{"id":76281,"date":"1974-11-12T00:00:00","date_gmt":"1974-11-11T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/g-k-krishnan-etc-etc-vs-the-state-of-tamil-nadu-anr-etc-on-12-november-1974"},"modified":"2018-05-05T05:35:58","modified_gmt":"2018-05-05T00:05:58","slug":"g-k-krishnan-etc-etc-vs-the-state-of-tamil-nadu-anr-etc-on-12-november-1974","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/g-k-krishnan-etc-etc-vs-the-state-of-tamil-nadu-anr-etc-on-12-november-1974","title":{"rendered":"G. K. Krishnan Etc. Etc vs The State Of Tamil Nadu & Anr. Etc on 12 November, 1974"},"content":{"rendered":"
Supreme Court of India<\/div>\n
G. K. Krishnan Etc. Etc vs The State Of Tamil Nadu & Anr. Etc on 12 November, 1974<\/div>\n
Equivalent citations: 1975 AIR 583, \t\t 1975 SCR (2) 715<\/div>\n
Author: K K Mathew<\/div>\n
Bench: Mathew, Kuttyil Kurien<\/div>\n
           PETITIONER:\nG.   K. KRISHNAN ETC.  ETC.\n\n\tVs.\n\nRESPONDENT:\nTHE STATE OF TAMIL NADU & ANR.\tETC.\n\nDATE OF JUDGMENT12\/11\/1974\n\nBENCH:\nMATHEW, KUTTYIL KURIEN\nBENCH:\nMATHEW, KUTTYIL KURIEN\nRAY, A.N. (CJ)\nALAGIRISWAMI, A.\n\nCITATION:\n 1975 AIR  583\t\t  1975 SCR  (2) 715\n 1975 SCC  (1) 375\n CITATOR INFO :\n R\t    1975 SC 594\t (4,8)\n F\t    1975 SC1006\t (2)\n RF\t    1981 SC 711\t (10)\n D\t    1983 SC 634\t (16,18,21)\n OPN\t    1983 SC1005\t (7)\n R\t    1985 SC 660\t (24)\n R\t    1988 SC2062\t (15)\n R\t    1989 SC 100\t (31)\n F\t    1990 SC 913\t (27)\n R\t    1990 SC1637\t (21)\n\n\nACT:\nMadras\tMotor  Vehicles\t Taxation Act  (3  of  1931)-Tax  on\ncontract Carriages enhanced by notification-If violative  of\nArt.   301-Motive   for\t enhancing   tax,   if\t relevant-If\ndiscriminatory as compared to stage carriages and  violative\nof Art. 14.\n\n\n\nHEADNOTE:\nThe  enhancement of motor vehicles tax on omnibuses  imposed\nby the State Government, by notification dated September 20,\n1971,  from Rs. 30\/per seat per quarter to Rs. 100 per\tseat\nper quarter was challenged on the following grounds :-\n(1)  The  notification was not a measure of taxation  but  a\ndevice\tto eliminate the competition of omnibus\" with  stage\ncarriages run by the Government;\n(21  Since the tax operates as a restriction on the  freedom\nof  trade,  commerce and intercourse within  the  State,  it\ncould  be  imposed  only by a law  which  had  obtained\t the\nprevious  sanction of the President under Art. 304.  and  as\nthe  notification was issued by the government in the  exer-\ncise  of  its delegate power, it was not a law made  by\t the\nlegislature,   nor  could  the\tprevious  sanction  of\t the\nPresident be obtained for it; and\n(3)The distinction made between contract carriages and stage\ncarriages. in the matter of levy of vehicle tax offends Art.\n14.\nRejecting the contentions.\nHELD  :\t 1.  The tax was imposed by the\t Government  in\t the\nexercise  of  its  power  under S. 4  of  the  Madras  Motor\nVehicles  Taxation Act, 1931.  As the State Legislature\t was\ncompetent  to  pass  the  Act  and  as\tthe  Government\t  is\nauthorised  under s. 4 to levy the tax, the question of\t the\nmotive with which the tax was imposed is immaterial.   There\ncan  be no plea of a colourable exercise of power to tax  if\nthe Government had power to impose the tax and the fact that\nthe imposition of the tax was for the purpose of eliminating\ncompetition would not detract from its validity. [720A-B]\n2.   (a)  Article  301 imposes a general limitation  on\t all\nlegislative  power in order to secure that  trade,  commerce\nand  intercourse throughout the territory of India shall  be\nfree.\tThe word 'free' does not mean freedom  from  regula-\ntion.  There is a distinction between laws interfering\twith\nfreedom\t to carry out the activities constituting trade\t and\nlaw  imposing  on  those engaged  therein  rules  of  proper\nconduct or other restraints directed to the due and  orderly\nmanner of carrying out the activities.\tThis distinction  is\ndescribed  as  regulation.  The true solution in  any  given\ncase  could be found by distinguishing between\tfeatures  of\nthe  transaction  or  activity in virtue of  which  it\tfell\nwithin\tthe category of trade, commerce and intercourse\t and\nthose  features which, though invariably found to  occur  in\nsome  form or another in the transaction or action  are\t not\nessential  to  the  conception.\t what  is  relevant  is\t the\ncontrast  between  the\tessential attributes  of  trade\t and\ncommerce  and the incidents of the transaction which do\t not\ngive  it  necessarily the character of trade  and  commerce.\nLaws for government of such incidents, ,regulate'.  If a tax\nis  compensatory  or  regulatory, it  cannot  operate  as  a\nrestriction  on\t the  freedom  of  trade  or  commerce.\t   A\ncompensatory  tax is based on the nature and the  extent  of\nthe  use made of the roads. if the proceeds are\t devoted  to\nthe  repair, upkeep, maintenance of relevant roads  and\t the\ncollection   of\t  the  exaction\t involves   no\t substantial\ninterference  with the movement.  What is essential for\t the\npurpose\t of securing freedom of movement by road is that  no\npecuniary burden should be placed upon. it\n716\nwhich  goes beyond a proper recompense to the state for\t the\nactual\tuse made of the physical facilities provided in\t the\nshape  of a road.  Motor vehicles require, for\ttheir  safe,\nefficient  and economical use, roads of considerable  width,\nhardness  and durability. and the maintenance of such  roads\nwill  cost the government money.  But, because the users  of\nvehicles   generally  and  of  public  motor   vehicles\t  in\nparticular,  stand in a special and direct relation to\tsuch\nroads,\tand  may  be said to derive  a\tspecial\t and  direct\nbenefit\t from them. it is not unreasonable that they  should\nbe  called  upon  to make a special  contribution  to  their\nmaintenance over and above their general contribution as tax\npayers of the State. [721C-H; 722B-F]\n(b)  In the counter affidavit filed on behalf of the  State,\nthe averment in that Government has incurred an\t expenditure\nof  Rs. 19.51 crores in the year 1970-71 on the\t maintenance\nand construction of roads while the receipts from out of the\nvehicle\t tax  was only Rs. 16.38 crores.  It  would  not  be\nright  to  say that a tax is not  compensatory\tbecause\t the\nprecise\t or specific amount collected is not  actually\tused\nfor  providing\tany  facilities,  and  a  working  test\t for\ndeciding whether a tax is compensatory or not is to  enquire\nwhether\t the  trades people are having the  use\t of  certain\nfacilities for the better conduct of their business and\t not\npaying\tpatently  much\tmore  than  what  is  required\t for\nproviding  the facilities.  It would be impossible to  judge\nthe  compensatory nature of a tax by a meticulous test\tand,\nin the nature of things, it could not be done.\tIt is always\ndifficult to evolve a formula which will in all cases ensure\nexact  compensation  for  the use of the  road\tby  vehicles\nhaving\tregard\tto their type, weight  and  mileage.   Rough\napproximation, rather than mathematical accuracy is all that\nis required. [722G; 723A-D]\nAutomobile Transport (Rajasthan) Ltd. v. State of  Rajasthan<\/a>\n[1963] 1 S.C.R. 491 followed.\n(c)  If\t the  tax  is  attacked on the\tground\tthat  it  is\nexcessive,  the burden ,of proof is upon the  one  attacking\nits  validity.