THE SALEM-DHARMAPURI OMNIBUS OPERATORS ASSOCIATION Vs. THE SECRETARY TO GOVERNMENT, HOME DEPARTMENT, GOVERNMENT OF MADRAS

JUDGEMENT

(1.) THESE are two sets of petitions for quashing two notifications of the State Government G.O. Ms. No. 923, Home, dated 19th April, 1969 and G.O. Ms. No. 434, Home, dated 27th February, 1970. They were issued in exercise of the powers conferred by subsection (1) of Section 17 of the Tamil Nadu Motor Vehicles Taxation Act, 1931, as amended. By these notifications, rules were made amending Schedules II and III to the Act and the amendments have been approved by the Legislative Assembly as required by Sub -section (3) of Section 17 of the Act. The first of the notifications increased the rate of tax in respect of contract carriages, from Rs. 30 to Rs. 50 per passenger seat per quarter, and the second from Rs. 50 to Rs. 100. The petitioners are individual omnibus operators in some of them and the Salem -Dharmapuri Omnibus Operators Association is one of the petitioners. They assail the validity of the notifications on the main ground that they constitute an improper exercise of the taxing power under the Act, inasmuch as they have been expressly made for the purpose of regulation of the contract carriages. Another ground is that, they are arbitrary and even confiscatory. The main ground seems to us to be well -founded.

(2.) IN one of these petitions the facts are these, which, for present purposes, are typical of those in the other petitions. The petitioner owns an omnibus MDU 7897 registered as a contract carriage. It has a capacity to accommodate 49 passengers with all the seats facing forward. He had been in the employ of a fleet operator as a driver and tourist organiser, but he resigned his job and entered into the field of transport business from 1968 on his own. He says that he pooled his small savings and purchased the omnibus on hire -purchase agreement, and held the permit No. 26/28. At that time the tax payable was Rs. 30 per seat per quarter. According to him, the system of issuing permits for omnibuses to ply as contract carriages was first introduced in the year 1963, that although at the start permits were issued only by the State Transport Authority which were valid throughout the State, subsequently on account of the phenomenal increase in the demand for contract carriages for the conveyance of tourists, pilgrims, marriage parties, etc., operators found it very difficult to cope with the demands even with the considerable number of existing spare buses and as a result, the policy of issuing permits for contract carriages was liberalised, and that the Regional Transport Authorities concerned were authorised to issue permits which would be valid for any region with State -wide validity. It is his case that these contract carriages were of somewhat luxurious kind, involving considerable investment, that originally the tax was levied on contract carriages at the rate of Rs. 10 per seat per quarter, but when the system of permitting contract carriages to ply as omnibuses by the Regional Transport Authorities or, as luxury coaches, by the State Transport Authority was introduced, the rate of tax was raised to Rs. 30 per seat per quarter from 1963. There was further increase of the rate Rs. 50 with effect from 1st July, 1969 and ever since, says the petitioner, he had been incurring loss. In support of these averments, he has filed a statement of accounts giving details of a net loss of Rs. 4,933 -40 for the period from 1st January, 1969 to 31st December, 1969. We were also told that the rates of charges for passengers by the contract carriages worked out roughly to 2 1/2 paise per mile per passenger, whereas in stage carriages the rate was 4 paise per passenger in ordinary buses, and 5 paise in the case of express buses, and further the contract carriages had to face operational difficulties such as they had to ply on newly formed routes and tracks which accounted for a large wear and tear. Apart from this, there is a large investment by way of capital expenditure on contract carriages. The conditions and terms on which these contract carriages would run were different from those of the stage carriages. Nevertheless, with effect from 1st April, 1970, the rate of tax has been further increased to Rs. 100 per seat per quarter, for contract carriages, which the petitioner says is unreasonable, expropriatory and has been introduced for extraneous and unjustifiable reasons. The petitioner would say therefore that this was a case of an arbitrary and colourable exercise of power.

(3.) THE Tamil Nadu Motor Vehicles Taxation Act was passed in order to abolish within the State the levy of all the then existing tolls and taxes on motor vehicles by local bodies, and provide for the levy of a Provincial tax on motor vehicles. Section 4 (1), which is the charging section, empowers the State Government to direct by notification, that the tax shall be levied on every motor vehicle using any public road in the State. The notification shall specify the rates at which and the quarter from which the tax shall be levied, provided such rate shall not exceed the maximum specified in the second schedule to the Act. At the same time, the State Government has been entrusted by Section 17 (1) with the power to make rules amending the schedule. It is in exercise of this power that the impugned notifications were issued, amending by rules the second schedule, by raising the rates as we have earlier mentioned. That schedule for purposes of specifying the maximum rates classifies motor vehicles and mentions the maximum quarterly tax payable by each class according to whether the relative vehicles are fitted with pneumatic tyres or not. In classifying vehicles, goods vehicles, motor vehicles plying for hire and used for the transport of passengers, and other vehicles are treated separately for fixing the rates, and in so doing their laden weight or the seating capacity, as the case may be, is taken into account. The Act contains other provisions complementary to administering levy, recovery and imposition of penalties. Section 10 directs how the proceeds of the tax collected under the Act should be utilised. After deducting administrative expenses, the balance is distributed in the manner indicated by the section, to the Government and local bodies. The provisions of this section read with the second schedule as well as the other provisions of the Act, do indicate that the tax is a kind of compensatory tax. That view of the nature of tax was taken by one of us in Ayodhya Naidu v. State of Madras : AIR 1965 Mad 349. In raising the tax and fixing the rate at which it should be raised, regard should naturally be had to facts and circumstances relevant thereto, in the context and intendment of the provisions of the Act, and the nature of the tax, and it will not be for the Courts to enquire into the wisdom of raising it or fixing its quantum. The State Legislature has made the Act evidently in exercise of its power under Entry 57 and possibly of Entry 56 of List II of the Seventh Schedule to the Constitution, viz., Taxes on Vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars, subject to the provisions of Entry 35 of List III, and taxes on goods and passengers carried by road or inland waterways. In exercise of the power under Entry 57 of List II, the State Legislature is entitled to levy the tax on vehicles, and so long as the power is used for the purpose of raising such tax, its validity cannot be questioned on the ground of its consequences. In this regard we accept the contention for the State. In McCray v. United States 49 L.Ed. 78, the validity of an Act levying tax on artificially coloured oleomargarine was questioned on the ground that a power granted as a means of raising revenue could not lawfully be diverted by the indirect use of it to do what the Congress had no power to do by direction, and that the end was not therefore legitimate. Repelling this contention, the Supreme Court of the United States said: