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1983 (9) TMI 323 - SUPREME COURT

1983 (9) TMI 323 - SUPREME COURT - 1983 AIR 1283, 1983 (2) SCALE 317, 1984 Supp (1) SCC 326 - Civil Appeal No. 2878 of 1981 - Dated:- 20-9-1983 - A VARADARAJAN AND D DESAI JJ. JUDGMENT 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 .....

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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 wi .....

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igh Court and it was held that as the impugned Act came into force from March 31, 1979, the petitioners did not incur any liability to pay enhanced tax under Section 4 of the Act from March 1, 1979 and if any such demand is made the same is without the authority of Jaw and the authority under the taxing statute was restrained from demanding such enhanced tax under the Taxation Amendment Act for the period from March 1, 1979 to March 31, 1979 and to this limited extent, the rule was made absolute .....

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nd is accordingly violative of Article 301 of the Constitution and cannot be sustained; (ii) 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 c .....

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roportionate increase in fare is arbitrary and therefore, violative of Article 14 and would impose an unreasonable restriction on the fundamental freedom to carry on business guaranteed by Article 19(1)(g) 5. 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 used for carriage of passengers at an usually high rate in .....

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restrict or impede but facilitate smooth and unhampered trade, commerce and intercourse throughout the territory of India, such tax would not be violative of Article 301 of the Constitution. Thus regulatory measures or measures 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. The State of Assam and Ors. .....

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ty 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 would 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 levying the tax that the entire revenue .....

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rough 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 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. At another stage, it was observed as under: What is necessary to uphold a regulatory and compensatory .....

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ect more revenue for the purpose of facilitating trade, commerce and intercourse intra-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 depletion on account of abolition of octroi. While publishing the Karnataka Motor Vehicles Taxation (Amendment) Bill, 1980, simultaneously the Statement of Objects and Reasons was published whic .....

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revious level with effect from 1st October 1979 upto 31st March, 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 was the subjugation of the Government against the combined action of the 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 .....

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as to pay R Section 8,340/- per quarter against the tax payable at ₹ 3,554/-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 compen .....

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ry octroi station, the goods vehicle or the passenger vehicle is stopped and enquiry made or octroi either collected or deposit insisted upon with a right to claim refund, one has to experience through this agonising journey to appreciate what a pernicious influence octroi had on transport of goods and passengers. Karnataka took the lead and abolished octroi. One can take judicial notice of a universal demand for abolition of octroi as an evil. Therefore, if tax was enhanced on passenger vehicle .....

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s suffered by the State in its revenues on account of abolition of octroi but as a matter of fact on this very ground it acquires the character of being compensatory. 8. The second limb of the submission was that as the State failed to maintain the levy of enhanced tax on goods vehicles against the combined resistance by the operators of the goods vehicles, it back tracked in the face of it and passed on the burden on the docile owners of passenger vehicles who are small in number and not well o .....

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hods and even rales for taxation if it does so reasonably. Therefore, if the Legislature after considering various aspects of the matter decided to enhance tax on the passenger vehicles on the ground that it was not possible to raise tax on goods vehicles for a short period on that account alone it cannot be said that the tax if it is otherwise compensatory, would cease to be one. On the contrary, if augmentation of the revenues by raising the tax was necessary for facilitating inter-State trade .....

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roads and other facilities connected with free flow of traffic both goods and passengers. Mr. Shanti Bhushan submitted that the impact of tax is so high that there is a gradual reduction in the number of passenger vehicles applying for registration in the State of Karnataka. A chart was submitted for our perusal showing the gradual fall in registration of new passenger vehicles. Statistics have either the tendency to provide window-dressing or if not meticulously analysed, they have the tendenc .....

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thority for the safety of travelling public may not grant more permits. Unless passenger survey is undertaken which would show that more passengers are available and proportionately the number of vehicles have not increased, this chart submitted by Mr. Shanti Bhushan has little to inform or teach us and throws no light on the vexed question under discussion. No useful inference can be drawn from this incomplete information. 10. It was however, pointed out that from year to year, the figures avai .....

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truction of tourist bungalows which may be accounted under other heads and therefore, such bald figures are far from convincing. On the other hand, Mr. R.P. Bhatt, learned counsel for the State of Karnataka gave us the following figures which when not controverted would be sufficient to repel the contention of the appellants. Expenditure (In Crores) s. Year (Receipt On PWD For Irrigation, Estt. Total No. (In crores) Roads Forest roads, expenses Taluka Board roads-grants 1. 1980-81, 47.37, 37.47, .....

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ity granted by the State of Karnataka for free flow of inter-State and intra-State trade, commerce and intercourse. Therefore, the first contention that since enhancement, the tax has ceased to be compensatory must be negatived. 11. It was next contended that 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 ser .....

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awal in the hike of enhanced tax levied under Karnataka Motor Vehicles Taxation (Second Amendment) Act, 1979 on the goods vehicles. It was also riot made clear whether the higher tax levied by the aforementioned Act was continued after March 31, 1980. The statement in the Statement of Objects and Reasons that the Government decided to reduce the tax under the aforementioned Act to the previous level with effect from 1st October, 1979 upto 31st March, 1980 by itself would show that the enhanced t .....

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roads and realistically they should be subjected to higher tax. Therefore, it was urged that the levy of enhanced tax on passenger vehicles is discriminatory or at any rate the enhanced tax on passenger vehicles is neither regulatory nor compensatory. As stated earlier, in the matter of taxation the rate of tax and the objects to be taxed are to be determined by the Legislature and unless it is found to be so unreasonable, the Court would not interfere with the latitude enjoyed by the Legislatu .....

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ven on account of use of the same road would not form the same class and no statistical information was supplied to the Court as to the degree of were and tear inflicted by the goods vehicles passing over roads than by the use of the road by the passenger vehicles. In the absence of this factual information, it is difficult to entertain the contention of the petitioner and the same must be negatived. 13. The last contention on behalf of the appellants was that the operators of omnibuses are not .....

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s shot up by 367% and the fare structure has hardly kept pace. It was also submitted that any economic activity must ensure a reasonable return on the capital invested and the enhanced tax has resulted in a net loss in the passenger transport business oral any rate it has become uneconomic and therefore, the Taxation Amendment Act must be quashed as levying unreasonable restriction on the fundamental freedom to carry on trade guaranteed by Article 19(1)(g) of the Constitution. Without accepting .....

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