\tThe amount of the charges and the method  of\ncollection  are\t primarily for determination  by  the  State\nitself, although they must be reasonable and fixed according\nto some uniform, fair and practical standard.  Although\t any\nmethod\tof  taxation  which has a  direct  bearing  upon  or\nconnection with the use of the highways is apparently valid,\na tax which has no such apparent bearing and is not shown to\nbe  compensatory,  but is rather a tax on the  privilege  of\nengaging  in trade and commerce, is beyond the power of\t the\nState.\t It  is also not necessary that there  should  be  a\nseparate  fund\tor  expenses allocation\t of  money  for\t the\nmaintenance of roads to prove the compensatory purpose\twhen\nsuch purpose is proved by alternative evidence. [723G-724B]\n(d)  It\t could\tnot be said that vehicle tax can  be  levied\nonly for the the of the road in existence and that the\tlevy\nis  not\t compensatory because government, has  included\t the\ncost  of the construction of new roads also in\ttheir  'road\ncosts' because. [724B-C]\n(i)  Even  if  the  cost of construction  of  new  roads  is\nexcluded,  the receipts would not be sufficient to meet\t the\nexpenses   incurred  for  maintenance  of  old\t roads\t and\ntherefore.  it\tis  difficult to say that  in  actual  fact,\ncapital expenditure for construction of new roads was  taken\ninto account in the levy of vehicle tax. [724E-F]\n(ii) This  court approved in the Automobile case the  reason\ngiven by the High Court that the State was charging far\t the\ncost incurred in maintaining and making roads. [724G-725A]\n(iii)\t  The  State may impose even upon motor vehicles  as\ncompensation  'for the use of the public highways a  charge)\nwhich  is a fair contribution to the cost  of  (constructing\nand  maintaining roads and \"for regulating traffic  thereon.\n[725B-C]\nArtmstrong  and\t Ors. v. The State of Victoria and  Ors.  99\nCommonwealth  'Law  Reports 28; Commonwealth  Freighters  P.\nLtd.   v.  Sneeddon  102  Commonwealth\tLaw   Reports\t280;\nInterstate Transit Inc. v. Lindsey 283 U.S. 183, at 185\t and\nCapital Greyhound Lines v. Brice 339 U.S. 542 referred to.\n717\nTherefore,     the  tax\t imposed  by  the  notification\t  is\ncompensatory in character and could not therefore   restrict\nthe freedom of trade and commerce. [726C-D]\n(e) There is no material to show that the tax is cofiscatory\nor excessive and operates     as an unreasonable restriction\nupon the appellants right to carry on the    trade.   A\t tax\nwhich  is  compensatory cannot operate\tas  an\tunreasonable\nrestriction upon the fundamental right of the appellants  to\ncarry on the business, for, the very idea of a\tcompensatory\ntax  is\t service  more or less\tcommensurate  with  the\t tax\nlevied.\t  No  citizen  has a right to  engage  in  trade  or\nbusiness without paying for the special services he receives\nfrom  the  State.  because,  that is part  of  the  cost  of\ncarrying on the business. [726E-F]\n3.   (a)  The  reasons\tfor enhancing  the  vehicle  tax  on\ncontract carriages are, (a)   that  contract  carriages\t run\nmore miles, (b) carry more load, and (c) stage carriages pay\nsurcharge  on the fare collected; while owners\tof  contract\ncarriage are not liable to pay the surcharge.  It cannot  be\nsaid that a classification made on the basis of the capacity\nof the contract carriage to run more miles is  unreasonable,\nbecause,  these carriages will be using the road  more\tthan\nthe stage carriages which have got time schedules. specified\nroutes and maximum and minimum number of trips. [727D-728C]\n(b)  There is always a presumption that a classification  is\nvalid,\tespecially  in\ta taxing statute and  a\t person\t who\nchallenges  a classification as unreasonable has the  burden\nof  proving  it.  Classification depends to a  great  extent\nupon an assessment of the local conditions under which these\ncarriages  are\tbeing  run  which  the\tlegislature  or\t the\nadministrative body alone is competent to make.\t The Act  in\nits II Schedule classifies contract carriages\t  and  stage\ncarriages separately for tax purposes.\tTherefore, when\t the\nGovernment,  in\t the exercise of its power to  tax,  made  a\nclassification\tbetween stage carriages on the one hand\t and\ncontract carriage on the other hand and fixed a higher\trate\nof  tax\t on the latter, the presumption is  that  Government\nmade  that  classification on the basis of  its\t information\nthat  contract carriages are using the roads more  than\t the\nstage  carriages  because they are running more\t miles;\t and\nthis  Court has to assume, in the absence of  any  materials\nplaced\tby  the\t owners\t of  contract  carriages,  that\t the\nclassification\tis  reasonable.\t  Hence,  the  levy  of\t  an\nenhanced  rate of vehicle tax on contract carriages  is\t not\nhit by Art. 14. [730G-731E]\nState of Gujarat v. Ambica Mills Ltd.<\/a> [1974] 11 S.C.J.\t211,\nat 231.\t San Antonio School District v. Rodriguez 411 U.S. 1\nand  Carmichael\t v. Southern Coal & Coke Co.  301  U.S.\t 495\nreferred to\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL  APPELLATE  JURISDICTION : Civil Appeal Nos.  2415  of
\n1972 and 128 to 132 of 1973.\n<\/p>\n
Appeals by Special Leave from the Judgments and Order  dated
\nthe  14th  February, 1972 of the Madras High Court  in\tWPs.
\nNos. 3062\/71 and 3069-3073 of 1971.\n<\/p>\n
S.   V.\t Gupte (In CA No. 128\/73), K. S. Ramamurthi  (In  CA
\nNo. 129 of 1973 and 2415 of 1972) and A. T. M. Sampath,\t for
\nthe appellants (in CAs.\t Nos. 2415\/72 and 128-132\/73).
\nS.   Govind  Swaminathan,  Advocate Gen. for  the  State  of
\nTamil Nadu, N. S. Sivan, A. V. Rangam and A. Subhashini, for
\nthe respondent (in C.A. 2415\/72 and 128-129\/73).
\nA.   T. M. Sampath, for the petitioners in WPs.\t Nos.  1051-
\n54, 1120, 1463-65 and 488-495\/73.\n<\/p>\n
E.   C. Agarwala, for the petitioners (in WPs.\tNo. 994\t and
\n1312\/73
\nK.   R. Nambiar, for the petitioners (in WP.  No,. 1850\/73).\n<\/p>\n
718<\/span><\/p>\n
N.   Natesan  (In WP.  Nos. 253 and 394\/73), A. K.  Sen\t (In
\n395\/73)\t  and  K.  Doraiswami  and  K.\tJayaram,   for\t the
\npetitioners (in all rest of petitions).\n<\/p>\n
S.   Govind  Swarninadhan, Advocate Gen. for State of  Tamil
\nNadu A.\t  V.  Rangam and A. Subhashini, for the\t respondents
\n(In all the petitions).\n<\/p>\n
The Judgment of the Court was delivered by
\nMATHEW,\t  J.-In\t the  Civil  Appeals,  the   questions\t for
\nconsideration are whether the enhancement of motor  vehicles
\ntax  on omnibuses imposed by G.O. No. 2044-Home dated  20-9-
\n1971  by the Government of Tamil Nadu from Rs. 30  per\tseat
\nper   quarter  to  Rs.\t100\/-  per  seat  per\tquarter\t  is
\nconstitutionally  valid\t and whether  the  distinction\tmade
\nbetween contract carriages and stage carriages in the matter
\nof  levy  of vehicle tax offends Article 14 of\tthe  Consti-
\ntution.\n<\/p>\n
The  writ  petitions assail the validity  of  the  aforesaid
\nnotification on the additional ground, namely, that the\t tax
\nlevied\tunder the notification imposes restrictions  on\t the
\nfreedom\t of  trade, commerce and intercourse  guaranteed  by
\nArticle\t  301\tof  the\t Constitution  and  that,   as\t the
\nnotification is not law passed after obtaining the  previous
\nsanction of the President of India, the tax is invalid.
