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CASE NO.: Appeal (civil)  4557 of 2006

PETITIONER: Hardev Motor Transport

RESPONDENT: State of M.P. & Ors

DATE OF JUDGMENT: 19/10/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T

[Arising out of S.L.P. (C) No. 22580 of 2005] WITH CIVIL APPEAL NO. 4558 OF 2006 [Arising out of S.L.P. (C) No. 24087 of 2005] S.B. SINHA, J :          

Leave granted.   

       Constitutional validity of Clause (g) of Entry IV of the First Schedule  of the Madhya Pradesh Motoryan Karadhan Adhiniyam, 1991 (for short "the  1991 Act") as amended by Madhya Pradesh Motoryan Sanshodhan  Adhiniyam, 2004 read with Explanation (7) of the First Schedule thereof is  in question in these appeals which arise out of a judgment and order dated  28.06.2005 passed by a Division Bench of the High Court of Madhya  Pradesh at Jabalpur.

       Appellants herein are holders of contract carriage permits.  On  allegations that they have been using their vehicles as stage carriage permits,  the vehicles were detained.  They were asked to pay duty as if the vehicles  were being plied without any permit.   

       The Parliament enacted Motor Vehicles Act, 1988 (for short "the  1988 Act") to consolidate and amend the law relating to motor vehicles in  exercise of its legislature power under Entry 35, List III of the Seventh  Schedule of the Constitution of India.  The said Act is a self-contained code.   

       "Permit" has been defined in Section 2(31) to mean "a permit issued  by a State or Regional Transport Authority or an authority prescribed in this  behalf under this Act authorizing the use of a motor vehicle as a transport  vehicle".   

       "Stage carriage", "contract carriage" and "tourist vehicle" have been  defined under Sections 2(40), 2(7) and 2(43) of the 1988 Act as under:

"2(40) "stage carriage" means a motor vehicle  constructed or adapted to carry more than six  passengers excluding the driver for hire or reward  at separate fares paid by or for individual  passengers, either for the whole journey or for  stages of the journey;

2(7) "contract carriage" means a motor vehicle  which carries a passenger or passengers for hire or  reward and is engaged under a contract, whether  expressed or implied, for the use of such vehicle as  a whole for the carriage of passengers mentioned

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therein and entered into by a person with a holder  of a permit in relation to such vehicle or any  person authorised by him in this behalf on a fixed  or an agreed rate or sum\027   (a) on a time basis, whether or not with reference  to any route or distance; or   (b) from one point to another,   and in either case, without stopping to pick up or  set down passengers not included in the contract  anywhere during the journey, and includes\027    (i) a maxicab; and (ii) a motorcar notwithstanding the separate fares  are charged for its passengers; 2(43) "tourist vehicle" means a contract carriage,  constructed or adapted and equipped and  maintained in accordance with such specifications  as may be prescribed in this behalf;"

       Section 66 of the 1988 Act deals with grant of permit.  Section 72 of  the 1988 Act provides for grant of stage carriage permit.  In terms of Sub- section (1) thereof, a stage carriage permit may be granted or refused to be  granted in accordance with the application but subject to the provisions of  Section 71 and with such modification as it deems fit.  Sub-section (2) of  Section 72 provides for the conditions as enumerated therein for grant of  such permit.  Section 74 of the 1988 Act provides for grant of contract  carriage permit on almost similar terms.  Sub-section (2) of Section 74  provides for grant of such permits on one or more of the conditions  enumerated therein including: (i)     use of the vehicle in a specified area  or on a specified route or routes; (ii)    specified rates of hiring should not exceed specified maximum rates;  and  (iii)   number of passengers.  

