PETITIONER: A. S. KARTHIKEYAN ETC. Vs. RESPONDENT: STATE OF KERALA & ANR. DATE OF JUDGMENT20/11/1973 BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) MATHEW, KUTTYIL KURIEN CHANDRACHUD, Y.V. ALAGIRISWAMI, A. BHAGWATI, P.N. CITATION: 1974 AIR 436 1974 SCR (2) 321 1974 SCC (1) 258 ACT: Kerala Motor Vehicles (Taxation of Passengers and Goods Amendment Act (18 of 1971) and Motor Vehicles (Kerala Third Amendment) Act 434 of 1971)-Validity of. HEADNOTE: Section 43 of the Motor Vehicles Act, 1939, lays down that the State Government may, from time to time issue directions to the State Transport Authority regarding fixing of fares and freights for stage carriages and public carriages, and s. 44(3) requires the State Transport Authority to give effect to such directions. In exercise of these powers the fare structure had been fixed for stage carriages in the respondent-State from time to time. In 1963, the. respondent decided, to increase the motor vehicles tax, to introduce tax on passengers and goods, and to modify the fare structure suitably for stage carriages. Accordingly under the Kerala Motor Vehicles Taxation Act, 1963, the new rate of tax was fixed. Section 3 of the Kerala Motor Vehicles. (Taxation of Passengers and Goods) Act, 1963, provided that there shall be levied and paid to the Govern- ment a tax on all passengers, luggage etc and the composition fee Was fixed per seat per quarter. Also, after hearing the representations and objections of the operators and the public, there was a revision, as from July 1, 1963 of the fare structure of stage carriages in the State. Till July 1966, the operators collected tax on passengers and goods and paid the taxes to the Government, But in 1966, the operators agitated for enhancement of fares and look the matter to Court. In Thomman & ors. v. The Regional Transport Officer, Ernakulam & Anr. I.L.R. [1968] 2 Kerala 153 the, High Court held that the tax under the, 1963-Act (Taxation of Passengers and Goods) was v., tax on passengers and. goods., and: not on the operators as, contended by operators. but held that the Act contained no satisfactory provision for its collection, in that it was not clear that the tax was payable,by the passengers to the operators. Thereafter, the Kerala Motor Vehicles (Taxation of Passengers and Goods. Amendment) Act 18 of 1971 was passed amending the 1963-Act. Two new sub-sections to s. 3 provided that the tax levied shall be paid by the, passengers and consignors of the goods to the operators along with fares and freights and that the operators shall be liable to pay the tax so levied to the Government. There was also a validating section in Act 18 of 1971, which stated that taxes levied or collected shall be deemed to be and to have always been levied or collected in accordance with law as if s. 3 of the 1963-Act, as amended by Act 18 of 1971 was in force at all material times. Another Act, Motor Vehicles (Kerala Third Amendment) Act 34 of 1971, effected 2 principal changes, namely,, (1) the addition of sub. s. (1A) to s. 43 of the Motor Vehicles Act which provided that any direction regarding the fixing of fares and freights prospectively, or retrospectively might provide that such fares and freights shall be inclusive of the tax payable by passengers or consignors of goods; and (2) a validate provision validating the directions, relating to fares issued on or after March 1. 1963 to be inclusive of the tax payable under the 1963-Act.With effect from,October 15, 1971, the Government also revised the rates offare. The operators contended that : (1) The provisions of Acts 18 and 34 of 1971 amounted to a tax not on passengers and goods but on the income of the operators, (2) the retrospective validation of levy an( collection amount to a tax on amounts collected as fare and therefore the tax was a new tax on fare, and (3) the retrospective validation was unreasonable because the operators were made liable for a tax which they did not in fact collect during the period July 1966 to October 14 1971, when they were agitating for enhancement of fa re. 322 Rejecting the contentions. the Court, HELD : (1) The Provisions of the 1963-Act (taxation of passengers and goods) indicate that the tax under that Act is a tax on passengers and owners of goods and that the operators only collected the tax. When passengers and owners of goods pay the tax, the Government requires an agency to collect it and the operators are such agents. The power to enact such a measure is derived from entry 56 of the State List If of the Seventh Schedule to the Constitution. [329B-C. D-F] M/s Sainik Motors, Jodhpur & Others v. The State of Rajasthan, [1962] 1 S.C.R. 517, followed. (2) The tax recovered retrospectively as well as prospectively is the same tax, a tax on passengers and goods. The tax is imposed by the 1963 Act and its character as well as incidence is determined by the 1963-Act. No tax is imposed or collected under Act 34 of 1971, nor was there any alteration of the character of the tax which had already been imposed. The machinery for its collection which was implicit in the 1963-Act was made explicit by Act 18 of 1971. The State Government fixed the fare in July 1, 1963 after taking into account the element of tax on passengers and goods imposed by the 1963-Act. The operators in collecting fares from passengers in fact collected the tax due from them under the 1963-Act along with the fare. Section 43(A) of the Motor Vehicles Act only clarified the factual basis. It is competent to the State Legislature to amend the Motor Vehicles Act by enacting that directions regarding fares can be inclusive of tax. The two Acts of 1971 were only for the purpose of dispelling the doubts expre ssed in Thomman Case.' [333C-G] Rai Ramkrishna & Others v. The state of Bihar, [1964] 1 S.C.R. 897, explained ;and followed. S. Srikantiah & Ors v. The Regional Transport Authority, Anantapur & Ors., [1971] Supp. S.C.R. 816, followed. (3) The correspondence and representations by the operators and notes of hearing prepared by the Secretariat in connection with the revision of fares, show, that the incidence of the increase in the motor vehicles tax and the increase in tax liability on account of tax on passengers and goods were all taken into consideration in fixing the fare with effect from July 1, 1973. Since the tax was an element included in the fare structure, the retrospective validation cannot be said to be unjust. especially because the operators had collected the entire amount. [332B-C; 334C-D] JUDGMENT:
ORIGINAL JURISDICTION: Writ Petition No. 326 of 1972 & 203
of 1973.
