mileage groups the increase was slight. According to the
counter affidavit of the State, there were few, if any,
buses covering less than 50 miles per day. In that view of
the matter there is no case of distinction so far as the
first group of appeals is concerned from the decision of
this Court in Nazeeria Motor Company’s case. Besides
nothing was shown to induce us to disregard the figures in
the budget estimates referred to by the High Court in its
judgment and order dated September 6, 1963, namely, that
whereas the whole revenue from this source was not likely to
exceed Rs. 6 crores, the expenditure proposed to be incurred
on road making, road repairing etc. was expected to overtop
Rs. 8,54,00,000.
Mr:Gupte however tried to draw a picture different from
the above in the second set of appeals. I referred us to a
report of an Enquiry Committee styled the Road Transport
Taxation
860
Enquiry Committee constituted by the Government of India
published in November 1967 purporting to show a huge surplus
of revenue over expenditure on roads etc. in ‘the State of
Andhra Pradesh during the years 1964-67. The relevant
portion of the report is given below :
“Statement showing the expenditure on Roads by
Andhra Pradesh State during the years 1964-
67.”
“State Revenue from Road Transport and
Expenditure on Roads by Andhra Pradesh State
during the years 1964-67.
Expenditure *Figures in lakhs
of Rupees
Year Revenue Original Mainte- Total Surplus
works nance
1964-65 744.35 200.51 439.50 694.01 50.34 page 206
1965-66 1059.60 225.98 490 .25 716.23 343.37 page208
1966-67 1170.00 186.98 398 .14 585.12 548.88page 208
NOTE : Figures of expenditure relate to those
which are spent directly by the State Government and do not
include grants given to local bodies for road construction
and maintenance.
Estimated figures do not include amounts given to local
bodies.”
Apparently the figures in the end column purport to show
considerable surplus in the revenue from road transport over
expenditure on roads by the State of Andhra Pradesh during
the years mentioned. Our attention was however drawn to the
additional counter affidavit of the State affirmed before
the High Court on April 24, 1968 wherein it was said that
the report relied on was misleading and the chart which was
taken from the annexures to the report of the Road Transport
Taxation Enquiry Committee showing surplus was contrary to
the prevalent state of affairs. It was categorically stated
that.
“the figures given in the annexures to the
Report are incorrect and the Government of
Andhra Pradesh was not responsible for the
misstatements relating to the State of Andhra
Pradesh found in the said annexures to the
said Report of the said Taxation Enquiry
Committee.”
It was also asserted in the said affidavit that the
questionnaire sent to the Government of Andhra Pradesh which
was dated 3-12-1965 did not ask and could not have asked for
‘information regarding the year 1966-67. It was also said
that in the reply dated 12-1-1966 by the, State Government
the estimated figure for the construction of roads was Rs.
2,49,45,200/- and the cost of maintenance was Rs. 6 crores
and the total expenditure was thus of the order of Rs’
8,50,00,000/-. It wag. reiterated that the Taxation Enquiry
Committee did not ask for the figures for 1966-67.
861
The High Court went into this question in some detail and
found that as per the budget estimates of 1967-68 the yield
under the said head ‘taxes on motor vehicles under the Motor
Vehicles Act’, receipts under the Provincial Motor Vehicles
Taxation Act and other receipts was estimated to add up to
Rs. 9,55,53,396/while the details of the expenditure under
the several heads was of the order of Rs. 9,81,65,411/-.
With regard to the budgetary figures for 1968-69 the
aggregate of the items including works on repairs and
maintenance expenditure on States Highways, road development
fund works, capital outlay on roads works came to Rs.
8,75,87,900/- and taking into account the figures on the
receipt side in the budget estimates, the court was of the
view that the total receipts would fall short of the
anticipated expenditure by about Rs. 50 lakhs. The High
Court also scrutinised the statistical data available in the
report of the Road Transport Enquiry Committee and the
explanation put forward by the State and observed :
“the figures given in the report of the Road
Transport Taxation Enquiry Committee do not
give a completely accurate picture which is
relevant to the present discussion.”
