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CASE NO.: Appeal (civil)  6462-6464 of 2001

PETITIONER: State of Gujarat & Ors.

RESPONDENT: Akhil Gujarat Pravasi V.S. Mahamandal & Ors.     

DATE OF JUDGMENT: 08/04/2004

BENCH: S. Rajendra Babu & G.P. Mathur.

JUDGMENT: JUDGMENT

With Writ Petition (C) Nos.249 and 252 of 2002

G.P. MATHUR,J.

1.      Civil Appeal Nos.6462-6464 of 2001 have been preferred by State of  Gujarat  against the judgment and order dated 17.8.2001 of a Division Bench  of the High Court, whereby Section 3A (1) and (2) of Bombay Motor  Vehicles Tax Act, 1958 and also Rule 5 of Bombay Motor Vehicles Tax  Rules, 1959 made vide notification dated 6.2.2001 were struck down and a  writ of mandamus was issued to the State authorities not to recover any tax  in pursuance thereto from the vehicles of the respondents herein (writ  petitioners in the High Court) which were kept but were not being used.   A  further direction was issued to the respondent State to grant refund of the tax  already recovered from the respondents within three months from the date of  receipt of copy of the judgment after examining their case regarding non-use  of the vehicles. After the decision of the High Court, the Bombay Motor  Vehicles Tax Act was amended by Gujarat Act No.9 of 2002 in order to  validate the imposition and collection of tax on designated omnibuses, which  was published in the Gazette on 31.3.2002.   Writ Petition Nos.249 and 252  of 2002 have been filed in this Court challenging the amendments made by  the aforesaid amending Act.    2.      It will be convenient to reproduce relevant provisions of the statute  which was subject matter of challenge before the Gujarat High Court.   The  Bombay Motor Vehicles Tax Act, 1958 (hereinafter referred to as "the Act")  was made applicable to the State of Gujarat by the Gujarat Adoption of  Laws (State and Concurrent Subjects) Order, 1960.    The Act was amended  several times and lastly on 6.2.2001 by Gujarat Act No.2 of 2001.   Section 2  of this Act gives the definitions and Sub-section (1) defines "certificate of  taxation" and it means a certificate, issued under Section 5, indicating  therein the rate at which the tax is leviable, and the periods for which the tax  has been paid, Sub-section (5) defines "registered owner" and it means the  person in whose name a motor vehicle is registered under the Motor  Vehicles Act, 1939 (or, as the case may be, the Motor Vehicles Act, 1988)  and Sub-section (7) defines "Taxation Authority" or "Authority" and it  means such officer or authority as the State Government may by notification  in the Official Gazette, appoint to be the Taxation Authority for the whole  State or for any area or areas for the purposes of the Act, and the State  Government may appoint more than one officer or authority as Taxation  Authority for the whole State or for any area.    The controversy here relates  to Sections 3 and 3A of the Act and the relevant part thereof are being  reproduced below :

Section 3   (1)   Subject to the other provisions of this Act, on  and from the 1st day of April, 1958, there shall be levied and  collected on all motor vehicles used or kept for use in the State,  a tax at the rates fixed by the State Government, by notification

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in the Office Gazette, [but not exceeding the maximum rates  specified in the [First, Second, Third, Fourth, Fifth, Sixth and  Seventh Schedules] :

       Provided \005\005\005\005\005.. [Omitted as not relevant]

       Provided further \005\005\005\005. [Omitted as not relevant]

(2)     Except, during any period for which the Taxation  Authority has, in the prescribed manner, certified that a motor  vehicle was not used or kept for use in the State, the registered  owner, or any person having possession or control, of a motor  vehicle of which the certificate of registration is current, shall,  for the purposes of this Act, be deemed to use or keep such  vehicle for use in the State.

(3)     No tax shall be leviable under sub-section (1) on motor  vehicles on which tax is leviable under sub-section (1) of  section 3A.

Section 3A.     (1) On and from the 1st day of April, 1991, there  shall be levied and collected on all omnibuses which are used or  kept for use in the State exclusively as contract carriages  (hereinafter in this section and sub-section (1A) of Section 4  referred to as "the designated omnibuses") a tax at the rates  specified in the table below :-

TABLE -------------------------------------------------------------------------------------------- Description of Designated omnibuses             Annual rate of tax --------------------------------------------------------------------------------------------

1.(a)  Ordinary designated omnibuses         (Rs.2,700) per passenger permitted           permitted to be carried not more     to be carried.         than twenty passengers.

  (b)  Ordinary designated omnibuses        (Rs.4,050) per passenger permitted           permitted to be carried more               to be carried.         than twenty passengers.

2.(a)  Luxury or tourist designated          (Rs.4,050) per passenger permitted           omnibuses permitted to be          to be carried.         carried not more than twenty          passengers.

   (b)  Luxury or tourist designated        (Rs.6,000) per passenger permitted           omnibuses permitted to be          to be carried.         carried more than twenty  passengers.

       Provided that in the case of the designated omnibuses  used solely for the purpose  of transporting students of  educational institutions in the State in connection with any of  the activities of such educational institutions a tax shall be  levied and collected under sub-section (1) of section 3, and not  under this sub-section.