Under Article 32 of the Constitution of India for the
enforcement of fundamental rights.
Civil Appeal No. 1875 of 1972.
Appeal by Special Leave from the Judgment and Order dated
the 15th March, 1972 of the Kerala High Court at Emakulam in
O. P No. 23 of 1971.
Civil Appeal No. 1765 of 1972.
From the Judgment and Order dated the 16th March,1972 of the Keral
a High Court Ernakulam in O.P. No. 3034 of 1971.
Civil Appeal No. 27 of 1973.
From the Judgment and Order dated the 13th March, 1972 of
the kerala High Court in O.P. No. 2320 of 1971.
Civil Appeal No. 361 of 1973.
323
From the Judgment and Order dated the 15th March. 1972 “of
the Kerala High Court in O.P. No. 2453 of 1971.
V. M. Tarkunde, C. K. Viswanatha Iyer, K. jayaram and
R.Chandrasekharan for the petitioners (in W. P. No. 326/72).
C. K. Viswanatha Iyer, K. Jayram and R. Chandrasekharan.
for the petitioners, (in W. P. No. 203/73).
M. M. Abdul Khader, V. A. Syed Mohammed, K. Paripoornam
and P. C. Chandi, for respondent No. 1 (in W.P. No.
203/73).
S. V. Gupte, V. Sivaraman Nair,, C. J. Balakrishnan and A.
Sreedhar Nambiar. for the appellant (in C. A. No. 1875/72).
V. Sivaraman Nair, C. J. Balakrishnan and A. Sreedharan
Nambiar, for the appellants, (in C. A. No. 1765/72).
V. Bhaskaran Nambiar and A. Sreedharan Nambiar, for the
appellant (in C. A. No. 27/73).
K. T. Harindranath and A. Sreedharan Nambiar, for the
appellants, (in C. A. No. 361/73) and for Intervener No. 5.
S. V. Gupte and A. Sreedharan Nambiar, for Intervener No.
1.
A. Sreedharan Nambiar, for Intervener Nos. 2, 3 and 6.
The Judgment of the Court was delivered by
RAY C.J. These matters raise questions on the validity of
legislative measures of levy and collection of tax on
passengers and goods carried by stage carriages and public
carrier vehicles. Stage carriages carry passengers and
public carriers carry goods. The validity of the Kerala
Motor Vehicles (Taxation of Passengers and Goods Amendment)
Act, 1970 for the sake of brevity called Act 18 of 1971 as
well as the Motor Vehicles (Kerala Third Amendment) Act,
1971 for the sake of brevity called Act 34 of 1971 is
challenged.
The petitioners in the writ petitions and the appellants in
Civil Appeals are operators of stage carriages in the, State
of Kerala.
The questions which fall for consideration in these matters
are these. First,, does Act 18 of 1971 levy a tax on
passengers or does it levy a tax on the income of operators
? Second, is the retrospective validation of levy and
collection of taxes by Act 18 of 1971 legal- ? Third, is it
competent to the legislature to amend section 43 of the
Motor Vehicles Act, 1939 called the 1939 Act by Act 34 of
1971 to include retrospectively tax within fare ?,
Section 43 of the 1939 Act lays down that the State
Government may, from time to time by notification in the
Official Gazette, issue directions to the State Transport
Authority regarding fixing of fares and freights for stage
carriages, contract carriages and public carriages. Section
44(3) of the 1939 Act requires the State Transport Authority
to give effect to such directions issued ‘by the Government.
It is in exercise of these powers that the fare structure
for stage carriages is fixed from time to time.
324
The State of Kerala came into existence with effect from 1
November 1956 by the, Reorganisation of States comprising
the Malabar area of the former Madras State and the
Travancore-Cochin area. The fare structure in force in the
Malabar area as on 1 November, 1956 was 3.90 nP per mile and
the minimum fare was 31 nP for distances less than 8 miles.
The fare structure in Travancore-Cochin area prior to 1
November, 1956 was 3.90 nP per mile and the minimum was 19
nP. There was difference only in the minimum fare between
Malabar and Travancore-Cochin areas.
In 1958 the difference between the minimum fare of the two
was eliminated. The, Kerala Government on 15 April, 1958
increased the rate of fare to 4 nP per mile and the minimum
fare was 16 nP.
Prior to 1 July, 1963 there was no provision for the levy of
tax on passengers and goods in the Travancore-Cochin area.
In the Malabar ,area the Madras Motor Vehicles (Taxation of
Passengers and Goods) Act 1952 was in force over and above
the Madras Motor Vehicles Taxation Act. In the Travancore-
Cochlea area there was only the Travancore-Cohin Vehicles
Taxation Act 14 of 1950. The incidence ,of tax on stage
carriages and public goods carriages was the same after the
formation of the Kerala State in 1956. In the Malabar area
a tax of Rs. 25/- per seat per quarter was levied under the
Motor ‘Vehicles Taxation Act and a compounded rate. of Rs.
12.50 per seat ‘per quarter under the Motor Vehicles
(Taxation of Passengers and Goods) Act. The aggregate of
the two taxes in the Malabar area was ,Rs. 37.50 per seat
per quarter in respect of stage carriages. In the,
Travancore–Cochin area the rate of vehicles tax under the
Vehicles Taxation Act was, Rs. 37-50 per seat per quarter
equal to the total incidence of tax in the Malabar area for
stage carriages.
The fare structure throughout the Kerala State after 1958
was 4 nP per mile and the minimum was 16 nP. In 1961 the
Government of Kerala continued the fare at 4 nP. per mile
but reduced the minimum from 16 nP to 10 nP.
In this background, the Government of Kerala on
consideration of proposals made by the Transport
Commissioner decided in the month ,of February, 1963 first
to increase the motor vehicles tax throughout the, State;
second, to introduce tax on passengers and goods through-out
the State; and, third to increase the fare structure
suitably for stage carriages. The incidence of tax at’ Rs.
37.50 per seat per quarter prevalent in the Kerala State was
low Compared to. the incidence of vehicle tax in the three
neighboring States of Madras, Mysore and Andhra Pradesh. In
Madras, the total incidence of vehicle tax per seat per
quarter was Rs. 40/- and composition fee under Taxation of
at Passengers and Goods Act was Rs. 25/- aggregating Rs.
65/- in 1962. In Mysore, the rate was Rs. 57.50 per seat
per quarter compose vehicle tax and composition fee under
Taxation of Passengers and Goods Act. in Andhra Pradesh, the
total comprising the taxation of passengers and vehicle tax
was Rs. 670 in 1963.
In 1963 the, Kerala Motor Vehicles (Taxation of Passengers
and Goods Act, 1963 for the sake brevity called Act 25 of
1963 was ,enacted. Section 3 of Art 25 of 1963 provided
that “there shall be
325
levied, and paid to the Government a tax on all passengers,
luggage and goods carried by stage carriages and on all
goods transported by public carrier vehicles at the rate of
10 nP in the rupee on the fares and freights payable to the
operators of such stage carriages and at the rate of 5 nP in
the rupee on the freights payable to the operators of such
public carrier vehicles.” The Act 25 of 1963 was published
on 15 April, 1963 in the Kerala Gazette Extraordinary and
was brought into force with effect from 1 July,. 1963. The
Act 25 of 1963 contained these provisions. The operator is
permitted to compound the tax assessable on him in
circumstances and conditions mentioned therein. The
operator is required to submit returns in prescribed forms.
The operator is to pay tax every month. There are
provisions for assessment, penalty, production of accounts.
The State Government of Kerala published a draft
notification on 4 March, 1963 for revising the fare
structure. After hearing the representations and objections
of the operators and the public, the final notification was
issued on 13 June, 1963 and was published in the Gazette on
18 June, 1963. By this notification, the fare was fixed at
3 nP per kilometre and the minimum fare was fixed at 20 nP.
The rate of tax under the Kerala Motor Vehicles Taxation
Act, 1963 was fixed at Rs. 35/- per seat per quarter in
respect of vehicles where the total distance permitted to be
operated did not exceed 200 kilometers and Rs. 401- in
respect of vehicles where the total distance permitted to be
operated per day exceeded 200 kilometres. The composition
fee payable under Act 25 of 1963 was fixed at Rs. 25/- per
seat per quarter. Therefore, the total incidence of the two
taxes under Motor Vehicles Taxation Act and the Taxation of
Passengers and Goods Act was Rs. 60/- per seat per quarter
for vehicles not ,operating in excess of 200 kilometres a
day and Rs. 65/- per seat per quarter in respect of vehicles
operating in I excess of 200 kilometres a day.
As a result of Act 25 of 1963, the fate structure with
effect from 1 July, 1963 was 3 nP per kilometre and the
minimum was 20 nP. Prior to 1 July, 1963, the rate of fare
was 2.5 nP per kilometre and the minimum was 10 nP.