\nWe  take up for consideration Writ Petition No. 253 of\t1973
\nand  the judgment therein will dispose of the Civil  Appeals
\nand the Writ Petitions.\n<\/p>\n
The  petitioner\t is  the owner of an  omnibus  which  has  a
\ncapacity to accommodate 54 passengers.\tHe obtained a permit
\non  16-5-1968 to operate it as a contract carriage  and\t was
\npaying\ttax  at the rate of Rs. 30\/- per  seat\tper  quarter
\nunder  the  Madras  Motor Vehicles Taxation Act\t 3  of\t1931
\n(hereinafter called the ‘Act’).\t This Act was passed with  a
\nview  to abolish levy of tolls in the Presidency  of  Madras
\nand  the, levy of taxes on motor vehicles by  local  bodies.
\nThe rate of tax which originally stood at Rs. 10\/- per\tseat
\nper  quarter was increased to Rs. 30\/- per seat per  quarter
\nwhen  the  systems of issuing permits for omnibuses  by\t the
\nregional   transport  authorities  came\t into  vogue.\t The
\nGovernment  of Tamil Nadu by G.O.M.S. 923-Home\tdated  19-4-
\n1969  increased\t the rate of tax with respect  to  omnibuses
\nfrom ‘Rs. 30\/- to Rs. 50\/- per seat per quarter with  effect
\nfrom 1-7-1969.\tIt was announced that this measure was\twith
\na view to avoid unhealthy competition between omnibuses\t and
\nregular\t stage carriage buses and to put down the misuse  of
\nomnibuses.  The owners of omnibuses questioned the  validity
\nof the notification in Writ Petition No. 1412 of 1969,\tetc.
\nDuring the pendency of those writ petitions, the  government
\nincreased  the rate of tax from Rs.  SO\/- to Rs.  100\/-\t per
\nseat per quarter with effect from 1-9-1970 by G.O.M.S.\t434-
\nHome  dated  27-2-1970.\t The avowed object of  this  measure
\nalso  was to avoid unhealthy competition of  omnibuses\twith
\nregular\t stage carriages.  A number of writ petitions  were,
\nfiled challenging the validity of this
\n719<\/span>
\nnotification.\tBy  a common judgment dated  29-1-1971,\t the
\nHigh  Court  allowed  the writ\tpetitions  and\tquashed\t the
\naforesaid notifications holding that the notifications\twere
\na  device to eliminate the operation of\t contract  carriages
\nand that the notifications were not made in the exercise  of
\nthe power of taxation.\tThe result was that the rate of\t tax
\nwas restored to Rs. 30\/- per seat per quarter.
\nAppeals were preferred against this decision to this Court.
\nThereafter,  the  Government of Tamil Nadu  issued  G.O.M.S.
\n2544 Home dated 20-1-1971 enhancing the tax from Rs. 30\/- to
\nRs. 100\/per seat per quarter with effect from 1-7-1971.\t  It
\nis  this  G.O. which the petitioner challenges in  the\twrit
\npetition.\n<\/p>\n
Counsel\t for  the petitioner submitted,\t firstly,  that\t the
\nnotification   was not a measure of taxation but a device to
\neliminate the competition of omnibuses with stage  carriages
\nrun by Government and, therefore, the tax is bad.  Secondly,
\nhe  submitted  that  the tax  is  neither  compensatory\t nor
\nregulatory_  in\t character  and, therefore,  the  tax  is  a
\nrestriction   on   the\tfreedom\t of  trade,   commerce\t and
\nintercourse   guaranteed  under\t Article  301  and  as\t the
\nnotification is not a law passed with the previous  sanction
\nof the President, it would not be saved by   Article 304(b).
\nIn  other  words,  the submission was  that  since  the\t tax
\noperates  as restriction on the freedom of  trade,  commerce
\nand  intercourse within the State, it could be imposed\tonly
\nby  a  law which had obtained the previous sanction  of\t the
\nPresident and as the notification in question was issued by-
\nthe  Government in the exercise of its delegated  power,  it
\nwas not a law made by the legislature nor could the previous
\nsanction of the President be obtained for it.
\nThe tax was imposed by the Government in the exercise of its
\npower under s. 4 of the Madras Motor Vehicles Taxation\tAct,
\n1931.  That section provides :\n<\/p>\n
\t      “4(1)    The   State   Government\t  may,\t  by
\n\t      notification  in\tthe official  gazette,\tfrom
\n\t      time to time direct that a tax shall be levied
\n\t      on  every motor vehicle using any public\troad
\n\t      in the Presidency of Madras,
\n\t      (2)   The\t  notification\tissued\tunder\tsub-\n<\/p>\n
\t      section (1) shall specify the rates at  which,
\n\t      and  the quarter from which, the tax shall  be
\n\t      levied :\n<\/p>\n
\t      Provided\tthat the rates shall not exceed\t the
\n\t      maxima specified in Schedule II.\n<\/p>\n
\t      (3)   A notification under sub-section (1) may
\n\t      be issued so as to   have retrospective effect
\n\t      from a date not earlier than the 1st     day
\n\t      of July, 1962.\n<\/p>\n
\t      Provided that a notification under sub-section
\n\t      (1) ill respect of the rates as amended by the
\n\t      Madras  Motor  Vehicles  Taxation\t (Amendment)
\n\t      Act, 1967 shall not have retrospective  effect
\n\t      from a date earlier than the 1st day of  July,
\n\t      1967.”\n<\/p>\n
15-L319SupCI\/75
\n720<\/span>
\nAs  the state legislature was competent to pass the Act\t and
\nas the Government is authorised under S. 4 to levy the\ttax,
\nthe question of the motive with which the tax was imposed is
\nimmaterial.  To put it differently, there can be no plea  of
\na colourable exercise of power to tax if the Government\t had
\npower to impose the tax and the fact that the imposition  of
\nthe tax was for the purpose of eliminating competition would
\nnot detract from its validity. if an authority has power  to
\nimpose\ta  tax,\t the fact that it gave a  wrong\t reason\t for
\nexercising the power would not derogate from the validity of
\nthe  tax.   Therefore, there is no substance  in  the  first
\ncontention.\n<\/p>\n
The  second  submission\t raises the  point  whether  tax  in
\nquestion is a restriction on the freedom of trade,  commerce
\nand   intercourse   guaranteed\tby  Article   301   of\t the
\nConstitution.\n<\/p>\n
In  Atiabari  Tea  Co. v.  State  of  Assam(1)\t(hereinafter
\nreferred  to as ‘Atiabari Case’), the appellants  challenged
\nthe  validity  of the Assam Taxation (on  Goods\t carried  by
\nRoads and Inland Waterways) Act, 1954, on the ground that it
\nviolated  Article 391 and was not saved by  Article  304(b).
\nBy a majority of 4 to 1, this Court upheld the challenge and
\ndeclared  the  Act to be void.\tThe majority  said  that  it
\nwould  be reasonable and proper to hold\t that  restrictions,
\nfreedom\t from which is guaranteed by Article 301,  would  be
\nsuch  restrictions as directly and immediately\trestrict  or
\nimpede the free flow or movement of trade and that taxes may
\nand do amount to restrictions, but it is only such taxes  as
\ndirectly and immediately restrict trade hat would fall\twith
\nin  the purview of Article 301.\t Sinha, C.J. dissented.\t  He
\nheld that taxation simpliciter, as opposed to discriminatory
\ntaxation,  was\tnot  within  Article  301.   Shah,  J.\t who
\ndelivered   a  separate\t judgment  said\t that  Article\t 301
\nguaranteed  freedom  in its  widest  amplitude-freedom\tfrom
\nprohibition,  control,\tburden or impediment  in  commercial
\nintercourse.\n<\/p>\n
The direct and immediate restriction test had great  adverse
\neffect upon the financial autonomy of states.  For instance,
\na  law passed by a state legislature under entry 56 in\tList
\n11, namely “taxes on goods and passengers carried by road or
\non  inland  waterways”\twould  be  a  restriction  which  is
\nimmediate  and\tdirect\ton the movement part  of  trade\t and
\ncommerce and would be bad.  This means that Entry 56 in List
\n11 is rendered otiose.\n<\/p>\n
In  view of the grave impact of this judgment, when  appeals
\nfrom  Rajasthan\t High  Court came up  for  consideration  in
\nAutomobile   Transport\t (Rajasthan)  Ltd.   v.\t  State\t  of
\nRajasthan<\/a>(2)  (hereinafter  referred to as  the\t ‘Automobile
\nCase’),\t a  larger  Bench was  constituted  and\t that  Bench
\nconsidered the question once again.  The appellants in\tthat
\ncase  impugned\tthe Rajasthan Motor Vehicles  Taxation\tAct,
\n1951,  inter alia as violating Article 301.  The High  Court
\ndismissed the petitions ‘and this Court, by a majority of  4
\nto 3 held that the Act was valid and dismissed the  appeals.