(2) (a)  The tax leviable under sub-section (1) shall be paid in  advance by every registered owner or any person having  possession or control of the designated omnibuses either  annually at the annual rate specified in the Table appearing in  sub-section (1) or in monthly instalments of one-twelfth of the  annual rate.   

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(b)     The annual payment of tax or the payment of monthly  instalment of tax shall be made within such period and in such  manner as may be prescribed.

(3)     \005\005\005\005\005\005.. [Omitted as not relevant]

(4)     \005\005\005\005\005\005.. [Omitted as not relevant]

(5)     (a) Where the registered owner or any person having  possession or control of a designated omnibus who has paid tax  under this section proves to the satisfaction of the Taxation  Authority that the designated omnibus in respect of which the  tax has been paid has not been used or kept for use  for a  continuos period of not less than one month, he shall be entitled  to the refund of an amount equal to one-twelfth of the annual  rate of tax paid in respect of such omnibus for each complete  month of the period for which the tax has been paid so however  that, except as otherwise provided in clause (b) the total amount  of a refund in a year shall not exceed \026

(i)     six hundred seventyfive rupees per passenger permitted  to be carried, in the case of an ordinary designated  omnibus permitted to be carried not more than twenty  passengers.

(ii)    one thousand twelve rupees per passenger permitted to be  carried, in the case of an ordinary designated omnibus  permitted to be carried more than twenty passengers.

(iii)   one thousand one hundred twenty-five rupees per  passenger permitted to be carried, in the case of a luxury  or tourist designated omnibus permitted to be carried not  more than twenty passengers.

(iv)    one thousand five hundred rupees per passenger  permitted to be carried, in the case of a luxury or tourist  designated omnibus permitted to be carried more than  twenty passengers.

Provided that for the purpose of determining the amount  of refund under this clause, only such of the period in which a  designated omnibus has not been used or kept for use shall be  taken into account as comprises of complete months.

(b)     Where a registered owner or a person having possession  or control of a designated omnibus, who has paid tax under this  section proves to the satisfaction of the State Government or  such officer not below the rank of the Director of Transport,  Gujarat State, as may, by notification in the Official Gazette, be  authorised in this behalf by the State Government that the  designated omnibus in respect of which tax has been paid, has  not been used or kept for use for a continuous period of not less  than one month but exceeding three months in a year, he shall  be entitled to the refund of an amount equal to one-twelfth of  the annual rate of the tax paid in respect of such omnibus for  each complete month of the period of which the tax has been  paid :

       Provided that for the purpose of determining the amount  of refund under this clause only such of the period in which a  designated omnibus has not been used or kept for use shall be  taken into account as comprises of complete months.

(6)     \005\005\005\005\005\005 [Omitted as not relevant]

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       Section 4(1) provides that the tax leviable under Section 3 in respect  of a motor vehicle specified in the First Schedule shall be paid in advance by  every registered owner, or any person having possession  or control, of such  motor vehicles to which sub-section (IAA) does not apply. 3.      The Bombay Motor Vehicle Rules, 1959 (hereinafter referred to as  ’the Rules’) were amended by Bombay Motor Vehicles Tax (Gujarat  Amendment) Rules, 2001 vide notification dated 6.2.2001 and after  amendment Rule 5 reads as under : "(1)    A registered owner or any person who has  possession or control of a motor vehicle in respect of which tax  is paid in advance, not intending to use or keep for use such  vehicle in the State and desiring to claim refund of tax on that  account shall before the commencement of the period for which  the refund of tax is to be claimed, make a declaration in form  NT for any specified period not exceeding beyond the period  for which the tax is paid in advance to the Taxation Authority  in whose jurisdiction such vehicle is to be kept under non-use  along with the certificate of taxation as well as certificate of  fitness in case of transport vehicles and a fee of rupees ten.

       Provided that where a vehicle is rendered incapable of  being used or kept for use on account of an accident,  mechanical defect or any other sufficient cause, which make it  impossible to give an advance declaration as aforesaid then  such declaration shall be given within a period of seven days  from the date of occurrence of such accident, mechanical defect  or such other cause, either in person or by registered post  acknowledgement due;

(2)     If the Taxation Authority is satisfied that the motor  vehicle, in respect of which a declaration in Form "NT" has  been made, has not been used, or kept for use for the whole or  part of the period mentioned in the declaration and it shall  certify that the motor vehicle has not been used or kept for use  for the whole or part of such period as the case may be by  making an endorsement in the certificate of taxation to that  effect.          Provided that nothing contained in this sub-rule shall  effect the right of the Taxation Authority to recover the tax and  penalty due for the period of non-use so certified if, at any time,  it is found that the vehicle was actually used or kept for use in  the State during such period.             (3)     The declaration in Form ’NT’ given under the  proviso to sub-rule (1) shall be accompanied by the certificate  of Taxation and documentary evidence if any, or any other  proof evidencing such non-use of the vehicle and the period  thereof. Where the appropriate Taxation Authority, on  considering the evidence adduced, if any, and on making such  inquiries as it deems fit, refuses to admit the declaration of non- use or to certify the period of non-use, it shall record in writing  its reasons therefor and communicate to the applicant."          

