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B.A. Jayaram Versus Union of India

1983 (8) TMI 305 - SUPREME COURT

Writ Petition No. 1854 of 1981 - Dated:- 12-8-1983 - REDDY, O. CHINNAPPA AND DESAI, D.A. JJ. Shanti Bhushan, Y.S. Chitale, K.K Venugopal KN. Bhat, V.K Verma, S. Ravindra Bhat, N. Ganpathy, C.S. Vaidayanathan, N. Nattar, R.B. Datar, A.V. Rangam, V.G. Gupta, T.V.S.N. Chari A.T.M. Sampath, Vineet Knmar, D.P. Singh, Miss H. Wahi, B.N. Tawakley, S. Srivinasan, P.R. Ramashesh, P.N. Ramlingam, S.R. Srivastava and Rathin Das for the Petitioners. R.P. Bhatt, V.S. Desai, Harbans Lal, Swaraj Kaushal, M.N., .....

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gional transport authority of any one region shall not be valid in any other region, unless the permit has been counter signed by the regional transport authority of that other region, and a permit granted in any one state shall not be valid in any other state unless counter-signed by the State Transport Authority of that other state or by the regional transport authority concerned. The procedure prescribed for obtaining the counter-signature of the transport authorities of other regions and sta .....

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, in respect of that state specify in that behalf. Preference is to be given, to applications for permits from the India Tourism Development Corporation, a State Tourism Development Corporation, a State Tourist Department and such operators and tourist cars or such travel agents as may be approved in that behalf by the Central Government. This was but the first basic step towards encouraging all India or inter-state tourist traffic. There were other hurdles to be cleared before any scheme for gr .....

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e levied". A coherent reading of Entry 57 of list II and Entry 35 of list III makes it abundantly clear that the power to levy taxes on vehicles suitable for use on roads vests solely in the State Legislature though it may be open to the Parliament to lay down the principles on which taxes may be levied on mechanically propelled vehicles. In other words the Parliament may lay down the guide lines for the levy of taxes on mechanically propelled vehicles but the right to levy such taxes vests .....

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o be paid in all the half a dozen or so States. The burden will surely be intolerable and the whole object of sec. 63 (7), namely promotion of all India or-inter-state tourist traffic will be frustrated. The Central Government was alive to the problem and referred the matter to the Transport Development Council for its advice. The Transport Development Council is a non-statutory body constituted by the Central Government and consists of the representatives of the Governments of all the States. T .....

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has already been paid in the home state. The Government of India accepted the E- suggestion and requested the State Governments and Union Administrations to issue necessary notifications. The suggestion ran into trouble right from the start. While the Governments of Andhra Pradesh, Bihar, Goa, Daman and Diu, Maharashtra, Nagaland and Uttar Pradesh readily agreed to issue such notifications on the basis of reciprocity, there was no such ready response from some other states. The Government of Ka .....

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f the notifications specified that each State Transport authority could issue 50 permits for tourist omnibuses. Pursuant to the request of the Central Government to which all the State Governments finally agreed, notifications were issued exempting tourist vehicles holding permits under sec. 63 (7) from payment of tax, if tax had been paid in the home state. We are particularly concerned in these cases with the notifications issued from time to time by the Government of Karnataka, since that is .....

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s had been paid to the State in which the vehicles were registered and provided further that the said State granted similar exemption to tourist motor cabs and tourist omnibuses whose permits were endorsed in the State of Karnataka under Rule 123-A of the Karnataka Motor Vehicles Rules. On July IS, 1976, the Government of Karnataka issued a notification reducing the tax payable under the Motor Vehicles Taxation Act, 1957, in respect of tourist vehicles for which permits had been issued under sec .....

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the vehicle to the State in which it was registered had already been paid and provided further that similar exemption from payment of tax was granted in respect of similar vehicles of the State of Karnataka. This scheme for the grant of 'All India Permits', designed as it was to promote all India and inter-state tourist traffic. soon fell into abuse at the hands of scheming transport operators. Within the scheme itself lay the seeds for abuse. The scheme enabled the State Transport Auth .....