\nThe  case  practically overruled the  decision\tin  Atiabari
\nCase(17),  insofar  as it held that if a  state\t legislature
\nwanted to impose tax to raise moneys necessary in order to
\n(1) [1961] 1 S.C.R. 809.\n<\/p>\n
(2)  [1963] 1 S.C.R. 491.\n<\/p>\n
721<\/span><\/p>\n
maintain roads, that could only be done after obtaining\t the
\nsanction of the President as provided in Article 304(b).  In
\nKhverbari  Tea co. Ltd. v. The State of,, Assam(1),  it\t was
\nsaid  that  the decision in Atiabar.; case was\taffirmed  in
\nAutomobile   Case  with\t a   clarification   that-regulatory
\nmeasures  or measures imposing compensatory tax do not\tcome
\nwithin\tthe purview of restrictions contemplated in  Article
\n301  and  that\tsuch  measures\tneed  not  comply  with\t the
\nrequirement  of\t the  provisions  of  Article  304(b).\t  In
\nwhatever  way  one may choose to put it, the effect  of\t the
\nmajority   decision  in\t the  Automobile  Case\tis  that   a
\ncompensatory tax is not a restriction upon the movement part
\nof trade and commerce.\n<\/p>\n
Article 301 imposes a general limitation on all\t legislative
\npower\tin  order  to  secure  that  trade,   commerce\t and
\nintercourse throughout the territory of India shall be free.
\nArticle\t 302  gave  power to Parliament\t to  impose  general
\nrestrictions upon that freedom.\t But a restriction is put on
\nthis relaxation by Article 303(1) which prohibits Parliament
\nfrom  giving  preference  to  one  State  over\tanother\t  or
\ndiscriminating\tbetween one State and another by  virtue  of
\nthe  entries relating to trade and commerce in Lists  I\t and
\nIII of Seventh Schedule and a similar restriction is  placed
\non  the\t states,  though  the reference\t to  the  states  is
\ninappropriate.\tEach of the clauses of Article 304  operates
\nas a proviso to Articles 301 and 303.  Article 304(a) places
\ngoods  imported\t from sister-states on a  par  with  similar
\ngoods manufactured or produced inside the state in regard to
\nstate  taxation within the allocated filed.  Article  304(b)
\nis  the\t State analogous to Article 302, for  it  makes\t the
\nstate’s\t power\tcontained in Article 304(b)  expressly\tfree
\nfrom  the prohibition contained in Article 303(1) by  reason
\nof the opening words of Article 304.  Whereas in Article 302
\nthe  restrictions  are\tnot subject to\tthe  requirement  of
\nreasonableness, the restrictions under Article 304(b) are so
\nsubject.   The\tword  ‘free’ in Article 301  does  not\tmean
\nfreedom\t from  regulation.   There is  a  clear\t distinction
\nbetween\t laws  interfering  with freedom to  carry  out\t the
\nactivities  constituting  trade and laws imposing  on  those
\nengaged therein rules of proper conduct or other  restraints
\ndirected  to the due and orderly manner of carrying out\t the
\nactivities.   This distinction is described  as\t regulation.
\nThe word ‘regulation’ has no fixed connotation.\t Its meaning
\ndiffers according to the nature of the thing to which it  is
\n,applied.   The true solution, perhaps, in any\tgiven  case,
\ncould  be  found by distinguishing between features  of\t the
\ntransaction  or activity in virtue of which it\tfell  within
\nthe  category of trade, commerce and intercourse  and  those
\nfeatures  which,  though invariably found to occur  in\tsome
\nform  or  another  in  the transaction\tor  action  are\t not
\nessential  to  the  conception.\t What  is  relevant  is\t the
\ncontrast  between  the\tessential  attribute  of  trade\t and
\ncommerce  and the incidents of the transaction which do\t not
\ngive  it  necessarily the character of trade  and  commerce.
\nSuch  matters relating to hours, equipment,  weight\/size  of
\nload,  lights, which form the incidents\t of  transportation,
\neven  if  inseparable,\tdo  not\t give  the  transaction\t its
\nessential   character  of  trade  or  commerce.\t  Laws\t for
\ngovernment of such incidents ‘regulate'(2).
\n(1)  [1964] 5 S.C.R.975.\n<\/p>\n
(2)  See   Wynes,  “Legislative,  Executive   and   Judicial
\nPowers”, p. 270.\n<\/p>\n
722<\/span><\/p>\n
Regulations  like  rules of traffic  facilitate\t freedom  of
\ntrade and commerce whereas restrictions impede that freedom.
\nThe collection of toll or tax for the use of roads, bridges,
\nor aerodromes, etc., do not operate as barriers or hindrance
\nto trade.  For a tax to become a prohibited tax, it has\t to,
\nbe  a  direct  tax, the effect of which\t is  to\t hinder\t the
\nmovement  part of-the trade.  If the tax is compensatory  or
\nregulatory,  it\t cannot\t operate as  a\trestriction  on\t the
\nfreedom of trade or commerce.\n<\/p>\n
The  question  for consideration then  is, whether  the\t tax
\nhere, is a compensatory tax.\n<\/p>\n
Strictly speaking, a compensatory tax is based on the nature
\nand  the  extent  of  the use made of  the  roads,  as,\t for
\nexample,  a mile-age or ton-mileage charge or the like,\t and
\nif   the  proceeds  are\t devoted  to  the  repair,   upkeep,
\nmaintenance  and  depreciation\tof relevant  roads  and\t the
\ncollection   of\t  the  exaction\t involves   no\t substantial
\ninterference with the movement.\t The expression\t ‘reasonable
\ncompensation’  is  convenient but vague.   The\tstandard  of
\nreasonableness\tcan only lie in the severity with  which  it
\nbears  on traffic and such evidence of extravagance  in\t its
\nassessment  as\tcome from general considerations.   What  is
\nessential for the purpose of securing freedom of movement by
\nroad  is that no pecuniary burden should be placed  upon  it
\nwhich  goes beyond a proper recompense to the state for\t the
\nactual\tuse made of the physical facilities provided in\t the
\nshape  of  a  road.   The difficulties\tarc  very  great  in
\ndefining this conception.  But the conception appears to  be
\nbased  on  a real distinction between remuneration  for\t the
\nprovision of a specific physical service of which particular
\nuse  is made and a burden placed upon transportation in\t aid
\nof  the general expenditure of the state.  It is clear\tthat
\nthe  motor vehicles require, for their safe,  efficient\t and
\neconomical  use,, roads of considerable width, hardness\t and
\ndurability;  the  maintenance of such roads  will  cost\t the
\ngovernment  money.   But,  because  the\t users\tof  vehicles
\ngenerally, and of public motor vehicles in particular, stand
\nin  a special and direct relation to such roads, and may  be
\nsaid  to derive a special and direct benefit from  them,  it
\nseems  not unreasonable that they should be called  upon  to
\nmake  a special contribution to their maintenance  over\t and
\nabove their general contribution as taxpayers of the  State.
\nIf,  however,  a charge is imposed, not for the\t purpose  of
\nobtaining  a  proper  contribution to  the  maintenance\t and
\nupkeep\tof  the\t road,\tbut for\t the  purpose  of  adversely
\naffecting trade or commerce, then it would be a\t restriction
\non the freedom of trade, commerce or intercourse(1).