4.      A perusal of the Act would show that Section 3 is the general  charging Section which provides for levy of tax on all motor vehicles used  or kept for use in the State and the rate of tax for different categories of  vehicles is given in the schedule appended to the Act.    However,  Section  3A is a special provision with regard to the "designated omnibuses" and  prescribes the annual rate of tax for ordinary, luxury or tourist designated  omnibuses having regard to their passenger carrying capacity which are used  or kept for use in the State.   The challenge here is to Section 3A and,  therefore, we will confine to the said provision.   Sub-section (2)(a) of

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Section 3A enjoins that the tax shall be paid in advance by every registered  owner or any person having possession or control of the designated  omnibuses either annually or in monthly instalments.   Sub-section (5)(a) of  Section 3A provides for refund of the tax already paid in advance where the  registered owner or any person having possession or control of a designated  omnibus satisfies the Taxation Authority that the vehicle had not been used  or kept for use for a continuous period of not less than one month.   Sub- section (5)(b) contains a similar provision of refund where the vehicle has  not been used or kept for use for continuous period of not less than one  month but exceeding three months in a year.  But here the power of refund  has been conferred upon the State Government or such officer not below the  rank of the Director of Transport, as may, by notification in the official  gazette, be authorised in this behalf by the State Government.  Rule 5 shows  that for claiming refund of the advance tax already paid a declaration in  Form NT has to be made to the Taxation Authority before the  commencement of the period for which the refund of tax is to be claimed in  case it is intended not to use or keep any such vehicle in the State.  However,  where the vehicle becomes incapable of being used or kept for use on  account of any accident, mechanical defect or any other sufficient cause,  which makes it impossible to give advance declaration, then such declaration  has to be given within a period of seven days from the date of occurrence of  such accident or mechanical defect or other cause. 5.      The writ petitions were filed in the High Court on the ground, inter  alia, that Section 3A of the Act is violative of Articles 14, 19(1)(g), 21 and  300 A of the Constitution as designated omnibuses which are in fact contract  carriages are discriminated against from other vehicles like stage carriages,  ordinary vehicles and goods vehicles and a very high rate of tax was  imposed upon them without there being any reasonable classification and  thus the impugned provision was wholly arbitrary and discriminatory.   It  was submitted that if the vehicle is "not used" or "kept for use" or  "passengers are not carried to the full capacity" no tax could be levied and  consequently the provisions of Section 3A had been enacted without any  legislative competence having regard to the fact  that the Act had been made  with reference to Entry 56 and 57 of List II of Seventh Schedule of the  Constitution.   In this connection it was also submitted that the provision was  bad inasmuch as the amount of annual rate of tax was fixed not as per the  capacity of the vehicle or the distance actually covered or number of days of  actual use but on a fixed rate basis. Whether the vehicle covered only one   kilometer or thousand kilometers, the same amount of tax had to be paid.   Another submission made was that tax had to be paid for the whole month  even though the actual use of the vehicle may have been for a much shorter  period.   Lastly, it was submitted that the provision for depositing  tax in  advance and thereafter claiming a refund was wholly illusory and in fact the  authorities had not made any such refund even though applications in that  regard were pending for a long period.   The High Court has held that the  impugned tax was a composite tax and not on passengers alone; the demand  of advance tax on passengers for one month was beyond the legislative  competence as Entries 56 and 57 of List II of Seventh Schedule of the  Constitution do not authorise levy of advance tax; similarly the demand of  advance tax on vehicles which are not put on road or which are kept away  from use was also beyond the legislative competence and the provision for  payment of advance tax and Rule 5 were without any authority of law.   The  High Court further held that the mere fact that there was a provision for  refund of the advance tax paid, could not save the enactment as the levy of  advance tax itself was without any authority of law.   On these findings, the  writ petitions were allowed and Section 3A (1) and (2) of the Act and Rule 5  of the Rules as inserted vide notification dated 6.2.2001 and also a  subsequent circular dated 8.2.2001 were struck down.    6.      Learned counsel for the writ petitioners (here as well as before the  High Court \026 operators of vehicles) have submitted that the tax is essentially  a tax on passengers since rate of tax is fixed having regard to the number of  passengers permitted to be carried and on a plain reading of the Statute it is  clear that the enactment has been made with reference to Entry 56 List II of  Seventh Schedule of the Constitution whereunder tax can be levied on  passengers actually carried.  But under this Entry, no tax can be levied

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unless a passenger actually travels in the vehicle and since the tax is levied  on the basis of seating capacity, it is beyond the legislative competence of  the State legislature.   It is submitted that the plea of the State before the  High Court was that it is a composite tax i.e. a tax on passengers and a tax  on motor vehicles which is also evident from the speech given by the  Hon’ble Minister in the legislature and also from the counter affidavit filed  before the High Court.   Therefore, in such a case, the requirement of both  the Entries 56 and 57 have to be satisfied.    The impugned tax does not  satisfy the requirements of Entry 57 because even if the vehicle is not  intended to be used or kept for use, the entire tax has to be paid.   Learned  counsel has further submitted that the provision for refund of the tax is  wholly illusory as the refund is allowed only if the vehicle is not used for the  entire period of one month and the use of the vehicle even for a single day  creates a liability for payment of tax for the whole month.   Learned counsel  has also assailed the provision of Rule 5 which lays down the criteria for  determining as to whether a vehicle has not been used or has not been kept  for use. 7.      Countering the submission made by learned counsel for the writ  petitioners, Shri Kirit N. Raval, learned Solicitor General appearing for the  State of Gujarat, has submitted that the owner of  designated omnibus has to  first apply for a certificate of registration under the provisions of Motor  Vehicles Act and such a certificate gives rise to a presumption that the  vehicle in question is meant for use on roads in the State.    The taxable  event occurs when the vehicle in question is ready for use and the liability to  pay tax immediately arises when the vehicle becomes usable.   Once the  certificate of registration has been given and the taxable event occurs, it is  perfectly open to levy advance tax on motor vehicles and the High Court  was in error in holding that advance tax cannot be levied.   This is  irrespective of the fact whether the tax in question is levied under Entry 56  or 57. Learned counsel has further submitted that if income tax can be levied  on income and there are provisions in the Income Tax Act for levy of  advance tax even when the income in question has not been earned, with a  machinery for refund, there is no reason why even under Entry 56 or 57, the  tax cannot be levied when the presumption of the vehicle being made for use  of passengers arises and taxable event has taken place.  Learned Solicitor  General has also submitted that the contention that the contract carriages  have been levied a higher tax ignores the accepted position that contract  carriages are a class by themselves and a higher tax on such category of  vehicles has been specifically held to be permissible.    The mere fact that  the tax falls heavily on one category is wholly irrelevant and the possibility  of better classification for imposition of tax in question is no ground for  striking down the levy.    8.      The relevant entries with reference to which the impugned enactment  has been made are Entries 56 and 57 of List II of Seventh Schedule of the  Constitution which read as under : Entry 56 \026   Taxes  on goods and passengers carried by road or on inland  waterways.

Entry 57 \026    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.

Entry 35 of List III \026 Mechanically propelled vehicles including the  principles on which taxes on such vehicles are to be levied.

9.     Before examining the contentions raised at the Bar it is necessary to  bear in mind certain fundamental principles which are too well settled.  The  necessity for the same arises on account of the fact that they have been lost  sight of in the contentions raised on behalf of the operators of designated  omnibuses both here and also in the High Court. 10.     In interpreting the scope of various entries in the legislative lists in  Seventh Schedule, widest possible amplitude must be given to the words  used and each general word must be held to extend to ancillary or subsidiary  matters which can fairly be said to be comprehended in it.   The entries  should, thus be given a broad and comprehensive interpretation.  In order to

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see whether a particular legislative provision falls within the jurisdiction of  the legislature which has passed it, the Court must consider what constitutes  in pith and substance the true subject matter of the legislation and whether  such subject matter is covered by the topics enumerated in the legislative list  pertaining to that legislature.          11.     The enactment under question is a taxing statute. The indicia of tax  was explained by a bench of seven judges in Commission, Hindu Religious  Endowments, Madras v. Shri Laxmindra Thirtha Swamiar of Shri Shirur  Mutt AIR 1954 SC 284 which has since  been consistently followed and it is  as under.  A tax is a compulsory exaction of money by public authority for  public purposes  enforceable by law and is not payment "for services  rendered".  This definition brings out the essential characteristics of a tax as  distinguished from other forms of imposition which, in a general sense, are  included within it.  The essence of taxation is compulsion that is to say, it is  imposed under statutory power  without the tax-payers consent and the  payment is enforced by law.  The second characteristic of tax is that it is an  imposition made for public purpose without reference to any special benefit  to be conferred on the payer of the tax.  This is expressed by saying that the  levy of tax is for the purposes of general revenue, which when collected  forms part of the public revenues of the State.  As the object of a tax is not to  confer any special benefit upon any particular individual there is no element  of ’quid pro quo’ between the tax payer and the public authority.  Another  feature of taxation is that as  it is a part of the common burden, the quantum  of imposition upon the tax-payer depends generally upon his capacity to pay.   12.     A fee is generally defined to be a charge for a special service rendered  to individuals by some governmental agency.  But the traditional view that  there must be actual quid pro quo has undergone a sea change with the  passage of time.  Corelationship between the levy and the services  rendered/expected is one of general character and not of mathematical  exactitude.  All that is necessary is that there should be a "reasonable  relationship" between the levy of the fee and the services rendered. It is   increasingly realized that the element of quid pro  quo in the strict sense is  not a sine qua non for a fee.  (See Sreenivas General Traders v. State of A.P.  AIR 1983 SC 1246, Municipal Corporation of Delhi v. Moh. Yasin AIR  1983 SC 617 and B.S.E. Brokers’ Forum v. Securities and Exchange Board  of India 2001 (3) SCC 482)        13.     Entry 56 authorises a tax, the incidence of which is on goods and  passengers carried by road or on inland waterways.    Even though the  amount of the tax may be measured by the fares or by the distance travelled,  the Entry does not specify who should be the assessee and, therefore, it is  open to enact a law to recover the tax from the owners or operators of the  vehicles.   The tax imposed under this Entry is of regulatory and  compensatory character.   The tax under Entry 57 is leviable by the State  legislature on all vehicles "suitable for use on roads" which are kept in the  State.   The tax is  compensatory in nature and, therefore, must have some  nexus with the vehicles using the public roads of the State.   The words  "suitable for use" signify the kind  of vehicles meaning thereby that the  vehicles should be such type which are normally capable of running on the  road.   The entry does not indicate in any manner that tax would be leviable  only for the period when the vehicle is actually using the road and not  otherwise and, therefore, it has no corelation with the actual period of use.   Naturally the State has to maintain the roads and to keep them in proper  condition for all those who own vehicles suitable for use on roads.  This is  irrespective of the fact whether they use it or not or use it occasionally  or  for short duration only. It being a tax and not a fee (as understood in the  conservative sense) the actual use of the public roads of the State cannot be  insisted upon for incurring the liability. 14.     The main ground of challenge of the writ petitioners is that Section  3A mandates payment of tax in advance even though the vehicle  may not at  all be used.   It may be noticed that Section 3A of the Act lays down that  there shall be levied and collected on all omnibuses which are used or kept  for use in the State exclusively as contract carriages a tax at the rates  specified in the table.   The incidence of tax is, therefore, on omnibuses  which are "used or kept for use in the State".   A similar controversy was  examined in Travancore Tea Co. v. State of Kerala AIR 1980 SC 1547.   