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a and possibly the scheme was expected to give a boost to the transport business in the smaller and less advanced States. And, of course, it was necessary to obtain the agreement and cooperation of all the States. But, the result was that transport operators from, big and comparatively prosperous and advanced States, well versed in the intricacies of the transport business very soon flocked to small and comparatively poor and less advanced States like Manipur and Nagaland to apply for and obtain .....

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e the permits were obtained and the vehicles were registered, these small States saw the last of the operators. Having obtained the permits, the operators with their vehicles flocked back to the parent State of the operators (not of the vehicles) or to a State like Karnataka where all contract carriages having been nationalized no private contract carriage was available and there was therefore a great opportunity to ply the vehicles as contract carriages within the State. States like Karnataka w .....

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whatever method, was the only object. In the counter-affidavit filed on behalf of the State of Karnataka in some of the Writ Petitions, it is stated. "Though the vehicles were registered outside the State of Karnataka, they have been permanently stationed in the State of Karnataka and particularly at Bangalore, and the vehicles were all being plied as Stage Carriages. Though All India Tourist Permits were obtained by the residents of other states, the permits were used by taking the vehicle .....

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a position to produce the trip sheet, name list with whom they entered into contract. It was also found that the passengers found in the vehicles had boarded the buses from one point without any contract or otherwise and without they being tourists. The passengers found in the tourist buses are regular passengers going from one place to another for purposes other than tourism. These vehicles were found catering to the needs of general travellers who can make use of the Stage Carriages operated b .....

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down them at another point and bringing different passengers in the return journey. From the statements enclosed, it is clear that the operators of the tourist buses covered by All India Tourist permits have misused the Tourist Buses by running them as regular stage carriages, competing with the KSRTC buses and other private stage carriages within the State.. As a result of indiscriminate misue of the Vehicles as Stage Carriages even though the permits were obtained under Section 63 (7) of the C .....

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al Act in the States other than the State of Karnataka are made use of for the purported use of running the tourist buses but actually the permits were misused to run the tourist vehicle either as stage carriages or as contract carriages". A survey made by the Transport Commissioner of Maharashtra revealed a similar state of affairs. The Transport Commissioner submitted a report to the Government of Maharashtra, a copy of which has been made available to us. It is stated in the report, &quo .....

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to point passenger services on routes where the volume of traffic is heavy viz. routes like Bombay Kolhapur, Bombay Mangalore (Mangalore), Bombay Panaji, Bombay-Belgaum, Bombay-Ahmedabad and Bombay-Indore. "On 9/10th April 1983, the Transport Commissioner had personally visited the Charoti Check Naka which is our border check post bordering Gujarat on the Bombay Ahmedabad road. From the records of the check post he found that as many as 115 All India Tourist Buses are regularly playing on t .....

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The petitioners, who are transport operators holding all- India permits, deny that any of them was guilty of any malpractice or misuse of the permits held by them. But, notwithstanding the petitioners' denial we do not have the slightest doubt that the allegations of misuse and malpractice made in the counter-affidavit, filed on behalf of the Karnataka Government, are generally and substantially correct. Complaints about the abuse of the scheme appear to have been made to the Central Governm .....

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fication dated 31st March, 81. It is this notification and the consequences of the notification that are in question in these several Writ Petitions. We are informed that the State of Andhra Pradesh has also issued a notification similar to that of the State of Karnataka withdrawing the exemption which it had granted earlier to vehicles operating on permits issued under sec. 63 (7) and registered in other States. Other states have not withdrawn the exemption previously granted by them to vehicle .....