\nIn  the counter-affidavit filed on behalf of the State,\t the
\naverment  is that Government has incurred an expenditure  of
\nRs. 19.51 crores in the year 1970-71 on the maintenance\t and
\nconstruction of roads while the receipts from out of vehicle
\ntax  is\t only Rs. 16.38 crores.\t It is also  stated  therein
\nthat  the  amount of Rs. 19.51 crores did  not\tinclude\t the
\ngrants made to local bodies like municipalities and  Pancha-
\nyat  Unions for the repair and maintenance of  roads  within
\ntheir jurisdiction: “Road    costs”,   according   to\t the
\naffidavit, not only includes
\n(1) see Freightlines & Construction Holding Ltd. v. State of
\nNew South Wales,
\n(1) [1968] A.C. 625.\n<\/p>\n
723<\/span><\/p>\n
he  cost of construction and maintenance of roads, but\talso
\nthe costs elating to the erection and maintenance of traffic
\ncontrol\t devices,  safety  measures,  improvements  to\t old
\nlayouts\t and  the  increased  establishment  of\t enforcement
\nstaff.\n<\/p>\n
In the Automobile Case (supra) this Court said that it would
\nnot  be right to say that a tax is not compensatory  because
\nthe  precise  or specific amount collected is  not  actually
\nused  for providing any facilities and that a working,\ttest
\nfor  deciding  whether a tax is compensatory or\t not  is  to
\nenquire\t whether  the trades people are having\tthe  use  of
\ncertain facilities for the better conduct of their  business
\nand paving not patently much more than what is required from
\nproviding the facilities, and that it would be impossible to
\njudge the compensatory nature of a tax by a meticulous\ttest
\nand, in the nature of things, it could not be done.
\nIt   is\t well  to  remember  the  practical   administrative
\ndifficulties  in imposing a tax at a rate per mile.   It  is
\nalways difficult to evolve a formula which will in all cases
\nensure\texact  compensation  for  the use  of  the  road  by
\nvehicles  having regard to their type, weight  and  mileage.
\nRough  approximation, rather than mathematical accuracy,  is
\nall  that is required.\tIn all such matters, it is  well  to
\nremember  the profound truth of the sayings “it is the\tmark
\nof  an educated man to look for precision in each  class  of
\nthings just so far as the nature of the subject admits”(1).
\nThe Supreme Court of U.S.A. takes the view that the validity
\nof  a  tax on vehicles must be determined not by  way  of  a
\nformula but rather by the result, and in several cases,\t the
\ncourt  has upheld the validity of a flat fee not  geared  to
\nweight,\t mileage  or seating capacity, provided the  fee  is
\nreasonable in amount and is not shown to be in excess of the
\ncompensation for the use of the roads (2). According to that
\nCourt, since the purpose of the tax imposed by the state  on
\nmotor  vehicle using its road is to obtain from them a\tfair
\ncontributive   share  of  the  cost  of\t  constructing\t and
\nmaintaining the public highways and facilities furnished and
\nto   defray   the  expense  of\tadministering\tthe   police
\nregulations enacted for the purpose of ensuring the,  public
\nsafety,\t the method used by the state for imposing tax\tdoes
\nnot  seem  to be of great significance; but  such  taxation,
\nhowever,  can  only be for the purpose of  compensating\t the
\nstate  for  the use of its roads and to defray the  cost  of
\nconstruction  and  maintenance and  expenses  in  regulating
\nmotor traffic, and it must affirmatively appear that such is
\nthe  purpose of the legislation sought to be  upheld.\tBut,
\nonce  a proper purpose is established, the state has  consi-
\nderable discretion in the method, measurement and amount  of
\nthe tax.\n<\/p>\n
It  has\t been said that the amount of the  charges  and\t the
\nmethod of collection are primarily for determination by\t the
\nstate  itself,\talthough they must be reasonable  and  fixed
\naccording to some uniform, fair and practical standard.\t  If
\nthe tax is attacked on the ground that it is excessive,\t the
\nburden of proof is upon the one, attacking its validity.
\n(1)  see  Basic Works of Aristotle, Ed.\t Richard McKson,  p.\n<\/p>\n
936.
\n(2)  see  Morf.\t v.  Bingaman,\t298  U.\t S.  407;  and\tAero
\nMayflower  Transit Co. v Board of R. R. Commrs., 332  U.  S.\n<\/p>\n
497.
\n724<\/span>
\nAlthough  any method of taxation which has a direct  bearing
\nupon  or  connection  with  the\t use  of  the  highways\t  is
\napparently  valid, a tax which has no such apparent  bearing
\nand is not shown to be compensatory, but is rather a tax  on
\nthe  privilege of engaging in trade or commerce,  is  beyond
\nthe  power  of the state.  Nor is it  necessary\t that  there
\nshould be a separate fund or express allocation of money for
\nthe  maintenance of roads to prove the compensatory  purpose
\nwhen such purpose is proved by alternative evidence.
\nMr.  Natesan  appearing\t for some of  the  writ\t petitioners
\nsubmitted that the levy is not a compensatory tax,  because,
\nthe government has included the cost of the construction  of
\nnew  roads  also in their ‘road costs’ and that\t that  would
\nderogate  from the compensatory character of the  tax.\t His
\nargument  was  that it is only for the use of  the  road  in
\nexistence  that vehicle tax can be levied and  that  capital
\nexpenditure  for construction of new roads cannot  be  taken
\ninto  account and included in the levy of vehicle  tax.\t  In
\nArmstrong and Others v. The State of Victoria and Others(1),
\nthe  Court  said  that traffic is a constant  flow  and\t the
\nregularly recurring charges of maintaining a surface for  it
\nto  run.  upon may be recoverable from the  flowing  traffic
\nwithout\t any derogation of the freedom of movement; but\t any
\ncontribution to capital expenditure goes altogether  outside
\nsuch a principle and the charge must be a genuine attempt to
\ncover  or  recover  the costs of upkeep of  the\t roads.\t  In
\nCommonwealth Freighters Pvt.  Ltd. v. Sneddon(2), the  court
\nobserved  that\tit  does not seem  logical  to\tinclude\t the
\ncapital cost of new highways or other capital expenditure in
\nthe  costs  taken as the basis of the  computation  of\troad
\ncosts.\n<\/p>\n
It is clear from the counter–affidavit filed that Rs. 19.51
\ncrores have been spent not only for the maintenance of roads
\nbut  also for construction of new ones and that the  receipt
\nfrom the vehicle tax was only Rs. 16.38 crores.\t However, it
\nis   not   clear  whether  any\t capital   expenditure\t for
\nconstruction  of  new roads really entered into\t the  actual
\nlevy  of vehicle tax.  It might be that even if the cost  of
\nconstruction  of new roads is excluded, the  receipts  would
\nnot  be\t sufficient  to\t meet  the  expenses  incurred\t for
\nmaintenance of old roads and, therefore, it is difficult  to
\nsay  that in actual fact, capital expenditure for  construc-
\ntion  of  new roads was taken into account in  the  levy  of
\nvehicle tax.\n<\/p>\n
That part, in the Automobile Case (supra), this Court quoted
\nwith approval a passage from the judgment of the High Court.
\nThe passage is as follows
\n\t      “…We find that in 1952-53 income from  motor
\n\t      vehicles\t taxation  under  the  Act  was\t  in
\n\t      neighbourhood of 34 lakhs.  In that very year,
\n\t      the  expenditure on new roads and\t maintenance
\n\t      of  old roads was in the neighbourhood  of
\n\t      60  lakhs.  In 1954-55, the  estimated  income
\n\t      from the tax was 35 lakhs, while the estimated
\n\t      expenditure was over 65 lakhs.  It is  obvious
\n\t      from these figures that the State is
\n(1)  99 Commonwealth Law Reports 28.\n<\/p>\n
(2)  102 Commonwealth Law Reports 280.\n<\/p>\n
725<\/span><\/p>\n
\t      charging\tfrom  the users\t of  motor  vehicles
\n\t      something\t in the neighbourhood of 50% of\t the
\n\t      cost it has to incur in maintaining and making
\n\t      roads”.\n<\/p>\n
The approach of this Court is supported by the decisions  of
\nthe  Supreme Court of U.S.A. In Interstate Transit, Inc.  v.
\nLindscy(1), it is observed that while a state may not lay  a
\ntax  on the privilege of engaging in interstate commerce  it
\nmay  impose even upon motor vehicles engaged exclusively  in
\ninterstate commerce a charge, as compensation for the use of
\nthe public highways which is a fair contribution to the cost
\nof  constructing and maintaining them and of regulating\t the
\ntraffic thereon.  In Capital Greyhound Lines v. Brice ( 2) ,
\nthe  state tax was upheld even though the attorney  for\t the
\nstate  had  conceded  that  the tax  was  allocated  to\t the
\nconstruction and maintenance of the state highways.