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Here the company alleged that the vehicles were purchased by it solely and  exclusively for use in the tea estates  and intended to be used only for  agricultural purposes and were not used nor kept for use in the State, as  contemplated by Section 3 of Kerala Motor Vehicles Taxation Act.   It was  further alleged by the company that for the purpose of plantation it was  maintaining the roads, fit for vehicular traffic, in the eight estates covering a  length of 131 miles.   Paragraphs 4, 5 and 6 of the Reports which are  relevant are being reproduced below : "4. The question that falls for decision is whether on the  assumption that the motor vehicles are used or kept for use  within the estate, and not intended to be used on public roads of  the State; the tax is leviable?  In order to appreciate the question  raised, it is necessary to refer to the relevant entry in the  Constitution, the provisions of the Act and the Motor Vehicles  Act and the decision relating to the question rendered by this  Court.  Entry 57 in List II of the Constitution relates to 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.  This entry enables the State Government to  levy a tax on all vehicles whether mechanically propelled or  not, suitable for use on roads. There is no dispute that the  vehicles are mechanically propelled and suitable for use on  roads.

5.     Section 3 of the impugned Act (Kerala Motor Vehicles  Taxation Act (Act 24 of 1963) provides that a tax  "shall be  levied on all motor vehicles used  or kept for use in the State."   The levy is within the competence of the State legislature as  entry 57 in List II authorises levy on vehicles suitable for use  on roads.  It has been laid down by this Court in Bolani Ores  Ltd. v. State of Orissa (1975) 2 SCR 138 at p,155; (AIR 1975  SC 17) that under Entry 57 of List II, the  power of taxation  cannot exceed compensatory nature which must have some  nexus with the vehicles using the roads i.e. public roads.  If the  vehicles do not use the roads, notwithstanding that they are  registered under the Act, they cannot be taxed.

6.      If the words ’used or kept for use in the State’ are  construed as used or kept for use on the public roads of the  State, the Act would be in conformity with the powers  conferred on the State  legislature under Entry 57 of List II.  If  the vehicles are suitable for use on public roads they are liable  to be taxed.  In order to levy a tax on vehicles used or kept for  use on public roads of the State and at the same time to avoid  evasion of tax the legislature has prescribed the  procedure\005\005\005\005\005."                          (emphasis supplied)        After laying down the above principle of law the question whether  estate roads are public roads was left for investigation and decision by  R.T.O. 15.     The validity of payment of advance tax was examined in State of  Karnataka v. K. Gopalakrishna Shenoy AIR 1987 SC 1911, with reference  to Mysore Motor Vehicles Tax Act, Section 3(1) whereof  provided for levy  of tax on all motor vehicles suitable for use on roads, kept in the State of  Mysore.   The explanation appended to Sub-section (1) of Section 3 laid  down that a motor vehicle of which certificate of registration is current shall,  for the purpose of the Act, be deemed to be a vehicle suitable for use on  roads.   Section 4 provided that the tax under Section 3 shall be paid in  advance by the registered owner or person having possession or control of  the motor vehicle.    Section 7 provided for refund of tax if it was proved to  the satisfaction of the prescribed authority that the vehicle had not been used  during the whole of the period for which tax had been paid or a continuous  part thereof not being less than one calendar month, a refund shall be made  of such portion of the tax and subject to such conditions as may be   prescribed.    In paras 6 and 7 of the Reports, it was held as under :

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"6\005\005\005\005\005On a reading of Sections 3 and 4 it may be seen  that they make the registered owner or person having  possession or control of a motor vehicle kept in the State  absolutely liable to pay tax in advance at the rates specified in  part A of the Schedule thereto for a quarter, half-year or year at  his choice.  The Motor Vehicle Taxation Acts in all the States  of the Indian Union follow a uniform pattern.  Entry 57 of List  II of Schedule VII of the Constitution is the Legislative Entry  conferring power on the States to levy the tax.  It has been  observed by this Court in Automobile Transport Ltd. v. State of  Rajasthan (1963) 1 SCR 491: (AIR 1962 SC 1406) that the tax  on motor vehicles is a compensatory tax levied for the use of   the roads and it is not a tax on ownership or possession of  motor vehicles.  The object of the Act is achieved by charging  to tax all motor vehicles suitable for use on roads kept in the  State, the registered owner or person having possession or  control being held liable to pay the tax in advance and then  providing for grant of refund for non-user subject to prescribed  conditions.

7.      What falls for consideration now is whether the owner or  person having the possession or control of a motor vehicle is  not bound to pay the tax under Section 3(1) of the Act because  the vehicle was in a state of repair and was not put to use on the  road and furthermore the Certificate of Fitness of the vehicle  had not been kept current  even though the Certificate of  Registration was kept current.  One factor which has to be  borne in mind in interpreting Section 3(1) and its Explanation is  the meaning to be given to the words "suitable for use on  roads", occurring in them as otherwise a misconception would  arise.  These very words occur in Entry 57 in the State List  which reads as under:-

       "Taxes on vehicles, whether mechanically propelled or  not, suitable for use on roads, including tram cars, subject to the  provisions of Entry 35 of List III".

The words "suitable for use on roads" in the said Entry have  been construed by Hidayatullah, J. as he then was, in  Automobile Transport (AIR 1962 SC 1406) case as under  :

       "The words ’suitable for use on roads’ describe the kinds  of vehicle and not their condition.   They exclude from the  Entry, farm machinery, aeroplanes, railways etc. which though  mechanically propelled are not suitable for use on roads.   The  inclusion of trams using tracks which may be on roads or off  them, makes the distinction still more apparent."

It, therefore, follows that the same meaning should be given to  those words occurring in Section 3(1) and the Explanation also.    The resultant position that emerges is that Section 3(1) confers  a right upon the State to levy a tax on all motor vehicles which  are suitably designed for use on roads at prescribed rates  without reference to the road worthy condition of the vehicle or  otherwise.   Section 4 enjoins every registered owner or person  having possession or control of the motor vehicle to pay the tax  in advance.   The Explanation to Section 3(1) contains a  deeming provision and its effect is that as long as the Certificate  of Registration of a motor vehicle is current, it must be deemed  to be a vehicle suitable for use on roads.   The inevitable  consequence of the Explanation would be that the owner or a  person having control or possession of a motor vehicle is  statutorily obliged to pay the tax in advance for the motor  vehicle as long as the Certificate of Registration is current  irrespective of the condition of the vehicle for use on the roads

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and irrespective of whether the vehicle had a Certificate of  Fitness with current validity or not.   The Act, however, takes  care to see that the owner of a motor vehicle or a person having  possession or control of it is not penalised by payment of tax in  advance for a vehicle which had not been actually used during  the whole of a period or part of a period for which tax had been  paid by him. \005\005\005\005"

       After considering the provision for refund of the tax as contained in  Section 7 of the Act, it was held as under in para 8 of the Report : "8.     \005\005\005\005\005 The principle underlying the Taxation Act is  that every motor vehicle issued Certificate of Registration is to  be deemed a potential user of the roads all through the time the  Certificate of Registration is current and therefore liable to pay  tax under Section 3(1) read with Section 4.  If, however, the  vehicle had not made use of the roads because it could not be  put on the roads due to repairs, even though the Certificate of  Registration was current, the owner or person concerned has to  seek for and obtain refund of the tax paid in advance after  satisfying the Authorities about the truth of his claim.  It is not  for the Transport Authorities to justify the demand for tax by  proving that the vehicle is in a fit condition and can be put to  use on the roads or that it had plied on the roads without  payment of tax.   It would be absolutely impossible for the State  to keep monitoring all the vehicles and prove that each and  every registered vehicle is in a fit condition and would be  making use of the roads and is therefore liable to pay the tax.    For that reason, the State has made the payment of tax  compulsory on every registered vehicle and that too in advance  and has at the same time provided for the grant of refund of tax  whenever the person paying the tax has not made use of the  roads by plying the vehicle and substantiates his claim by  proper proof.   Any view to the contrary would defeat the  purpose and intent of the Taxation Act and would also afford  scope and opportunity for some of the persons liable to pay the  tax to ply the vehicle unlawfully without payment of tax and  later on justify their non-payment by setting up a plea that the  vehicle was in repair for a continuous period of over a month or  the whole of a quarter, half-year or year as they choose to  claim."

16.     In Chief General Manager, Jagannath Area v. State of Orissa 1996  (10) SCC 676, the question for consideration was whether the dumpers  belonging to the appellant which were being used within the mining areas  were taxable under Orissa Motor Vehicles Taxation Act, Section 3 whereof  laid down that a tax shall be levied on every motor vehicle used or kept for  use within the State at the rates specified in the Schedule.   Two contentions  were raised before this Court and the second contention was that the tax on  vehicles being compensatory in nature, levy of such tax can be sustained  only on the ground that the vehicles used the roads for which the tax is  levied and if the vehicle in question did not use the roads and yet tax is  levied on the same, the said levy is liable to be struck down.   Repelling the  argument that in absence of actual use of the road, the tax would not be  leviable, this Court held as under in para 11 of the Reports : "11.    The tax imposed on the motor vehicles is basically a tax  for the use of the roads within the State.  It is no doubt a  compensatory tax which facilitates trade, commerce and  intercourse within the State by providing roads and maintaining  roads in a good state of repairs.   As has been held by this Court  in Automobile Transport Ltd. v. State of Rajasthan & Ors.  (1963) 1 SCR 491, it would not be right to say that the tax is  not compensatory because the precise or specific amount  collected is not actually used in providing any facilities.   If a  statute fixes a charge for a convenience or service provided by

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the State or an agency of the State, and imposes it upon those  who choose to avail themselves of the service or convenience,  or who can use the services provided for, the imposition  assumes the character of remuneration or consideration charged  in respect of an advantage sought or received or advantage  which can be received.   The mere fact that any particular  individual though can take advantage of the convenience of the  services provided by the State but for some reason or the other  chooses not to enjoy the services provided cannot escape the  taxing liability on that score nor can the provision imposing the  tax become invalid on that score. \005\005\005.."