       Clause (ix) of Sub-section (2) of Section 74 of the 1988 Act  empowers the Regional Transport Authority to vary the conditions of permit  or attach to the permit further conditions.  Clause (xii) of Sub-section (2) of  Section 74 reads as under:

"(xii) that, except in the circumstances of  exceptional nature, the plying of the vehicle or  carrying of the passengers shall not be refused;"

       Sub-section (3) of Section 74 reads as under:

"(3) (a) The State Government shall, if so directed  by the Central Government, having regard to the  number of vehicles, road conditions and other  relevant matters, by notification in the Official  Gazette, direct a State Transport Authority and a  Regional Transport Authority to limit the number  of contract carriages generally or of any specified  type, as may be fixed and specified in the  notification, operating on city routes in towns with  a population of not less than five lakhs. (b) Where the number of contract carriages are  fixed under clause (a), the Regional Transport  Authority shall, in considering an application for  the grant of permit in respect of any such contract  carriage, have regard to the following matters,  namely:\027  (i) financial stability of the applicant;

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(ii) satisfactory performance as a contract carriage  operator including payment of tax if the applicant  is or has been an operator of contract carriages;  and (iii) such other matters as may be prescribed by the  State Government"

       Section 192A of the 1988 Act provides for a penal clause stating:

"(1) Whoever drives a motor vehicle or causes or  allows a motor vehicle to be used in contravention  of the provisions of sub-section (1) of section 66 or  in contravention of any condition of a permit  relating to the route on which or the area in which  or the purpose for which the vehicle may be used,  shall be punishable for the first offence with a fine  which may extend to five thousand rupees but shall  not be less than two thousand rupees and for any  subsequent offence with imprisonment which may  extend to one year but shall not be less than three  months or with fine which may extend to ten  thousand rupees but shall not be less than five  thousand rupees or with both: Provided that the court may for reasons to be  recorded, impose a lesser punishment.  (2) Nothing in this section shall apply to the use of  a motor vehicle in an emergency for the  conveyance of persons suffering from sickness or  injury or for the transport of materials for repair or  for the transport of food or materials to relieve  distress or of medical supplies for a like purpose: Provided that the person using the vehicle reports  about the same to the Regional Transport  Authority within seven days from the date of such  use.  (3) The court to which an appeal lies from any  conviction in respect of an offence of the nature  specified in sub-section (1), may set aside or vary  any order made by the court below,  notwithstanding that no appeal lies against the  conviction in connection with which such order  was made."

       The 1988 Act, thus, contains penal provision for violation of the  provisions of the said Act and/ or violating the terms and conditions of the  permit.  A penalty can be imposed by a court.  An order of penalty is an  appellable one.  The Central Government in exercise of its power conferred  upon it made rules known as the Central Motor Vehicle Rules, 1989.   Rules  85 and 85A of the Rules provide for additional conditions of tourist permit.  

       The 1988 Act and the Rules made thereunder provide for a complete  code.  The matter relating to the imposition of tax, however, is provided for  under the statutes enacted by each State.  The State of Madhya Pradesh for  the said purpose enacted the 1991 Act.  Section 2(c) of the 1991 Act defines  ’tax’ to mean a tax leviable under the Act.  Section 3 provides that a tax shall  be leviable on every motor vehicle used or kept for use in the State at the  rates specified in the First Schedule.  Section 16 provides for power of entry,  seizure and detention of motor vehicles in case of non-payment of tax.  Sub- sections (1) to (5) of Section 16 of the 1991 Act read as under:

"16. Power of entry, seizure and detention of  Motor Vehicles in case of non-payment of tax : (1)  The Taxation Authority or any other officer,  authorised by the State Government in this behalf,  may at all reasonable time enter into and inspect

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any motor vehicle or premises where he has reason  to believe that a motor vehicle is kept for the  purpose of verifying whether the provisions of this  Act or any rules made thereunder are being  complied with: Provided that no officer shall be authorised under  this sub-section with respect to motor cycles and  motor cars : (2) Any person driving a motor vehicle in any  public place shall, on being so required by the  Taxation Authority or any officer authorised in this  behalf by the State Government, produce-- (a) the certificate of registration; (b) the token in evidence of the payment of tax ;  and (c) the certificate of insurance relating to the use of  the vehicle and shall keep such vehicle stationary  for such time as may be required by such authority  or officer to satisfy himself that the tax in respect  of such motor vehicle has been paid : Provided that in the case of a motor vehicle other  than a transport vehicle; the certificates so required  shall be produced for inspection within such period  and in such manner as may be prescribed under  Sub-section (4) of Section 130 of the Motor  Vehicles Act, 1988. (3) The Taxation Authority or any officer  authorised by the State Government in this behalf  may if he has reason to believe that a motor  vehicle has been or is being used without payment  of tax, penalty or interest due, seize and detain  such motor vehicle and for this purpose take or  cause to be taken any step as may be considered  proper for the temporary safe custody of such  motor vehicle and for the realisation of tax due. (4) Where a motor vehicle has been seized and  detained under Sub-section (3), the owner or the  person incharge of such vehicle may apply to the  Taxation Authority or any officer authorised in this  behalf by the State Government together with the  relevant documents for the release of the vehicle  and if such authority or officer after verification of  such documents, is satisfied that no amount of tax  is due in respect of that vehicle, may by an order in  writing release such vehicle. (5) Where a motor vehicle has been seized and  detained under Sub-section (3), the Court taking  cognizance of the offence shall not release such  vehicle."

       Section 23 of the 1991 Act empowers the State to amend the Schedule  in regard to the rates of tax by not more than fifty per cent of the rates  specified therein.  As noticed hereinbefore, the rate of tax is specified in the  First Schedule appended to the said Act.  Entry IV of the First Schedule  provides for public service vehicle.  The relevant portions of Clauses (d), (f)  and (g) of Entry IV of the First Schedule read as under:

"Class of Motor Vehicle Rate of Quarterly tax  for Motor Vehicles IV. PUBLIC SERVICE VEHICLE

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*** ***

(d) Vehicles permitted to carry more than  six passengers plying as stage carriage on  routes other than city routes \026  *** (2) In respect of vehicles permitted to  play as ordinary service for every  passenger which the vehicle is permitted  to carry and where the total distance  permitted to be covered by a vehicle in a  day \026  (i) does not exceed 100 kms.

(ii) thereafter for each 10 kms.

***

Rs. 160 per seat per  month

Rs. 10 per seat per  month.

(f) Contract carriage ***

(3) Vehicle permitted to carry more than  six passengers and plying as contract  carriage covered by all India Tourist  permit issued by other State under sub- section (9) of Section 88 of the Motor  Vehicles Act, 1988 for each seat  (excluding driver) which the vehicle is  permitted to carry.

***

(5) Vehicles permitted to carry more than  six passengers and plying as contract  carriage on special permit granted under  sub-section (8) of Section 88 of the  Motor Vehicle Act, 1988 by the other  State for each seat (other than the driver)  which the vehicle is permitted to carry

Rs. 40.00 per seat per  day for the entire period  vehicle remains in  Madhya Pradesh

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50 paise for ordinary  bus and Re. 1 for  deluxe/ air-conditioned  bus per seat per 10 kms.  or part thereof for the  entire distance to be  covered in accordance  with the conditions of  the permit, in addition  to tax paid under clause  (c), (d), (e) or (f)(2) as  the case may be.

(g) Motor Vehicle plying without permit (a) Vehicle permitted to carry exceeding  3 but not exceeding 29 passengers  (excluding driver) \026  

(b) Vehicle permitted to carry exceeding  29 passengers (excluding driver)

Rs. 600 per seat per  month in accordance  with entire registered  seating capacity; Rs. 1000.00 per seat per  month in accordance  with entire registered  seating capacity."

       Explanation (7) of the First Schedule reads as under:

"Explanation (7) - The words "plying without  permit" in Clause (g) shall include plying of a  public service vehicle on an authorised route or  making a trip not authorised by a permit granted  under the Motor Vehicles Act, 1988 but shall not  include the plying of a public service vehicle under  circumstances laid down in Sub-section (3) of  Section 66 of the Motor Vehicles Act, 1988."

       Sub-clause (3) of Clause (f) and Clause (g) of Entry IV of the First  Schedule were amended in the following terms:

"(3)    Vehicle permitted to carry more than six  passengers and plying as contract carriage covered  by all India Tourist permit issued by other State  under sub-section (9) of Section 88 of the Motor  Vehicles Act, 1988 for each seat (other than the  driver) which the vehicle is permitted to carry \026  Rs. 200.00 per seat per week or part thereof till the  vehicle remains in Madhya Pradesh."

"(g) Motor vehicle plying without permit; A.      Vehicle permitted to carry upto 12  passengers (excluding driver) \026 Rs. 1000.00 per  seat per month in accordance with the entire

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registered seating capacity. B.      Vehicle permitted to carry more than 12  passengers (excluding driver) \026 Rs. 1500.00 per  seat per month in accordance with the entire  registered seating capacity."   

       Tax imposed on motor vehicles in terms of the provisions of the 1991  Act is a regulatory one.  It was so held in Bolani Ores Ltd. v. State of Orissa  [(1974) 2 SCC 777] stating:

"\005If the vehicles do not use the roads,  notwithstanding that they are registered under the  Act, they cannot be taxed\005"

       We may, however, hasten to add that even if a vehicle is roadworthy  and can be plied on a road, a tax may be imposed, but if a vehicle is not  capable of being plied on the road, no tax would be leviable.

       In Automobile Transport (Rajasthan) Ltd. etc. v. The State of  Rajasthan and Others [1963 (1) SCR 491], it is stated:

"We were addressed at some length on the  distinction between a tax, a fee and an excise  duty. It was also pointed out to us that the taxes  raised under the Act were not specially ear- marked for the building or maintenance of roads.  We do not think that these considerations  necessarily determine whether the taxes are  compensatory taxes or not. We must consider the  substance of the matter and so considered, there  can be no doubt that the taxes imposed are no  hindrance to the freedom of trade, commerce and  intercourse. If a statute fixes a charge for a  convenience or service provided by the State or  an agency of the State, and imposes it upon those  who choose to avail themselves of the service or  convenience, the freedom of trade and commerce  may well be considered unimpaired. In such a  case the imposition assumes the character of  remuneration or consideration charged in respect  of an advantage sought and received."

       The power of the State of Madhya Pradesh to seize a vehicle in terms  of Section 16(6) of the 1991 Act came up for consideration before this Court  in M.P. AIT Permit Owners Assn. and Another v. State of M.P. [(2004) 1  SCC 320].  The question which arose for consideration therein was that  having regard to the fact that the Parliamentary Act provides for a lesser  penalty as specified in Section 192A thereof, can the State by reason of the  taxing statute impose a higher penalty?  It was held:

"Section 192-A of the MV Act provides that if a  motor vehicle is driven in contravention of Section  66(1), that is, if a vehicle is driven or caused to be  driven as a transport vehicle without permit, or in  contravention of any condition thereof relating to  the route on which or the area in which or the  purpose for which the vehicle may be used, the  user is punishable with fine for the first offence  and imprisonment for the subsequent offence but  this section does not provide for confiscation of the  vehicle. Section 16(6) of the Act provides that  subject to the provisions of sub-section (8), where

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upon receipt of report about the seizure of the  vehicle under sub-section (3), the taxation  authority is satisfied that the owner has committed  offence under Section 66 read with Section 192-A  of the MV Act of plying vehicle without permit  and he may by order in writing and for reasons to  be recorded confiscate the vehicle seized under the  said provision. Under Section 16(3) of the Act, a  vehicle seized for non-payment of tax or other  dues is liable to be returned on showing that tax  has been paid. Thus, if tax with regard to the  seized vehicle is paid that vehicle has got to be  released. So far as the link that is sought to be  established with taxation procedures is concerned,  it snaps the moment tax is paid and vehicle is  released. In such an event also motor vehicle can  be confiscated on a report that such vehicle has  been seized. The cause or basis for confiscation of  motor vehicle is driving such vehicle contrary to  Section 66 of the MV Act read with Section 192-A  of the MV Act and a report of seizure under  Section 16(3) of the Act."

       The said decision, however, was rendered on the premise that the  State Act is repugnant to the Central Act.

       It is, however, not in dispute that the 1991 Act has received the assent  of the President of India.  While considering the question of constitutionality  of the provisions of the 1991 Act, therefore, Article 254(2) of the  Constitution of India may not have any role to play.

       We may at this juncture notice that the concepts of tax, compensatory  tax and fees having regard to diverse decisions rendered by this Court over a  number of years were referred to a Constitution Bench.  The decision of the  Constitution Bench of this Court is since reported in Jindal Stainless Ltd. &  Anr. v. State of Haryana & Ors. [JT 2006 (4) SC 611].  The Constitution  Bench of this Court made a deep analysis of the nature of tax, principles of  imposition of tax, compensatory tax and levy of fee and stated the law, thus:

"Tax is levied as a part of common burden. The  basis of a tax is the ability or the capacity of the  taxpayer to pay. The principle behind the levy of a  tax is the principle of ability or capacity. In the  case of a tax, there is no identification of a specific  benefit and even if such identification is there, it is  not capable of direct measurement. In the case of a  tax, a particular advantage, if it exists at all, is  incidental to the States’ action. It is assessed on  certain elements of business, such as, manufacture,  purchase, sale, consumption, use, capital etc. but  its payment is not a condition precedent. It is not a  term or condition of a licence. A fee is generally a  term of a licence. A tax is a payment where the  special benefit, if any, is converted into common  burden."

       In regard to compensatory tax, it was opined:

"A tax can be progressive. However, a fee or a  compensatory tax has to be broadly proportional  and not progressive. In the principle of  equivalence, which is the foundation of a  compensatory tax as well as a fee, the value of the

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quantifiable benefit is represented by the costs  incurred in procuring the facility/services which  costs in turn become the basis of  reimbursement/recompense for the provider of the  services/facilities. Compensatory tax is based on  the principle of "pay for the value". It is a sub-class  of "a fee". From the point of view of the  Government, a compensatory tax is a charge for  offering trading facilities. It adds to the value of  trade and commerce which does not happen in the  case of a tax as such. A tax may be progressive or  proportional to income, property, expenditure or  any other test of ability or capacity (principle of  ability). Taxes may be progressive rather than  proportional. Compensatory taxes, like fees, are  always proportional to benefits. They are based on  the principle of equivalence. However, a  compensatory tax is levied on an individual as a  member of a class, whereas a fee is levied on an  individual as such. If one keeps in mind the  "principle of ability" vis-‘-vis the "principle of  equivalence", then the difference between a tax on  one hand and a fee or a compensatory tax on the  other hand can be easily spelt out. Ability or  capacity to pay is measurable by property or rental  value. Local rates are often charged according to  ability to pay. Reimbursement or recompense are  the closest equivalence to the cost incurred by the  provider of the services/facilities. The theory of  compensatory tax is that it rests upon the principle  that if the government by some positive action  confers upon individual(s), a particular measurable  advantage, it is only fair to the community at large  that the beneficiary shall pay for it. The basic  difference between a tax on one hand and a  fee/compensatory tax on the other hand is that the  former is based on the concept of burden whereas  compensatory tax/fee is based on the concept of  recompense/reimbursement. For a tax to be  compensatory, there must be some link between  the quantum of tax and the facility/services. Every  benefit is measured in terms of cost which has to  be reimbursed by compensatory tax or in the form  of compensatory tax. In other words,  compensatory tax is a recompense/reimbursement.

       Opining that compensatory tax being a judicially evolved concept, it  was observed that the scope and effect thereof must be construed within the  said parameters.   

       In G.K. Krishnan and Others v. State of Tamil Nadu and Others  [(1975) 1 SCC 375], Mathew, J. stated the law, thus:

"Strictly speaking, a compensatory tax is  based on the nature and the extent of the use  made of the roads, as, for example, a mileage or  ton-mileage charge or the like, and if the  proceeds are devoted to the repair, upkeep,  maintenance and depreciation of relevant roads  and the collection of the exaction involves no  substantial interference with the movement. The  expression "reasonable compensation" is  convenient but vague. The standard of  reasonableness can only lie in the severity with  which it bears on traffic and such evidence of

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extravagance in its assessment as come from  general considerations. What is essential for the  purpose of securing freedom of movement by  road is that no pecuniary burden should be placed  upon it which goes beyond a proper recompense  to the State for the actual use made of the  physical facilities provided in the shape of a road.  The difficulties are very great in defining this  conception. But the conception appears to be  based on a real distinction between remuneration  for the provision of a specific physical service of  which particular use is made and a burden placed  upon transportation in aid of the general  expenditure of the State. It is clear that the motor  vehicles require, for their safe, efficient and  economical use, roads of considerable width,  hardness and durability; the maintenance of such  roads will cost the government money. But,  because the users of vehicles generally, and of  public motor vehicles in particular, stand in a  special and direct relation to such roads, and may  be said to derive a special and direct benefit from  them, it seems not unreasonable that they should  be called upon to make a special contribution to  their maintenance over and above their general  contribution as taxpayers of the State. If,  however, a charge is imposed, not for the  purpose of obtaining a proper contribution to the  maintenance and upkeep of the road, but for the  purpose of adversely affecting trade or  commerce, then it would be a restriction on the  freedom of trade, commerce or intercourse."

       We are not oblivious of a recent decision of this Court in  Vijayalashmi Rice Mill and Others v. Commercial Tax Officers, Palakol and  Others [(2006) 6 SCC 763], although we are not strictly concerned  therewith, but we notice that herein the application of Jindal Stainless Ltd.  (supra) was kept limited stating:

"It may be noted that the decision in Jindal  Stainless was given in connection with Article 301  of the Constitution, and it was not regarding the  nature of a fee.  Hence, it cannot be regarded as an  authority explaining the nature of a fee."

       We, however, feel that this Bench is bound by the Constitution Bench  decision of this Court.

       The issue which arises for our consideration in the light of the  aforementioned authoritative pronouncement, as noticed hereinbefore, is  whether the impugned provision specifies the test laid down by the  Constitution Bench.   

       Section 3 of the 1991 Act is the charging section.  It provides that the  tax shall be levied on every motor vehicle used or kept for use in the State at  the rates specified in the First Schedule.  The levy of tax, therefore, is on the  motor vehicles.  Its rate may vary keeping in view its use or the nature  thereof.  However, the use of a motor vehicle so far as public service  vehicles are concerned would depend upon the nature of permit held by it.  It  is not in dispute that Appellants herein have been granted permit for plying  their buses as contract carriage.  Allegation against this is that they have  been violating the terms and conditions of the permit by plying their vehicles  as stage carriage.  It is, however, not in dispute that the rate of tax of a  contract carriage permit is more than the stage carriage.  Clause (g) of Entry

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IV specifies the rate of tax of motor vehicle plying without permit at the rate  of Rs. 1500/- per seat per month.   

       Explanation (7) of the First Schedule of the 1991 Act does not create  any legal fiction.  It provides for a inclusive definition stating that the words  "plying without permit" in Clause (g) shall include plying of a public service  vehicle on an authorized route or making a trip not authorized by a permit  granted under the 1988 Act.