The High Court concluded that the petitioners had not been
able to give any statistical data or adduce any sound
reasons to persuade it to reject the data furnished by the
budgetary estimates and the analysis thereof given on behalf
of the State and accordingly held that the proposed
enhancement of tax was not designed to augment the general
revenues of the State but was intended to meet the expending
requirements of maintenance of old roads and development of
the road system as a whole. On these facts the High Court
concluded that there was no warrant for the charge that the
increased levy ceased to be a compensatory measure.
In the second group of petitions, the High Court also
negatived the contention raised on behalf of the petitioners
that the increase in taxation would virtually throw them out
of the transport business. It was argued before the High
Court that the increase in the tax being of the order of 50%
over the pre-existing levy there was bound to be an enormous
addition to the total revenues of the State and this
addition could not be said to be for- the purpose of
providing additional amenities to motor operators in
particular but was one for adding to the general revenues of
the State.
As against this it was submitted on behalf of the State
before the High Court that to meet the increase in the
operational cost of the operators Government had permitted
an increase in fares to be charged by the operators by
another order bearing the same date as that of the impugned
order.’ Reliance was also placed on the
862
fact that on previous occasions the operators bad no been
slow in utilising similar permission to raise the fare
structure. It was further submitted on behalf of the.
State before, the High Court that “the Motor Vehicles
Taxation had undergone changes to make it confirm to and
subserve the development of improved means of communication,
by the development of roads and control of transport etc.”
The Court also noted the submission on behalf of the State
that the general condition of roads in the State was poor
and it the St-ate were to provide facilities for trade and
commerce equal to or comparable with the facilities for easy
communication available in other States, a large outlay for
construction of new roads as also the improvement of the
existing road system was inevitable. The High Court thus
found justification for the additional levy in the
conditions obtaining in the State.
It was submitted before us, as was done before the High
Court, that taxation by reference to mileage specially in
regard to bus operators who had to ply their vehicles in
other States where the rate of taxation was much lower was
an anachronism and an unreasonable restriction. Our
attention was drawn to Annexure 2 to the Writ Petition No.
1792 of 1968 where the total mileage covered by various
bills operators including the break-up thereof showing the
mileage in Andhra area, in Madras and Mysore were given and
it was said :
“While the buses used by the petitioners are
taxed on the basis of the total mileage
covered by them, the actual user in the State
of Andhra Pradesh, is much less and in some
cases it constitutes so low a fraction as one
third of the total mileage;”
It was therefore contended that the levy. in respect of the
entire mileage was incompatible with the compensatory nature
of the tax. The High Court accepted the explanation on
behalf-of the State that “there were reciprocal arrangements
between the States and consequently the provisions made by
the other States in regard to the free movement on their
roads, constituted a compensator measure for the tax even
though it is wholly levied by the State of Andhra Pradesh”.
We see no reason to take a view different from the above.
The facts and figures disclosed do not justify us in coming
to the conclusion that the levy was a general one for
augmenting the revenues of the State. On the other hand the
figures disclosed show that the total receipts from the tax
even now fall short of the expenditure on roads and allied
purposes. We axe also not satisfied on the material before
us that the impost has resulted in bus operators running
their business at a loss.
863
The only question. left. is whether there was justification
for levy (I an impost at the rate of Rs. 30/- per quarter
per seat on spare buses. While it is true that the spare
buses are not allowed to be run regularly we see no reason-
to hold that because of this the levy is unjustified, or
ceases to be a compensatory tax. As was pointed out by the
High Court, under S. 3 of the Act the State Government was
empowered by notification to direct that a tax shall be
levied on every motor vehicle used or kept for use in a
public place in the State and a vehicle kept for use as a
standby was therefore subject to levy under the taxing
provisions. It was absolutely imperative for the owner of a
fleet of buses to maintain some spare vehicles to be
available for substitution in the case of a break-down.
Every owner having five buses is required to maintain one
spare bus and operators having more than ten buses are to
keep two such buses available. Although they cannot be
allowed to run regularly it is essential for the proper
regulation of the transport business that some spare buses
should be available to avoid inconvenience or hardship to
passengers. Accordingly the levy of a tax on such buses
which can at any time be put on the road is justified in
like manner as in the case of regular buses as a
compensatory levy.
In the result, the appeals and the writ petitions fail and
are dismissed with costs. One set of hearing fee.
V. P. S. Appeals and petitions dismissed.
864