After the fixation of fare structure on 1 July, 1963 there
were repeated representations from operators to increase the
fare and representations from the public for reduction of
the minimum of 20 nP. A transport High level Committee %+as
constituted with Shri C. M. Mathew a retired District Judge
as the Chairman. The Committee recommended that there was
no need to raise the fare structure but it recommended a
reduction of the minimum fare from 20 Ps. to 10 Ps.
Presumably pursuant to the recommendation, a notification
was issued on 24 April, 1964 reducing the minimum from 20 Ps
to 10 Ps.
From the year 1963 to 1966, the operators paid to the
Government taxes under Act 25 of 1963. The operators
collected tax on passengers and goods.
But in 1966 the operators agitated for enhancement of fare.
Eventually the operators went before the Kerala High Court.
The
326
operators challenged Act 25 of 1963. The main contention of
the operators was that Act 25 of 1963 imposed the tax not on
the passengers or consignors of the goods but on the
operators who carry the passengers or the goods. The
decision of-the Kerala High Court in Thomman & Ors v. The
Regional Transport Officer, Ernakulam(1) reported in I.L.R.
(1968) 2 Kerala 153 was on 4 March, 1968. The High Court
held that the tax is a tax on the passengers and goods. The
High Court expressed the view that there was no satisfactory
provision for the collection of the tax. The High Court
observed that provision must be made for the collection of
the tax from the passenger as tax specifying the quantum
calculated and computed on the basis of the provision of the
Act.
Soon after the decision in Thomman case (supra) the State
Government issued a notification dated 29 April, 1968 and
published it on 30 April, 1968. This notification was to
the effect not the fare with effect from 1 July, 1963 was
inclusive of the tax leviable under Act 25 of 1963. There
was also a draft amendment to the Kerala motor Vehicles
(Taxation of Passengers and Goods) Rules, 1963. A new rule
numbered rule 3(2) was inserted. That new rule was to the
following effect :-
“The fares and freights collected from the
passengers or consignors of goods as the case
may be, may include in it, such proportion of
the tax as is payable under section 3 of the
Act and the prescribed authority while making
the assessment under sub-rule (i) shall
calculate the tax due to the Government under
the act from the fares and freights collected
on the same Proportion”.
The purpose of the 1968 notification was that the fare
already fixed and which was effective from 1 July, 1963 was
inclusive of the tax and that such tax was being collected
from the passengers and the consignors of the goods.
The 1968 notification was also challenged in the Kerala High
Court. The Government represented that no tax would be
collected without complying with the directions in Thomman
case (supra) On this representation of the State, the Kerala
High Court dismissed the writ petitions.
Thereafter a bill was introduced in the Assembly to amend
Act 25 of 1963. The Bill was published in the Gazette on
11, Aught, 1969. The Bill was to have come up or
consideration on 9 January. 1970. it was not taken up for
consideration on that day. Instead an Ordinance (ordinance
No. 1 of 1970) was promulgated on 4 January, 1970
introducing amendment s to Act 25 of 1963. This 1970
Ordinance was challenged in the Kerala.High Court. On 19
January, 1970 the High Court passed an order that collection
of tax under Act 25 of 1963 as amended by Ordinance 1 of
1970 is stayed in respect of the period prior to its
publication in the Karela Gazette on 5 January, 1970 to the
extent the operator has not collected the same during the
said Period” The operators resolved to collect 10 per cent
extra over the fare from the month of January,
327
1970. The transport Commissioner asked them not to do so.
On 2 February, 1970 a conference was held by the Minister
for Transport. The operators agreed that no enlaced amount
would be collected by them pending the decision of the
Kerala High Court. The Government issued instructions on 24
February, 1970 that until further orders from the Government
“the operators shall not be required to pay the tax under
Act 25 of 1963 for the period from 5 January, 1970 in
rendering services in respect of the concerned vehicle such
as issue and renewal of permits etc.”
The impugned Act 18 of 1971 was passed by the Legislature on
28 February, 1970 and received the assent of the Governor on
1 June, 1971. Act 18 of 1971 introduced two sub-sections to
section 3 of the Act 25 of 1963. Act 18 of 1971 was enacted
to clarify the position with regard to levy of and
collection of taxes from passengers and consignors of goods
in accordance with the observations of the Kerala High
Court,in Thomman case (supra). The High Court observed in
that case that provision should be made for the collection
of the tax from the passenger as tax specifying the quantum
calculated and computed on the basis of provision in the
Act. The High Court also observed that the tax would be
payable to the operator who was liable to pay the same to
the State. It is in this background that Act 25 of 1963 was
amended by Act 19 of 1971. Act 25 of 1963 contained inter
alia the provisions that “there shall be levied and paid to
the Government a tax on all passengers, luggage and goods”.