       The role of an explanation of a statute is well-known.  By inserting an  explanation in the Schedule of the Act, the main provisions of the Act  cannot be defeated.  By reason of an explanation, even otherwise, the scope  and effect of a provision cannot be enlarged.  It was so held in S. Sundaram  Pillai, etc. v. R. Pattabiraman  [AIR 1985 SC 582 : (1985) 1 SCC 591] in the  following terms:

"Thus, from a conspectus of the authorities  referred to above, it is manifest that the object of  an Explanation to a statutory provision is\027 "(a) to explain the meaning and intendment of the  Act itself, (b) where there is any obscurity or vagueness in  the main enactment, to clarify the same so as to  make it consistent with the dominant object which  it seems to subserve, (c) to provide an additional support to the  dominant object of the Act in order to make it  meaningful and purposeful, (d) an Explanation cannot in any way interfere  with or change the enactment or any part thereof  but where some gap is left which is relevant for the  purpose of the Explanation, in order to suppress  the mischief and advance the object of the Act it  can help or assist the Court in interpreting the true  purport and intendment of the enactment,\005"

[See also Swedish Match AB and Another v. Securities & Exchange  Board of India and Another, (2004) 11 SCC 641]

       We have noticed that the Constitution Bench categorically states that  compensatory tax cannot be progressive.  We have furthermore noticed that,  according to the Constitution Bench, imposition of tax cannot be a term or  condition of a licence.  If a permit has been granted, the holder of a permit is  liable to comply with the conditions of permit.  If he violates the terms and  conditions of permit, law will take its own course.  A permit is granted under  the 1988 Act.  If there is violation of the terms of permit, the consequences,  therefor, shall ensue as contained in Section 192A of the 1988 Act.  A  distinction must be borne in mind that a tax cannot be imposed by way of  penalty although penalty can be imposed for non-payment of tax or evasion  of tax.  The State may make suitable legislations in this behalf.  But the same  would not mean that while specifying a rate of tax, the executive  government of the State can indirectly levy a penalty which it cannot do  directly.   

       Our attention has been drawn to a decision of this Court in State of  U.P. and Others v. Sukhpal Singh Bal [(2005) 7 SCC 615] and in particular  the following passage:

"In the case of State of Madras v. V.G. Row (AIR  at p.   200, para 15) this Court observed as follows:  (SCR p.         607) "It is important in this context to bear in mind that  the test of reasonableness, wherever prescribed,  should be applied to each individual statute

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impugned, and no abstract standard, or general  pattern of reasonableness can be laid down as  applicable to all cases. The nature of the right  alleged to have been infringed, the underlying  purpose of the restrictions imposed, the extent and  urgency of the evil sought to be remedied thereby,  the disproportion of the imposition, the prevailing  conditions at the time, should all enter into the  judicial verdict.""

       Kapadia, J. in that case was dealing with the constitutionality of a  penal provision.  It was stated that before a penalty can be imposed, mens  rea on the part of the defaulter is required to be established.  The said  decision is merely an authority for the proposition that a statute may provide  for a fixed penalty or minimum penalty.  But it was not laid down therein  that penalty can be imposed without giving an opportunity of hearing to the  defaulter or without satisfying the other conditions laid down therefor.  [See  also State of T.N. v. M. Krishnappan and Another, (2005) 4 SCC 53].

       The transport authorities of the State indisputably have a power to  check a vehicle so as to ascertain whether payment of tax is being evaded.   They have been conferred with the power to detain a vehicle.  They can  release the vehicle only when tax as demanded is paid.  Even the power of  the court to release the vehicle has been taken away unless tax is paid and  the court can satisfy itself as to whether a tax is paid or not only on the  receipt of the certificate issued by the transport authorities of the State.  The  power of the transport authorities, therefore, is very wide.  We, however, do  not mean to suggest that only because a wide power has been conferred the  same by itself would lead to a presumption that the same is capable of  misuse or on that count alone the provisions of Article 14 of the Constitution  of India would be attracted.  But, when a statue confers a wide power upon a  statutory authority, a closer scrutiny would be required.