\nWhether the restrictions visualized by Article 304(b)  would
\ninclude the levy of a non-discriminatory tax is a matter  on
\nwhich  there  is scope for difference of  opinion.   Article
\n304(a)\tprohibits only imposition of a\tdiscriminatory\ttax.
\nIt is not clear from the article that a tax simpliciter\t ran
\nbe  treated  as\t a restriction on the  freedom\tof  internal
\ntrade.\tArticle 304(a) is intended to prevent discrimination
\nagainst\t imported goods by imposing on them tax at a  higher
\nrate  than  that borne by goods produced in  the  state.   A
\ndiscriminatory\ttax  against  outside goods  is\t not  a\t tax
\nsimpliciter but is a barrier to trade and commerce.  Article
\n304 itself makes a distinction between tax and\trestriction.
\nThat  apart,  taxing  powers of the  Union  and\t States\t are
\nseparate and mutually exclusive.  It is rather strange\tthat
\npower to tax   given  to  states, say  for  instance,  under
\nEntry 54 of List II to\tpass a law imposing  tax on sale  of
\ngoods should depend upon the goodwill of     the       Union
\nexecutive.   It is said that a tax on sale does\t not  impede
\nthe  movement  of  goods.   But Shah, J. said  in  State  v.
\nNatarajan “that tax under Central sales\t tax on\t inter-state
\nsale,  it  must be noticed, is in its essence  a  tax  which
\nencumbers   movement  of  trade\t and  commerce”.    However,
\nBachawat, J. in his separate judgment in that case said that
\nArticle\t 301 makes no distinction between movement from\t one
\npart  of  the state to another part of the  same  state\t and
\nmovement  from\tone  state  to another, that  if  a  tax  on
\nintrastate sale does not offend Article 301, equally, a\t tax
\non  inter-state\t sale cannot do so, and\t that,\tneither\t tax
\noperate directly or immediately on the free flow of trade or
\nfree movement as the tax is on the sale, the movement  being
\nincidental  or consequential. What is guaranteed by  Article
\n301 is freedom of trade, commerce and intercourse.   Freedom
\nof  movement  of goods from one place to another is  a\tvery
\nimportant  facet of freedom of trade and commerce.  That  is
\nperhaps\t the  reason why the Court, in the  Automobile\tCase
\n(supra)\t restricted  the  freedom  of  trade  and   commerce
\nguaranteed  under  Article 301 to the movement part  of\t it.
\nWhether there is any warrant for restricting the concept  of
\nfreedom of trade and commerce to the movement part of it  is
\na  matter  upon\t which we are not called upon  to  make\t any
\npronouncement.\tA tax on
\n(1)283 U. S. 183, at 185.\n<\/p>\n
(3)  [1968] 3 S.C.R. 829.\n<\/p>\n
(2) 339 U. S. 5442.\n<\/p>\n
726<\/span><\/p>\n
sale of goods might encumber sale and purchase and, to\tthat
\nextent,\t restricts the freedom of trade and commerce.\tThat
\napart,\tas Shah, J. said, if tax on inter-state sale  is  in
\nessence\t “a  tax  which\t encumbers  movement  of  trade\t and
\ncommerce”,  a  tax  on intra-state,  sale,  if\tit  Involves
\nmovement  from one part of the state to another part of\t the
\nsame state, would encumber the movement part of it and is  a
\nrestriction on the freedom of trade and commerce.  Generally
\nspeaking, selling and buying involves delivery of the  goods
\nsold  and  bought.   If\t that be  so,  it  would  mean\tthat
\nimposition  of sales tax by a state on intrastate  sale,  at
\nany  rate, when the sale involves movement of goods will  be
\nrestriction  of\t trade\tand  commerce  and  unless  the\t law
\nimposing  it  has  received the\t previous  sanction  of\t the
\nPresident, the law would be bad as a tax on sales is neither
\nregulatory  nor\t compensatory.\t If the\t President  were  to
\nrefuse his consent, the state will be bereft of that  source
\nof  revenue which the Constitution has expressly,  given  to
\nthe State.  It is unnecessary to pursue the matter  further,
\nas  we\tthink  the  tax\t imposed  by  the  notification\t  is
\ncompensatory in character and could not, therefore, restrict
\nthe freedom of trade and commerce according to the  decision
\nin Automobile Case (supra).\n<\/p>\n
In  the Civil Appeals, two points have been raised,  namely,
\n(1)  that  the tax imposed is excessive\t and  therefore,  it
\noperates  as unreasonable restriction upon  the\t fundamental
\nright  of the appellants to carry on the business;  and\t (2)
\nthat  the imposition of different rates of tax\ton  contract
\nand stage carriages is discriminatory and is, therefore, hit
\nby Article 14.\n<\/p>\n
So far as the first contention is concerned, we do not think
\nthat any material has been placed before us to hold that the
\ntax   is  confiscatory\tand  operates  as  an\tunreasonable
\nrestriction  upon  the\tappellants’ right to  carry  on\t the
\ntrade.\tWe have already held that the tax is compensatory in
\ncharacter.   If\t that  is so, we do not think  that  it\t can
\noperate as an unreasonable restriction upon the\t fundamental
\nright of the appellants to carry on their business, for, the
\nvery  idea  of\tcompensatory tax is  service  more  or\tless
\ncommensurate with the tax levied.  No citizen has a right to
\nengage\tin trade or business without paying for the  special
\nservices  he receives from the state.  That is part  of\t the
\ncost of carrying on the business.\n<\/p>\n
Mr.  Gupte contended that there was no reason  for  imposing
\nvehicle\t tax at a higher rate on contract carriages than  on
\nstage  carriages.   He said that both  stage  carriages\t and
\ncontract  carriages are similarly situated with\t respect  to
\nthe purpose of vehicle taxation, namely, the use of the road
\nand,  therefore, a higher vehicle tax on contract  carriages
\nis manifestly discriminatory.  In other words, the  argument
\nwas  that  the\tclassification\tof  the\t vehicles  as  stage
\ncarriages and contract carriages for the purpose of a higher
\nlevy of vehicle tax on contract carriages has no  reasonable
\nrelation to the purpose of the Act.\n<\/p>\n
The  Act  contained  originally 3  schedules  out  of  which
\nSchedule II was repealed in 1938 with the result that  there
\nare  now  Schedules II and III only.  Schedule II  was\tmade
\nunder  s. 4(2) of the Act and Schedule III under s. 5  (1  )\n<\/p>\n
(c) of the Act.\t Section 17 of the Act gave
\n727<\/span>
\npower  to  the\tState, Government  to  make  rules  amending
\nSchedule  11  or  Schedule  HI.\t Sub-clause  (3)  of  S.  17
\nprovided that any rule made under s. 17 shall be laid on the
\ntable of the Legislative Assembly and the rule shall not  be
\nmade  unless the Assembly approves the draft either  without
\nmodification  cr.  addition and on such rule being  so\tmade
\nshall  be  published  in the  official\tgazette\t and  shall,
\ntherefore,  have full force and effect.\t Schedule  II  deals
\nwith various types of motor vehicles.  Entry 4(iii)  therein
\ndeals with vehicles permitted to ply as stage carriages\t and
\nto  carry more than 6 persons and not plying exclusively  in
\nthe City of Madras or Municipalities.  The maximum quarterly
\ntax is indicated in respect of such vehicles under 2 heads :
\n(1)  vehicles  fitted with pneumatic tyres;  and  (2)  other
\nvehicles.   For\t every\tseated passenger  (.other  than\t the
\ndriver and the conductor) which the vehicle is permitted  to
\ncarry,\tthe maximum quarterly tax for vehicles\tfitted\twith
\npneumatic  tyres  as also for other  vehicles  was  provided
\ndepending  upon\t the distance covered by such  vehicles\t per
\nday.   Entry  4(iv)  deals with vehicles  permitted  to\t ply
\nsolely\tas contract carriages carrying more than  5  persons
\n(other\tthan the driver).  For every person other  than\t the
\ndriver, which the vehicle is permitted to carry, the maximum
\nquarterly  tax for vehicles fitted with pneumatic tyres\t and
\nfor other vehicles is also provided.\n<\/p>\n
The  reason  for  enhancing  the  vehicle  tax\ton  contract
\ncarriages  is  stated in the counter-affidavit.\t  It  is  as
\nfollows.   Commercial vehicles consist of  public  transport
\npassenger   buses,  namely  stage  carriages  and   contract
\ncarriages and goods vehicles namely, trucks of varying capa-
\ncity.\tThe  tax  on  lorries is  graduated,  based  on\t the
\npermitted  laden  weight, the higher the laden\tweight,\t the
\nhigher the amount of tax.  So far as the passenger buses are
\nconcerned, the stage carriages cannot do unlimited  mileage.