The provision was amended by Act 18 of 1971 by substituting
the words “there shall be levied a tax” in place of the
words “there shall be levied and paid to the Government a
tax”. The result of the amendment was that “there shall be
levied a tax on all passengers, luggage and goods”. The
former wording of section 3 that “there shall be levied and
paid. to the Government a tax on all passengers, luggage and
goods” was, said by the High Court to raise doubts as to
whether the provision clearly said-that the tax was payable
by the passengers to the operators.
The two new sub-sections introduced to section 3 by Act 18
of 1971 are first that the tax levied under subsection (1)
shall be paid by the passengers or the consignors of the
goods as the case may be to the operators along with the
fares or freights payable to the operators of the stage
carriages or the goods vehicles. The second introduction is
that the operator shall be liable to pay thee tax levied
under sub-section (1) on all passengers, luggage or goods
carried by stage carriages and on all goods carried by goods
vehicles of which he is the operator to the Government in
the manner provided in this Act.
The other provision in Act 18 of 1971, is validating section
which is as follows :-
“Notwithstanding any judgment, decree or order
of any court, all taxes levied or collected or
purposed to have been levied or collected
under the Principal Act before the date of
commencement of this section shall be deemed
to be and to have always been levied or
collected in accordance with law as if section
3 of the principal Act as amended by this Act
was in force at all material times when such
tax was
9-522sup. CI/74
328
levied or collected, and no such levy or
collection shall be called in question on the
ground that it was without authority of law,
and all taxes so levied or purported to have
been levied but not collected may be collected
in accordance with the provisions of the
principal Act as amended by this Act :
Provided that nothing in this Act shall render
any person liable to be convicted of any
offence in respect of anything done or
omitted to be done by him before the 5th day
of January, 1970 if such act or omission was
not an offence under the principal Act
before
the aforesaid date but for the provisions of
this Act.”
The validating section in Act 18 of 1971 stated that taxes
levied or collected shall be deemed to be and to have always
been levied or collected in accordance with law as if
section 3 of Act 25 of 1963 as amended by act 18 of 1971 was
in force at. all material times. The validating section
became necessary to render levy as well as collection
lawful.
Act 18 of 1971 received the assent of the Governor on 1
June, 1971. On the same day Ordinance No. 15 of 1971 was
passed. This Ordinance was replaced by Act 34 of 1971. Act
34 of 1971 effected two principal changes. First, it
amended section 43 of the Motor Vehicles Act, 1939 by adding
sub-section (1A) to section 43 of that Act. The amended
sub-section (1A) stated principally that any direction
regarding the fixing of fares and freights prospectively or
pectively might provide that such of ares and frights”shall
be inclusive the tax payable by passengers or consignors of
goods” The other change effected by Act 34 of 1971 is that
it validated into alia the directions relation to fares
issued on or after 1 March, 1963 or thereafter to be
inclusive of the tax payable under Act 25 of 1963.
The challenge by the operators to the validating sections in
Act 18 of 1971 and Act 34 of 1971 is primarily based on the
ground that the operators did not and could not collect tax
from the passengers because the fare fixed with effect from
1 July, 1963 did not include the tax imposed by Act 25 of
1963. The other challenge is that the directions issued by
the State Government before the amendment of directions
section 43 of the 1939 Act about fixing of fare did not
include tax and therefore, retrospective validation of fare
to be inclusive of tax was to levy tax on fare.
The three principal contentions on behalf of the operators
with regard to the legality of Acts 18 and 34 of 1971 are
these. First, the impugned provisions amount to a tax :dot
on passengers and goods but on the income of operators.
Second the impugned provisions as to retrospective
validation of levy and collection are a tax on amounts which
are collected as fare and, therefore retrospectively it is a
tax on fare and fare alone. Third the retrospective
validation is unreasonable because the operators are
retrospectively tax which they did not in fact collect.
All these contentions turn on the question as to Whether tax
was included as an element in the fare, which became
effective from 1 July, 1963.
329
The question whether the statutes, viz., Act 25 of 1963 and
Act 18 of 1971 impose a tax on passengers and owners of
goods or is a tax on the income of operators has been
rightly held by the Kerala High Court in Thomman case
(supra) and this case to be a tax on passengers and goods.
This Court in M/s Sainik Motors, Jodhpur & Others v’ The
State of Rajasthan [1962] 1 S.C.R. 517 construed the
Rajasthan Passengers and Goods Taxation Act, 1959 and held
that the incidence of the tax was upon passengers and goods
and not upon the-income of the operators of stage carriages
though ‘the measure of the tax is furnished by the amount of
fare and freight charged”. The power to enact such
legislative measure is derived from Entry 56 of the State
List. The Entry provides “taxes on goods and passengers
carried by road or on inland waterways”. In Sainik Motors
case (supra) section 3 provided “there shall be levied,.