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Legislature to levy the particular tax, the power of the State Government to grant exemption from payment of tax under the authority delegated to it by the Legislature and the implied power of the State Government to withdraw an exemption granted by it are conceded. Yet a number of ingenious and platitudinous submissions have been though we must confess that many of them have only to be stated to be rejected. Some of them served no better purpose than occupy the time of the Court, time which ha .....

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he cases before us, we must say that everyone was brief and none over stated his case. It was submitted that see. 63 (7) of the Motor Vehicles Act was designed to promote All India and inter-state tourist traffic and thus to advance trade, Commerce and inter-course throughout the territory of India. It was implicit in sec. 63 (7) that the States would exercise their power of taxation in such a way as not to impose an additional burden on tourist Vehicles registered in other states and plying on .....

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as, therefore, unconstitutional and bad in law. The transport operators of Karnataka who were not directly hit by the withdrawal of the exemption by the Government of Karnataka advanced a subtler argument and suggested that they were in fact the worst hit. The argument was that though despite the withdrawal of the exemption, they were paying no more tax to the State of Karnataka than they were paying hitherto, the withdrawal of the exemption had created a situation which denied them the benefit .....

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e wholly unable to see any force in these submissions The learned counsel for the parties on either side invited our attention to the Automobile Transport (Rajasthan) Ltd. v. The State of Rajasthan & Ors Bolani Ores Ltd. v. State of Orissa, G.K. Krishnan v. State of Tamil Nadu, International Tourist Corporation v. State of Haryana and Malwa Bus Service Pvt. Ltd. v. State of Punjab(5) to explain the extent and the limits of the freedom of trade, commerce and intercourse throughout the territo .....

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o uphold a tax which purports to be or is claimed to be a compensatory tax is "the existence of a specific, identifiable object behind the levy and a nexus between subject and the object of a levy".(') "If the object behind the levy is identifiable and if there is sufficient nexus between the subject and the object of the levy, it is not necessary that the money realised by the levy should be put into a separate fund or that the levy should be proportionate to the expenditure. .....

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the tax according to the benefits received and the expenditure incurred". Nor is the court to interpose itself by assuming the role of a cost accountant and attempt to balance meticulously the cost of the services, benefits and facilities against the realisation from the levy. And, if the levy as a whole is justified by the need generally, it does not have to be separately justified with reference to every group of persons claiming to require and receive less service than others. Once the n .....

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the territory of the State. Taxes resulting from such legislative activity are by their very nativity and nature, cast and character, regulatory and compensatory and, are therefore, not within the vista of Art. 301, unless, as we said, the tax is a mere pretext designed to injure the freedom of interstate trade, commerce and intercourse. The nexus between the levy and the service is so patent in the case of such taxes that we need say no more about it. The Karnataka Motor Vehicles Taxation Act .....

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is subject to Entry 35 of the Concurrent List and, as explained by us at the outset, it is therefore open to the Parliament to lay down the 17 principles on which taxes may be levied on mechanically propelled vehicles. But the Parliament while enacting S. 63 (7) of the Motor Vehicles Act refrained from indicating any such principles, either expressly or by necessary implication. The State's power to tax and to exempt was left uninhibited. It may be that a a State legislation, plenary or subo .....

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granted. There is no question of impairing the freedom under Art. 301 by refusing to exempt or by withdrawing an exemption. Not to pat on the back is not to stab in the back. True, straw by straw, the burden of taxation on tourist vehicles increases as each State adds its bit of straw, but, then, each State is concerned with its coffers and has the right to tax vehicles using its roads; and, the contribution which a tourist carriage is required to make to its treasury is no more than what other .....

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gh glasses of a different tint. It does not even have the merit that the withdrawal of the Karnataka exemption affects them directly. The submission is rejected. One of the submissions made to us was that if there was a misuse of the all-India permits, the remedy was to punish the wrong doers by taking appropriate action against the wrong-doers by cancelling the permit, if necessary, but not to withdraw the benefit of the exemption altogether, even in the case of honest operators. That is a matt .....

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