\nBut  contract carriages, depending upon\t the  organisational
\nefficiency,  can do much more distance of travel per day  as
\nthere  is flexibility of space and time for  its  operation.
\nThe  stage  carriages  have to operate only  on\t fixed\ttime
\nschedules  and on fixed routes and the number of miles\tthey
\ncan negotiate is limited by the rule to 250 miles.  Besides.
\nthey  can  operate  only  on roads  duly  certified  by\t the
\nconcerned  authorities\tas fit for such operation.   On\t the
\nother  hand,  in the-case of contract  carriages,  there  is
\nneither\t any  fixed time schedule nor any fixed\t route;\t the
\nnumber\tof miles they can run is also quite unlimited;\tthey
\nare  free  to  operate\ton any route  whether  the  road  is
\ncertified  as  fit  for\t such traffic  or  not.\t  Hence\t the
\ncontract  carriages  can run a larger number of\t miles\tthan
\nstage carriages and therefore the wear and tear of the\troad
\ncaused\twould be greater and in the case of roads which\t are
\nnot  fit for such operation, the damage to the road  surface
\ndue  to\t wear and tear is quite likely to  be  much  larger,
\ninvolving higher cost of maintenance of such roads; in other
\nwords,\tthe contract carriage even with the  same  passenger
\nseating capacity as a stage carriage can travel on any\troad
\nand on any type of surface at any time of the day or  night,
\nand  thus can cause greater damage to roads,  especially  of
\nthe inferior type of road surfaces which it traverses.\t The
\nhigher\tspeed of vehicle will induce correspondingly  higher
\nimpact\tstresses on the pavement structure than the  vehicle
\nof
\n728<\/span>
\nthe same capacity at lower speeds.  These higher stresses in
\nthe  pavement layers affect the performance  characteristics
\nad durability of the, surface.\tAlso, higher speeds  require
\nlonger accelerating and decelerating, distances which brings
\nin  the maximum value of the frictional coefficient  causing
\nincreased wear and tear of the road surfaces.  Moreover, the
\nload  factor  of a stage carriage  including  the  passenger
\nluggage may be comparatively low.  In the  counter-affidavit
\nit  is\talso stated that the rate ‘of tax payable  on  stage
\ncarriage is Rs. 651- per seat per quarter and a surcharge of
\n10 paise per rupee on the fare collected, through there is a
\nprovision for compounding the tax collected at Rs. 25\/-\t per
\nseat  per  quarter  under  the\tTamil  Nadu  Motor  Vehicles
\n(Taxation  of  Passengers  and Goods)  Act,  1952,  is\talso
\npayable\t by  their  owners  and\t that  owners  of   contract
\ncarriages are not liable to pay the Surcharge.
\nSection\t 2(3)  of  the Motor Vehicles  Act,  19,39,  defines
\n“contract carriage” as follows :\n<\/p>\n
\t       ” ‘ contract carriage’ means a  motor vehicle
\n\t      which  carries a passenger or  passengers\t for
\n\t      hire  or reward under a contract expressed  or
\n\t      implied for the use of the vehicle as a  whole
\n\t      at or for a fixed or agreed rate or sum-\n<\/p><\/blockquote>\n
\t      (i)   on\ta  time basis whether  or  not\twith
\n\t      reference to any route or distance, or\n<\/p><\/blockquote>\n
\t      (ii)  from one point to another, and in either
\n\t      case without stopping to pick up,
\n\t      or set down along the line of route passengers
\n\t      not  included in the contract; and includes  a
\n\t      motor cab notwithstanding that the  passengers
\n\t      may pay separate fares.”\n<\/p><\/blockquote>\n
\t      “Stage carriage” has been defined in S.  2(29)
\n\t      of that Act as under
\n\t      ”\t stage\tcarriage’  means  a  motor   vehicle
\n\t      carrying\tor  adapted to carry more  than\t six
\n\t      persons excluding the driver  which  carries
\n\t      passengers  for  hire or\treward\tat
\n\t      separate\tfares  paid  by\t or  for  individual
\n\t      passengers,  either for the whole\t journey  or
\n\t      for stages of the journey”.\n<\/p><\/blockquote>\n
   Under  s.  46  of  the  Motor  Vehicles  Act,  1939,\t  an
\napplication  for stage carriage permit must  contain,  among
\nother  things, the route or routes or the area or  areas  to
\nwhich  the  application\t relates, the  minimum\tand  maximum
\nnumber of daily trips proposed to be provided in relation to
\neach  route  or\t area and the time table  of  normal  trips.
\nSection 48 of that Act is clear that the regional  transport
\nauthority  may attach a condition that the vehicle shall  be
\nused  only in a specified area or on a specified  route\t and
\nalso  fix the minimum or maximum number of daily trips,\t the
\nnumber\tof  passengers, the weight and nature  of  passenger
\nluggages.   An\tapplication for a contract  carriage  permit
\nmust contain, among other things, specification of the\tarea
\nfor  which  the\t permit\t is required (see  s.  49)  and\t the
\nregional transport
\n729<\/span>
\nauthority  may\tattach\ta  condition  that  the\t vehicle  or
\nvehicles  can be used only in a specified area\tor  specific
\nroute or routes and that except in accordance with specified
\nconditions,  no contract of hiring, other than an  extension
\nor modification of a subsisting contract may be entered into
\noutside\t the specified area (see S. 51).  A  stage  carriage
\npermit\tmay authorize the use of the vehicle as\t a  contract
\ncarriage (sees. 42).  The State Government is authorised  by
\ns.  43\tto issue directions as to the fixing  of  fares\t and
\nfreights including the maximum and minimum thereof for stage
\ncarriages and contract carriages.  The limit of the speed of
\nany motor vehicle can be fixed by the State Government or an
\nauthority  authorized in that behalf and the  maximum  speed
\nshall  in  no case exceed the maximum fixed  in\t the  eighth
\nschedule (sees. 71).\n<\/p>\n
It cannot be said that a classification made on the basis of
\nthe capacity of the contract carriages to run more miles  is
\nunreasonable because those carriages will be using the\troad
\nmore   than  the  stage’  carriages  which  have  got\ttime
\nschedules,  specified routes and minimum and maximum  number
\nof  trips.   A\tperson.who challenges  a  classification  as
\nunreasonable has the burden of proving it.  There is  always
\na presumption that a classification is valid, especially  in
\na taxing statute.  The ancient proposition that a person who
\nchallenges  the\t reasonableness\t of  a\tclassification,\t and
\ntherefore,  the\t constitutionality  of the  law\t making\t the
\nclassification,\t has to prove it by relevant materials,\t has
\nbeen reiterated by this Court recently.(1) In the context of
\ncommercial  regulation, Article 14 is offended only  if\t the
\nclassification\trests  on grounds wholly irrelevant  to\t the
\nachievement  of the objective and this lenient\tstandard  is
\nfurther\t weighted in the State’s favour by the fact  that  a
\nstatutory  discrimination will not be set aside if a:  state
\nof facts may reasonably be conceived by the Court to justify
\nit.(2)
\n.lm15
\nIn  State  of Gujarat v. Ambica Mills Ltd.<\/a> (3),\t this  Court
\nsaid : “. . . In the utilities, tax and economic  regulation
\ncases,\tthere are good reasons for judicial  self-restraint,
\nif  not\t judicial deference to\tlegislative  judgment.\t The
\nlegislature, after all, has the affirmative  responsibility.