charged and paid to the State Government a tax on all fares
and freights in respect of passengers carried and goods
transported by motor vehicles at such rates which are
thereafter set out”. Section 4 in Sainik Motors case
(supra) provided that the “tax should be collected by the
owner of the motor vehicles and paid to the State Government
in the prescribed manner”. Though there is no comparable
provision in the present case of section 4 in Sainik Motors
case (supra) as to method of collection of tax the various
provisions like levy and payment before amendment of section
3 and levy and collection after amendment of that section,
composition of tax in section 4, submission of return in
section 5, procedure where no payment is made in section 7,
fares and freights escaping assessment in section 8, penalty
for non-payment of tax in section 9 indicate that the tax is
on passengers and’ owners of goods and the operators collect
the tax. It is obvious that *hen passengers and owners of
goods pay the tax the Government requires an agency to
collect such tax because these taxes are payable to the
Government. The operators of stage carriages and public
carriers are agents of the Government to collect these
taxes. The composition of tax which is allowed to operators
also shows that it is a tax on passengers and owners of
goods and the composition is a convenient mode of payment by
operators who collect the tax.
The agitation of the operators for increase of fare which
had been going on particularly since the year 1966 led to
the formation of two committees for investigation into that
question. One of the committees was with Shri K. Sankaran,
a retired Chief Justice of Kerala High Court as Chairman and
the other committee was with the Minister for Revenue and
Labour as Chairman. The Government on consideration of the
recommendations of these committees revised the rates of
fare with effect from 15 October, 1971. The rate of fare,
was raised from 3 Ps per kilometer fixed on 1 July, 1963 to
3.3 Ps With effect from 15 October, 1971 per kilometer. The
minimum fare which had been fixed on 1 July, 1963 at 20 Ps
and reduced to 10 Ps on 24 April, 1964 was raised to 20 Ps
with effect from 15 October, 1971. The Government con-
sidered revision of fare on account of several factors.
The operators paid to Government taxes on passengers and
goods from 1 July, 1963 upto the month of July, 1966. The
operators have also been paving to the Government taxes on
passengers and goods
330
from 15 October, 1971. The entire controversy between the
operators on the one hand and the State on the other is for
the period July, 1966 to 14 October, 1971.
The heart of the matter is whether tax was included in the
fare and, therefore, paid by passengers particularly in the
disputed period between July, 1966 and October, 1971. If no
tax has in fact been paid by passengers or owners of goods
the retrospective validation by Acts 18 and 34 of 1971 of
levy and collection of tax and retrospective inclusion of
tax within fare could be contended to be unreasonable, un-
workable and unconscionable according to the operators.
when the operators challenged Act 25 of 1963 in Thomman case
(supra) the High Court said that the Court was not in a
position to say whether the liability imposed by the Act had
or had no been absorbed by the increase of fare with effect
from 1 July 1963. The provision in the Act is that there
shall be a tax at the rate of 10 np in the rupee on the
fares and freights- payable to the operators of stage
carriages and at the rate of 5 nP in the rupee on the
freights payable to operators of public carrier vehicles.
The machinery for the collection of the tax is the same as
for the collection of the fare. The provision of tax at the
rate of 10 Ps in the rupee as also 5 Ps in the rupee shows
that the tax is payable along with fares and freights.
There is no difficulty in ascertaining or quantifying the
tax payable because the rates are specified to be “in the
rupee”. Tax is collected by the operator with the fare from
the passengers. To illustrate if the fare paid is 110
praise the, tax levied is 10 paise. The fare to be
appropriated by the operators is 100 paise and the tax of 10
paise is collected by the operator and paid to the
Government.
The contemporaneous evidence on the question whether the
State Authorities at the time of fixing the fare in the
month of July, 1963 included the tax imposed under Act, 25
of 1963 within the fare fixed is furnished first by the
letter of the actor of Transport dated 2 April, 1963,
second, by the representation of the operators dated 3
April, 1963 and third by the notes of hearing prepared by
the Secretariat under the heading “Motor Vehicles Stage
Carriages Fare Revision File.
The Director of Transport in his aforementioned letter set
out in paragraphs 2,3 and 4 thereof as follows
“2. At the existing rate of fares, the earning
per mile (E.P.M.), worked out for the year
1962-63 comes to 123 nP. The present proposal
to increase the basic rate as 3 nP per head
per kilometer will result in about 20 percent
increase in the rate of fares. From the
actual figures of the previous years, the
Department could expect only about 8 per cent
in the E.P.M. from the services it the
proposed rate- of fares. Thus 133 nP seems to
be a fail- estimate of the E.P.M. which the
department could expect to get for the year
1963-64 after the fair increase,.
3. As against the increased E.P.M. of 133
nP the expenditure worked out will come to 130
nP per mile, This increased operational cost
is estimated by the Department taking
331
into account the enhanced rate of vehicle tax,
the new imposition of passenger tax under the
T.P.G. Act and such other duties. Consequent
to the proposed levy of tax on passenger,
there will be more than 60 per cent increase
in the rate of tax to be paid by the
department. All these factors were taken into
consideration in estimating the operational
cost.
4. No doubt the increased rate of tax, the
levy of passenger tax and such other duties
would reduce the profit-margin and the return
on capital out lay to a considerable extent.