17.     This view has been reiterated in several decisions of this Court.   In  State of Kerala v. Arvind Ramakant Modawdakar 1999 (7) SCC 400, the  Court ruled that it is a settled position in law that the actual user of the road  by the vehicles which are covered by the requisite permits is not always a  relevant factor since the taxable event under Section 3(1) of Kerala Motor  Vehicles Taxation Act occurs when the vehicle is used or is kept for use in  the State and once the vehicle becomes liable for payment of tax, the extent  and quantity of use by the vehicle is not a decisive factor for the purpose of  levy of tax.  In Mahakoshal Tourist v. State of M.P. 2002 (7) SCC 245 the  challenge made with regard to the absence of a machinery for assessment of  tax for the vehicles plying in the State of Madhya Pradesh on the basis of All  India Tourist permit and denying them refund of tax for the period they were  not used or kept for use in the said State was considered.   In view of the  language used in Section 3 of the relevant Act which provided for levy of  tax on every motor vehicle "used or kept for use in the State" at the rate  specified in the schedule, it was held that the expression "used" or "kept for  use" means, either the actual use of the vehicle on the roads of the State of  Madhya Pradesh or keeping the vehicle (which is in condition and capable  of being used) available for use in the State, if so desired.   It was further  held that while plying outside the State in connection with the contract, a  vehicle will, nonetheless be within the import of  "kept for use in the State"  and it is immaterial for the purpose of Section 3 whether a vehicle is actually  being used or is kept for use in the State. 18.     The language used in Section 3A - all omnibuses which are used or  kept for use in the State exclusively as contract carriages - is in conformity  with Entry 57 of List II.   The consistent view taken by this Court is that if a  vehicle is "used" or is "kept for use" in the State, it becomes liable for  payment of tax and the actual use or quantum of use is not material.   The  fact that the statute provides for refund of the tax, if the authority is satisfied  that the vehicle has not been used, does not mean that the legislature can  only make a provision for levy of tax which is limited for the period of  actual use or that no tax can be levied during the period the vehicle is not put  to use in the State.   The provision for the refund has been made only for the  advantage of the operator so that he may be relieved of the burden of  tax  when he is not getting any income from the vehicle on account of its non-use  but it has no relevance to the competence or authority of the State to enact a  law providing for imposition of a tax on vehicles which are used or are kept  for use in the State.    19.     Learned counsel for the writ petitioners has laid great emphasis upon   Bolani Ores Ltd. v. State of Orissa AIR 1975 SC 17 where having regard to  Bihar and Orissa Motor Vehicles Taxation Act an observation was made that  "it is not the purpose of the Taxation Act to levy taxes on vehicles which do  not use the roads or in any way form part of the flow of traffic on the roads  which is required to be regulated".   Another observation in the same  judgment \026 "but Entry 57 of List II is subject to the limitation that the power  of taxation thereunder cannot exceed the compensatory nature which must  have some nexus with the vehicles using the roads, viz. public roads.   If the  vehicles do not use the roads, notwithstanding that they are registered under  the Motor Vehicles Act, they cannot be taxed" has also been heavily relied  upon for contending that tax can be levied only for the period when the  vehicle is actually using the road and consequently Section 3A of the Act is  invalid.   In fact, the High Court has also taken support from  the aforesaid