\nThe   Courts  have  only  the  power  to  destroy,  not\t  to
\nreconstruct.   When  these are added to\t the  complexity  of
\neconomic  regulation,  the  uncertainty,  the  liability  to
\nerror,\tthe  bewildering conflict of the  experts,  and\t the
\nnumber\tof times the judges have been overruled\t by  events-
\nself  limitation  can  be seen to be  the.path\tof  judicial
\nwisdom and institutional prestige and stability (see  Joseph
\nTussman\t and Jacobus tenBroek, “The Equal Protection of\t the
\nLaws”, 37 California Law Rev. 341.’
\n This  approach\t is  consistent\t with  the  latest  reported
\ndecision  of the Supreme Court of the U.S.A. in San  Antonio
\nSchool District v. Bodrigues(4) where the majority  speaking
\nthrough Justice Stewart said:\n<\/p>\n
\t      “Thus,  we  stand on familiar ground  when  we
\n\t      continue\tto acknowledge that the Justices  of
\n\t      this Court lack both the ex-\n<\/p><\/blockquote>\n
(1)  see Amalgamated Tea Estates v. State of Kerala.<\/a>  (1974)
\n4  S.C.C. 415 & Murthy Match Works v. Asstt.   Collector  of
\nCentral Excise,<\/a> [1974] 4 S.C.C. 428.\n<\/p>\n
(2) see McGowan v. Maryland, 366 U. S., at 425-626.
\n(3) [1974] 11 S.C.J. 211, at 231.\n<\/p>\n
(4) 411 U.S.I.\n<\/p>\n
730<\/span><\/p>\n
\t      pertise\tand  the  familiarity\twith   local
\n\t      problems\tso necessary to the making  of\twise
\n\t      decisions\t with  respect to  the\traising\t and
\n\t      disposition  of public revenues.\tYet, we\t are
\n\t      urged  to\t direct the States either  to  alter
\n\t      drastically the present system or to throw out
\n\t      the property tax altogether in favour of\tsome
\n\t      other   form  of\ttaxation.   No\t scheme\t  of
\n\t      taxation,\t whether  the  tax  is\timposed\t  on
\n\t      property,\t income, or purchases of  goods\t and
\n\t      services,\t has yet been devised which is
\n\t      free of all discriminatory impact.  In such  a
\n\t      complex arena in which no perfect alternatives
\n\t      exist,  the Court does well not to impose\t too
\n\t      rigorous a standard of scrutiny lest all local
\n\t      fiscal  schemes become subjects  of  criticism
\n\t      under the Equal Protection Clause.”\n<\/p>\n
\t      Marshall, J. in his dissenting judgment  (with
\n\t      which  Douglas, J. concurred), summed up,\t his
\n\t      conclusion as follows :\n<\/p>\n
\t      “In summary, it seems to me inescapably  clear
\n\t      that this Court has consistently adjusted\t the
\n\t      care   with   which  it  will   review   state
\n\t      discrimination in light of the  constitutional
\n\t      significance of the interests affected and the
\n\t      invidiousness\t of\t the\t  particular
\n\t      classification.\tIn the context\tof  economic
\n\t      interests, we find that discriminatory,  state
\n\t      action  is almost always sustained,  for\tsuch
\n\t      interests\t are  generally\t far  removed\tfrom
\n\t      constitutional  guarantees.   Moreover,\t“the
\n\t      extremes\tto  which  the\tCourt  has  gone  in
\n\t      dreaming\t up   rational\t bases\t for   state
\n\t      regulation in that area may in many  instances
\n\t      be  ascribed to a healthy revulsion  from\t the
\n\t      Court’s\tearlier\t  excesses  in\t using\t the
\n\t      Constitution  to protect interests  that\thave
\n\t      more  than enough power to protect  themselves
\n\t      in   the\tlegislative  halls”   Dandridge\t  v.\n<\/p>\n
\t      Williams, 397 US, at 520.”\n<\/p>\n
Judicial  deference to legislature in instances of  economic
\nregulation  is\tsometimes  explained by\t the  argument\tthat
\nrationality  of\t a  classification may\tdepend\tupon  ‘local
\nconditions’ about which local legislative or  administrative
\nbody  would be better informed than a court.   Consequently,
\nlacking\t the  capacity\tto inform  itself  fully  about\t the
\npeculiarities  of  a  particular local\tsituation,  a  court
\nshould\thesitate  to  dub  the\tlegislative   classification
\nirrational  (see Carmichael v. Southern Coal & Coke  Co.(1).
\nTax  laws, for example, may respond closely to\tlocal  needs
\nand  court’s  familiarity with these needs is likely  to  be
\nlimited.   Therefore,  the Court must be aware\tof  its\t own
\nremoteness and lack of familiarity with the local  problems.
\nClassification\tis dependent on peculiar needs and  specific
\ndifficulties   of   the\t community.   The  needs   and\t the
\ndifficulties of a community are constituted out of facts and
\ninformation beyond the easy ken of the court.  It depends to
\na  great  extent upon an assessment of the  local  condition
\nunder  which  these  carriages\tare  being  run\t which\t the
\nlegislature or the administrative body ;alone was  competent
\nto make(2).  Therefore, when the Government,
\n(1)301 U.S. 491
\n(2)  See  State\t of Gujarat v. Ambica Mills Ltd.<\/a>  [1974]  11
\nS.C.J.\t211  Chiranjit lal v. Union of India  [1950]  S.C.R.
\n869; State of West Bengal v. Anwar Ali Sarkar<\/a> [1952]  S.C.R.
\n284 at 303.\n<\/p>\n
731<\/span><\/p>\n
in  the exercise of its power to tax, made a  classification
\nbetween\t stage.\t carriages  on the  one\t hand  and  contract
\ncarriages on the other and fixed a higher rate of tax on the
\nlatter,\t the  presumption is that the Government  made\tthat
\nclassification on the basis of its information that contract
\ncarriages are using the roads more than the stage  carriages
\nbecause they are running more miles.  Therefore, this  Court
\nhas to assume, in the absence of any materials placed by the
\nappellants  and\t petitioners,  that  the  classification  is
\nreasonable.    It  was\ta  matter  exclusively\twithin\t the
\nknowledge  of the petitioners and the appellants as to,\t how
\nmany miles the contract carriages would\t\t     run  on
\nan average per day or month. When, in the  counter-affidavit
\nthe  allegation\t was made that the owners  of  the  contract
\ncarriages  are free to run at any time throughout the  State
\nwithout\t restrictions, the inference which the State  wanted
\nthe  Court  to\tdraw was that the  owners  of  the  contract
\ncarriages were utilizing this freedom for running more miles
\nthan the stage\t    carriages. As to the number of miles run
\nby the contract carriages, it was not possible for the state
\ngovernment to furnish any statistics.\t     They could only
\nsay that since there are no restrictions, they must have run
\nmore  miles  and  that\tcannot\tbe  said  to  be  a   purely
\nspeculative   assessment.   If\tthe  petitioners   and\t the
\nappellants  had\t a  case that contract\tcarriages  were\t not
\nrunning more miles on an average\t   than the    stage
\ncarriages,  it\twould  have  been open\tfor  them  to  place
\nrelevant  materials  before the Court as the materials\twere
\nwithin\ttheir exclusive knowledge and possession.  In  these
\ncircumstances,\twe think there is the presumption  that\t the
\nclassification is reasonable, especially in the light of the
\nfact that the classification is based on local conditions of
\nwhich\tthe  Government\t was  fully  cognizant.\t Since\t the
\npetitioners and\t    the\t appellants have not discharged\t the
\nburden\tof proving that the classification is  unreasonable,
\nwe hold that the levy of an enhanced rate of vehicle tax  on
\ncontract carriages was not hit by Article 14.
\nWe dismiss the writ petitions and appeals without any  order
\nas to\t  costs.\n<\/p>\n
V.P.S.\t\t\t\t      Petitions dismissed.\n732<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India G. K. Krishnan Etc. Etc vs The State Of Tamil Nadu & Anr. Etc on 12 November, 1974 Equivalent citations: 1975 AIR 583, 1975 SCR (2) 715 Author: K K Mathew Bench: Mathew, Kuttyil Kurien PETITIONER: G. K. KRISHNAN ETC. ETC. Vs. RESPONDENT: THE STATE OF TAMIL NADU & ANR. ETC. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-76281","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nG. K. Krishnan Etc. Etc vs The State Of Tamil Nadu & Anr. 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