Despite the incidence of higher rate of tax,
levy of passenger tax and other duties, I feel
that the department could still operate its
services profitably at the rate of fares
contained in the draft notification published
by the Government. Since by careful
operational economics the expenditure per mile
could be reduced, by 2 to 3 nP per mile and
the earnings increased by rationalisation of
services. So further enhancement of fare is
unnecessary.”
These statements in the letter of the Director of Transport
indicate that the increased operational cost was estimated
and considered by the Department after taking into account
the enhanced rate of vehicles tax, the new imposition of the
passenger tax and other duties.
The representation of the operators was in answer to draft
directions contained in notification dated 4 March, 1963
containing proposals to revise the fare rates. The draft
notification proposed maximum fare at the rate of 3.75 nP
per head per kilometer for fast passenger services in the
case of Ghat roads and 3nP per head per kilometre as a
maximum fare for ordinary services in the case of other
roads. The operators set out the wide disparity between
increase in operational cost on the one hand and the
inadequacy of the proposed fare rates on the other. The
operators estimated their daily expenses under several
heads. One of the heads estimated by the operators was
“increase in tax at the revised rate, as envisaged by State
budget”. That is referable to tax on passengers and goods.
The operators stated that the maximum fare should be raised
to 3.5 nP per kilometre. This was after taking into account
the tax element.
The representation of the operators shows that the tax on
passengers and goods was one of the elements in the fare
structure. This becomes apparent in the hearing notes of
the Carriage Fare Revision File prepared by the Secretariat.
It was calculated hat the proposal to increase from the then
existing fare of 2.5 nP per kilometre to 3 nP per kilometre
would bring an additional income of Rs. 40 per day for an
ordinary bus of 40 seats operating 200 kilometres per day.
The occupation ratio work out between 60 to 80 per cent.
Leaving out margin for occupation ratio the average
additional income worked at Rs. 30 per vehicle of 40 seats.
The existing motor vehicles tax per seat per quarter at the
time of the fixation of fare was Rs. 37.50 per seat per
quarter. The then proposed enhanced tax on vehicles was ;it
Rs. 60 per seat per quarter. The existing motor vehicles
tax worked at 41.6 nP per day. The enhanced tax worked out
at 66.6 nP per day. The increase in motor vehicles tax
332
would impose an additional tax burden of 25 nP per seat per
day. The increase in motor vehicles tax would be at Rs. 10
per bus of 40 seats a day. The additional cost of operation
on account of increase in cost of fuel, spare parts came to
12 nP per mile or 8 nP per kilometre. The operational cost
of a bus of 40 seats came to Rs. 16 per day. The total
additional cost per day of 40 seats on account of vehicles
tax and cost of fuel and spare ports came to Rs. 26. The
additional income as already indicated came to Rs. 30 per
day. Therefore, the operator was not hit by the proposal
for taxation which was taken into Consideration. The
operators and the Chairman of the State Transport Board
demanded further increase in the rate of fare. The entire
evidence at the time of the fixation of fare is ample proof
of the fact that the. incidence of the increase in motor
vehicles tax, the increase in tax liability on account of
tax on passengers and goods, and additional cost of
operation on account of increase in cost of fuel and spare
parts were all taken into consideration in fixing the fare
with effect from 1 July, 1963.
Counsel on behalf of the operators contended that Act 34 of
1971 imposed a new levy for these reasons. Fares were
formerly exclusive of tax. As a result of Act 34 of 1971,
fares were made inclusive of tax. The character of the fare
was altered by retrospective piece of legislation. A
deeming provision subjected the amount collected by
operators as fare to a deduction of tax. Reliance was
placed on the decision of this Court in Rai Ramkrishna &
Others v. The State of Bihar, [1964] 1 SCR 897 in support of
the contention that the character of the tax was, altered by
its retrospective operation.
In Rai Ramkrishna case (supra) the Bihar Finance Act 1950
levied tax on passengers and goods carried by public motor
service in Bihar. The owners of motor vehicles challenged
the validity of the Act. The Act was struck down by this
Court. The State thereafter issued an Ordinance. The
provisions of the Act which had been struck down by this
Court were validated and brought into force retrospectively
by the Ordinance from the date when the earlier Act had
purported to come into force. The provisions of the
Ordinance were thereafter incorporated in the Bihar
Taxation-on Passengers and Goods Act, 1961. The validity of
the Act of 1961 was challenged. The owners of vehicles
contended there that retrospective operation completely
altered the character of the tax proposed to be
retrospectively recovered.