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observation for holding that for the period, the designated omnibuses are not  using the roads and are merely standing, no tax is leviable. It is trite that any  observation made during the course of reasoning in a judgment should not  be read divorced from the context in which they were used.   Bolani Ores  Ltd. had filed a suit seeking a declaration that certain machineries like  Shovels, Caterpillars, Bulldozers, Rockers, Dumpers and Tractors, etc.  which were used in mining operation in the area leased out to them were not  liable for registration under Section 22 of the Motor Vehicles Act and cannot  be taxed under Section 6 of the Bihar Taxation Act.   The observation  aforesaid was made in the context of the machinery which was used for  mining operation within the leased area which obviously did not form part of  the flow of traffic on the roads.   The Court was not called upon to answer  the question posed here, namely, whether a normal motor vehicle cannot be  taxed for the period during which it is kept for use but is actually not  operating.   The Court did not hold as a proposition of law that for the period  a vehicle is not used on the roads, it cannot be taxed. 20.     The principle laid down in State of Mysore v. Sundaram Motors Pvt.  Ltd. AIR 1980 SC 148 reliance on which has been placed by the High Court  has also no application here.   Section 3 of Mysore Motor Vehicles Taxation  Act provided that a tax shall be levied on all motor vehicles suitable for use  on roads, kept in the State of Mysore.   M/s Sundaram Motors were dealers  in motor vehicles which were manufactured in Bombay and some of these  vehicles passed through the territory of State of Mysore on way to their  destination in another State (Tamil Nadu) and during the course of the  journey, the vehicles halted for rest and food, etc. of the drivers.   It was held  that the short break taken during the course of journey could not fasten  liability for tax as the words "kept" employed in Section 3 had an altogether  different connotation, which has an element of stationariness.   The principle  laid down in this case can hardly have any application here.  Similarly, the  writ petitioners can derive no assistance from State of Gujarat v.  Kaushikbhai K. Patel AIR 2000 SC 2175, wherein the words "for reasons  beyond the control of such owner or person" previously occurring in Section  3A(5)(b) were held to be beyond the legislative competence of the State.  In  this case the High Court had held that once the statute provided for refund of  tax on account of non-use of the vehicle, the legislature could not have  imposed a further condition to the effect "for reasons beyond the control of  such owner or person" and the said expression was held to be beyond the  legislative competence.   The appeal preferred by the State of Gujarat was  dismissed by this Court and the view taken by the High Court was affirmed.   We would like to point out that the judgment does not show that the  attention of the Bench was invited to any of the decisions which we have  referred to above, wherein it has been held that actual user of the road is not  material and mere keeping of the vehicle which is capable of being used is  enough to attract liability of tax. 21.     Learned counsel for the writ petitioners has submitted that the purpose  for which the Act was enacted was to augment the financial resources of the  State to meet the huge expenditure on account of natural calamities etc. as  has been mentioned in the Statement of Objects and Reasons. Therefore the    Act  is not a compensatory enactment which may have been passed for  collecting revenue for the purpose of maintenance of roads and consequently  the same is invalid.   In our opinion, the contention raised has no substance.    In G.K. Krishnan v. State of Tamil Nadu AIR 1975 SC 583 this Court has  clearly ruled that if the State Legislature was competent to pass the Act, the  question of  motive with which the tax was imposed is immaterial and   there  can be no plea of a colourable exercise of power to tax if the Government  had the power to impose the tax.  It was further held that if the Government  had an authority to impose a tax, the fact that it gave a wrong reason for  exercising the power would not derogate from the validity of the tax.   22.      Learned counsel for the writ petitioners has also submitted that only  contract carriages which are designated as omnibuses and luxury or tourist  designated omnibuses have been subjected to a very heavy tax under Section  3A of the Act, whilst all other vehicles are taxed under Section 3 of the Act  and whereunder the quantum of tax is much lower as would be evident from  First to Seventh Schedule of the Act.  The submission is that these vehicles  have been discriminated against in the matter of taxation and there is no

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lawful justification for meeting out such differential treatment to them.   We  are unable to accept the submission made.   A similar contention was  negatived in G.K. Krishnan v. State of Tamil Nadu AIR 1975 SC 583 on the  ground that the classification of vehicles as Stage carriage and contract  carriage for the purpose of imposing a higher tax on the latter is presumed to  be reasonable having regard to the fact that it was based on local conditions  of which the Government was fully cognizant and the differentiation thus  made has reasonable relation to the purpose of the Act.   A similar  contention made in  Malwa Bus Service v. State of Punjab AIR 1983  SC  634 was repelled and  it was held as under :         "\005\005..There is no dispute that even a fiscal legislation is  subject to Article 14 of the Constitution.  But it is well settled  that a legislature in order to tax some  need not tax all.  It can  adopt a reasonable classification of persons and things in  imposing tax liabilities.  A law of taxation cannot be termed as  being discriminatory because different rates of taxation are  prescribed in respect of different items, provided it is possible  to hold that the said items belong to distinct and separate groups  and that there is a reasonable nexus between the classification  and the object to be achieved by the imposition of different  rates of taxation.  The mere fact that a tax falls more heavily on  certain goods or persons may not result in its invalidity\005\005\005"                   It was further held that the Courts lean more readily in favour of   upholding the constitutionality of taxing law in view of the complexities  involved in the social and economic life of the community.   Unless the  fiscal law in question is manifestly discriminatory, the Court should refrain  from striking it down on the ground of discrimination.   This being the  position of law, it is not possible to accept the contention of the writ  petitioners that the tax imposed upon the designated omnibuses is  discriminatory.   23.     Nothing new has been pointed out to challenge Gujarat Act No.9 of  2002 by which the Bombay Motor Vehicles Taxation Act, as adopted in the  State of Gujarat with up to date amendments, was further amended after the  decision of the High Court which was rendered on 17th August, 2001.   In  fact, the main argument of the learned counsel for the writ petitioners is that  the said amending Act merely rearranged the Sections and suffered from the  same infirmity as the previous Act.   Since we are of the opinion that the  view taken by the High Court is not correct and Section 3A and Rule 5 of  the Rules, as incorporated vide notification dated 6.2.2001 are intra vires and  are perfectly valid, the challenge made to Gujarat Act No.9 of 2002 has no  substance and must fail.    24.     In the result, Civil Appeal Nos.6462-6464 of 2001 filed by the State  of Gujarat are allowed and the impugned judgment and order dated  17.8.2001 of the High Court is set aside.   Writ Petition Nos.249 and 252 of  2002 filed in this Court are dismissed.   No costs.