       The 1991 Act also does not make any provision for compliance of the  principles of natural justice or for determination of a question as to whether  the conditions of permit have been violated by an independent authority.

       Appellants have paid tax.  They have paid tax as specified for in  permits granted in their favour as a contract carriage.  The rate of tax  payable by a contract carriage is higher than the rate of tax imposed on a  stage carriage.  For non-payment of tax or for payment of tax for a wrong  purpose, a penalty can be imposed but it is difficult to conceive that a  different rate of tax which is not contemplated under Section 3 of the 1991  Act can be imposed by way of penalty.

       The interpretation clauses contained in the 1988 Act are incorporated  in the 1991 Act by reference.  The interpretation of the expressions "permit",  "contract carriage" and "stage carriage" must, thus, be understood on the  premise that the said expressions carry the same interpretation as contained  in the 1988 Act.   

       A distinction between "contract carriage" and "stage carriage" has  been noticed by this Court in State of A.P. and Others v. B. Noorulla Khan  and Another [(2004) 6 SCC 194] stating:

"The distinction between a stage carriage  permit or a contract carriage permit as envisaged  by the legislature has to be maintained as the two  types of permits are intended to meet different  requirements. The contract carriages are for those  who want to hire the vehicle collectively or  individually for a group or a party for their  transport to a destination/destinations. The vehicle

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has to be hired as a whole for the carriage of  passengers mentioned in the contract. There has to  be only one contract for carrying the passengers  mentioned in the contract from one destination to  another. An agent or a group of  persons/individuals cannot hire a public service  vehicle for going from one place to another with  passengers having different purposes. If such a  construction is put then there would be no  distinction between stage carriage or contract  carriage permits. If contract carriage permit-holder  is permitted to pick up an individual or a few of  them from the starting point of the journey and  drop them at the last terminus of the route it would  virtually be a stage carriage with corridor  restriction. Stage carriage is intended to meet the  requirements of the general public travelling from  one destination to another having different  purposes whereas a contract carriage is meant for  those who want to hire a public service vehicle as a  whole collectively for their transport from one  destination to another having the same purpose\005"

       As a logical corollary the mode and manner in which the permits are  granted must necessarily be considered to be part of the provisions of the  1991 Act.  Article 254(2) of the Constitution of India as such may not be  attracted but it is a trite law that the executive while fixing a rate of duty  cannot be permitted to usurp the legislative power and make a provision  which would be inconsistent with the substantive provision of the statute.  In  other words, the provisions contained in the Schedule must be in consonance  with the substantive provisions in the main Act.  It must be in conformity  with the charging Section.  As in terms of Section 3 of the 1991 Act, the  legislature directed that the tax can be levied on motor vehicles subject to the  rates fixed; by taking recourse to Explanation (7), firstly, no new definition  could be introduced and, secondly, an owner of a vehicle having one kind of  permit could not have been treated as having no permit at all only because  the transport authorities have reasons to believe that the conditions of permit  have been violated.  By way of example we may notice that recently a  Constitution Bench of this Court in State of Kerala and Others v.  Maharashtra Distilleries Ltd. and Others [(2005) 11 SCC 1] has laid down  guidelines for reading of the entries in the Schedule vis-‘-vis the provisions  of the Act.

       For the reasons aforementioned, Clause (g) of Entry IV of the First  Schedule of the Madhya Pradesh Motoryan Karadhan Adhiniyam, 1991 (for  short "the 1991 Act") as amended by Madhya Pradesh Motoryan  Sanshodhan Adhiniyam, 2004 read with Explanation (7) of the First  Schedule is declared unconstitutional.  The appeals are allowed.  No costs.