STATE OF KERALA Vs. ARAVIND RAMAKANT MODAWDAKAR

JUDGEMENT

(1.) The State of Kerala has preferred these appeals against the judgment of a Division Bench of the High Court of Kerala Dated 11-12-1995 in W. A. No. 1180/1995 and other connected appeals whereby the appellate Bench of the Kerala High Court reversed the judgment of a learned single Judge of the said High Court dated 28-9-1995 in a batch of writ petitions being O. P. Nos. 12240 1994-F and connected matters.

(2.) The original writ petitions, who are respondents in the various appeals before us, filed writ petitions before the High Court of Kerala, challenging the constitutional validity of the provisions contained in Item 4(1)(f) of the Schedule to the Kerala Motor Vehicles Taxation Act, 1976, as amended by Section 4 of the Kerala Finance Act, 1994 (hereinafter referred to as 'the Act') whereby the State had enhanced the rate of quarterly tax in respect of the contract carriage vehicles operating inter-State. They also sought certain other incidental reliefs. The primary contention of the petitioners in these petitions was that the reduction of tax liability in favour of the vehicles covered by intra-State contract carriage permit without granting the same benefit to inter-State contract carriages amounted to an arbitrary discrimination between the vehicles of persons similarly situated, hence, the same is violative of Article 14 of the Constitution of India. The learned single Judge who heard the batch of writ petitions by an elaborate judgment came to the conclusion that the contract carriages covered by intra-State permit formed a different class for the purpose of levying motor vehicles tax as compared to contract carriages which are covered by inter-State permits. After discussing the various case-laws on the subject, he held that the legislature has under Entry 56 or 57 of List II of the 7th Schedule a power to impose taxes which are compensatory and/or regulatory in nature, and by virtue of the power vested in the State under Section 22 of the Act, the State has the power to reduce the tax with reference to a particular type of vehicle in public interest which power had been exercised by the State rightly by reducing the levy of tax in favour of contract carriages covered by intra-State permits. He negatived the contention of the respondent-writ petitioners that this reduction of tax in favour of contract carriages covered by intra-State permits only violated Article 14 of the Constitution. He upheld the contention of the State that the contract carriages covered by inter-State permits did form a different class of contract carriages as compared to contract carriages which are covered by inter-State permits. He also held that this classification within the class of contract carriages was a reasonable classification for the purpose of levy of tax. Having come to the said conclusion, he proceeded to dismiss the writ petitions.

(3.) In appeal, the Division Bench of the said High Court took a contrary view and held that the above classification within the class of contract carriages based on the nature of permits covering these vehicles would be arbitrary and violative of Article 14 of the Constitution since the said classification has no nexus with the object of taxation. It also held that the motor vehicles taxation being a compensatory and regulatory tax, there could be no two-tier tax measure based on the nature of permit held by these contract carriages and if there was any justification for the State to reduce the tax burden on the class of contract carriages covered by intra-State permits to lessen the hardship to its operators, the same would equally apply to the operators of the contract carriages covered by inter-State permits also.