The contentions in Rai Ramkrishna case (supra) were two-
fold. First, retrospective recoveries did not have
legislative competence. Second, the owners could not
recover tax from passengers carried by them between 1 April,
1950 and the date’ of the retrospective validation of the
Act in 1961. Therefore, the tax was unreasonable. It may
be stated here that future recoveries were not challenged in
that case. As a matter, of fact, the right to make future
recoveries was conceded. In the present case, the
prospective future recoveries are also not challenged. The
challenge is confined to retrospective validation only,
This Court said in that case “If the scheme of section 3 for
the levy and recovery of the tax is valid under entry 56 of
list II so far as future recoveries are concerned, it is not
easy to see how it can be said that the character of the tax
is radically changed in the present circumstances,
333
because it would be very difficult, if not impossible, for
the owners to recover the tax from the passengers whom he
has carried in the past. The tax recovered retrospectively
like the one which will be recovered prospectively still
continues to be a tax on passengers and it, adopts the same
machinery for the recovery of the tax both as to the past as
well as to the future”.
The decision in Rai Ramkrishna case (supra) does not support
the contention of the operators. The decision on the other
hand shows that tax recovered retrospectively as well as
recovered prospectively is the same tax. The character of
the tax is not altered. The position is identical in the
present case.
The contention of the operators is fallacious for these
reasons. No tax is imposed or collected under Act 34 of
1971. The tax is imposed by Act 25 of 1963. The character
as well as incidence of the tax is determined by Act 25 of
1963. The machinery for collection of the tax which was
implicit in Act 25 of 1963 was made explicit by Act 18 of
1971. The State Government under chapter IV of the Motor
Vehicles Act, 1939 having regard to various factors
mentioned in section 43(1) of the 1939 Act issues directions
to the State Transport Authority relating to the fixing of
fares and freights including the maximum and minimum in
respect thereof for stage carriages, contract carriages and
public carriers. The provisions of Act 34 of 1971 are that
while- fixing the fares, the Government may take into
account the tax, if any, imposed on the passengers and that
such fares may be inclusive of the tax payable consignors of
goods to the operators under any matter. Under section 44
of the 1939 Act, the by the passengers or law dealing with
the State Transport Authority shall give effect to the
directions issued by the State Government under section 43
of the Act. Fare could be fixed either exclusive or
inclusive of tax. The State Government fixed the fare on 1
July, 1963 after taking into account the element of tax on
passengers and goods imposed by Act 25 of 1963. The
operators in collecting fare from passengers in fact
collected the tax due from passengers under Act 25 of 1963
along with the fare. Section 43(1A) of the Motor Vehicles
Act, 1939 was, therefore, introduced with retrospective
effect to clarify the factual basis. There was neither
imposition of any new tax by Act 34 of 1971 nor was there
any alteration of the character of the tax which had already
been imposed. In the present case, the principle Act 25 of
1963 levied the tax.. Acts 18 and ’34 of 1971 were for the
purpose of dispelling the doubts expressed in Thomman case
(supra).
In the recent decision in S. Srikantiah & Ors. v; The
Regional Transport AuthoritY. Anantapur & Ors. [1971] Suppl
S.C.R. 816 this Court considered the validity of a
notification under section 43 of the Motor vehicles Act,
1939. The Madras Vehicles (Taxation of Passengers and
Goods) Act, 1952 became applicable to Andhra Pradesh. In
1959 the Andhra Pradesh legislature enacted the Motor
Vehicles (Taxation of Passengers and Goods) Andhra Pradesh
(Amendment) Act. By that amendment, the rates were increa-
sed. The state Authority was directed by the Government to
fix
334
maximum fares inclusive of the leviable tax under the Act
for the stage carriages. The Andhra Pradesh Amendment Act
was challenged. The Andhra Pradesh High Court struck down
the Act as unconstitutional. The Legislature thereafter
passed a validating Act in 1961. The operators again
questioned the Amendment Act on the ground that they had not
collected the fare on the enhanced rate fixed by the
Transport Authority. The contention in that case was that
the enhanced surcharge which became operative on coming into
force of 1961 Act could not be sustained without amending
the conditions of the permit dealing with the fares leviable
by the operators. This Court held that the notification
under the Motor Vehicles Act in that case issued under
section 43 of the Act fixing the maximum fare inclusive of
the tax has the effect of incorporating the maximum fare as
notified including the tax leviable as a condition of the
permit. Therefore, it is competent to the Legislature to
amend the Motor Vehicles Act by enacting that directions
regarding fares can be inclusive of tax.
The arguments advanced on behalf of the operators fail in
view of the cardinal fact that tax was an element included
in the fare structure. The retrospective validation cannot
be said to be unjust because the operators collected the
entire amount. The tax has always been paid by passengers
and owners of goods. The tax is not on the income of the
operators. There was and is no lack of machinery for
collection of taxes. The operators collected tax as Well as
fare. The directions regarding fare were validated by Act
34 of 1971 by reason of the litigation between the operators
and the State.
For these reasons, the contentions of the operators fail.
The petitions,and appeals are dismissed. The decision of
the Kerala High Court in Civil appeal No. 1875 of 1972 and
other appeals is upheld. In view of the fact that the High
Court directed the parties to bear their respective costs,
parties will bear their own costs in these matters.
V.P.S. Petitions and appeals dismissed.
33 5