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PETITIONER: MAHARAJA TOURIST SERVICE ETC. ETC

       Vs.

RESPONDENT: STATE OF GUJARAT

DATE OF JUDGMENT26/04/1991

BENCH: MISRA, RANGNATH (CJ) BENCH: MISRA, RANGNATH (CJ) KULDIP SINGH (J)

CITATION:  1991 AIR 1650            1991 SCR  (2) 524  1992 SCC  Supl.  (1) 489 JT 1991 (2)   423  1991 SCALE  (1)799

ACT: Constitution  of India,  1950; Articles 19(1) (g),  301-Levy of  additional tax under Motor Vehicle Tax Acts of different States- Validity of. Motor Vehicles Act,1939/1988/ Motor Vehicle Tax Acts- Section 63(7)/88(9)-   Motor  Vehicle  Tax  Acts  Punjab,   Gujarat, Rajastahan    and   Madhaya Pradesh-   Additional   Tax    - Constitutional validity of.      Punjab  Motor Vehicles Taxation Rules 1925 Rule 8  (v)- Exemption to vehicles registered  outside the State and kept in the State upto 30 days -Expression ’kept for use’ - Scope of - kept for more than 30 days for regular use - Not by way of  transit  -  Exigibility  of tax-  To  be  determined  in individual cases as  and when raised.      Words and phrases : ’kept for use’-   Meaning  of.

HEADNOTE:      Under  the taxing power contained in the several  Motor Vehicles  Tax  Acts  in vogue  in  the  Respondent-  States, provision  has been made for taxation as also for  levy   of additional  tax.  The  petitioners    who  hold   All  India Tourist Permits challenged the constitution validity of  the additional   tax,  on  the  ground   that  it  was   neither compensatory  nor regulatory, and therefore  was   violative of   Articles  19(1) (g)  and 301  of the  Constitution.  In respect  of  the  State  of Punjab  and Haryana which   have a common Act, an additional  contention  was  raised to  the effect that Rule 8(v) of the Punjab Motor Vehicles  Taxation Rules  1925, provides total exemption from liability of  tax if  the vehicle  was brought  into the  State  and kept  for use within the State for  a period  not exceeding 30 days in a  year,  and since the vehicles registered  outside  Punjab and Haryana  States are not kept within the State for   more than 30 days in a year, the demand of tax  in  the  face  of Rule 8(v)  is contrary to law.         Disposing of the Writ Petitions, this Court,      HELD : 1. Law is settled that to uphold levy of tax  as in  the  present case, what is necessary is existence  of  a nexus between  the subject and                                                        525 the object of the levy and it is not necessary to show  that

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the  whole  or a substantial part of the  tax  collected  is utilised. Hence the demand  of tax is not open to  challenge and  the  plea raised against the levy, whether  of  tax  or additional  tax,  is  not    justified.  Under  the   taxing provision  a  statutory outer limit has been   provided  and the    actual amount  is left to be determined by the  State Government  by notification. Obviously,  discretion is  left with  the   State Government to demand at rate  which  in  a given  situation would be justified . Once it is held   that the  tax is either conmpensatory or  regulatory  that  forms the  guideline for the State Government to keep in  view  to determine the rate at which within the upper limit fixed  by law the demand has to be made. {525E-H}      Automobile Transport (Rajasthan) Ltd. v. The  State  of Rajasthan  and  Ors , {1963} 1 SCR 491;  M/s.  International Tourist  Corporation  and  Ors.  v.  State  of  Haryana  and Ors.,[1981] 2 SCC 318 and   B.A. Jayaram and  Ors. v.  Union of India and Ors., [1984] SCC 168., relied on.      2.  The  word    ’kept’  has not been  defined  in  the Punjab   Motor   Vehicles  Taxation Act, 1924.  It  must   , therefore,  be  interpreted in its ordinary   popular  sense consistent  with  the  context.  The  ordinary    dictionary meaning  of  the  word ’keep’ is ’to     retain’,      ’  to maintain’  or   ’cause  to stay or remain in a  place  ’  or ’to  detain’  or  ’to  stay or    continue  in  a  specified condition ,    position etc., It is something different from a  mere state of transit or a course of journey through  the State  . it is something  more than a mere stoppage or  halt for  rest,  food  or refreshment,  etc.  in  the  course  of transit through  the  territory of the State. That being the position, rule 8 (v) which uses the term ’kept for use’  may not  cover a case of bare transit  and in terms of the  rule exemption is  available for vehicles kept upto 30 days in  a year.   In  that  view   of  the  matter  tourist   vehicles registered  outside  the State of Punjab and  Haryana   when brought    into  these two States for regular  use and   not by way  of transit and when used for more than 30 days  in a year   would  attract taxability;  otherwise  the  exemption provision in rule 8(v) would be available [530C-F]      M/s.  International  Tourist Corporation  and  Ors.  v. State  of  Haryana and Ors., [ 1981] 2SCC 318 and  State  of Mysore and Ors. v. M/s. T.V. Sundaram Iyengar & Sons  (P) Ltd., [1980] 1 SCC 66, referred to.      3. The question of  exigibility of tax in the State  of Punjab   and  Haryana  with reference to  rule 8(v)  of  the Punjab  Motor  Vehicles Taxation Rules, 1925 is left  to  be determined in individual cases as and when raised. [530G].                                                        526

JUDGMENT:    ORIGINAL  JURISDICTION:  Writ Petition No.  505  of  1990 etc.etc.      (Under  Article 32 of the Constitution of India)      R.N.  Sachtey,  S.K.  Bhattacharya,  S.C.  Patel,  Anip Sachthey,  Mahabir Singh, R.K.. Agnihotri, R.K.  Kapur,  Ms. Anil Katyar, N.D, Garg, C.M. Nayar (NP), H.S. Munjral, V. B. Joshi,   V.K.  Verma,  S.K.  Agnihotri,  Sakesh  Kumar,   N. Ganapathy,  M.  Veerappa, ,Mrs. Rani Chhabra,  M.N.  Shroff, Indra  Makwana, Sushil Kumar Jain, S.N. Aggarwal, Ms.  Vijay Lakshmi Menon, C.V.S Rao, Aruneshwar Gupta and Sushil  Kumar for the appearing parties.           The Judgement of the Court was delivered by           RANGANATH MISHRA, CJ. These are applications under

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Article 32 of the Constitution on behalf  of petitioners who hold  All India Tourist Permits granted under section  63(7) of  the Motor Vehicles Act, 1939.  corresponding to  section 88(9)  of  the  Motor Vehicles Act,  1988.  The  respondent- States in these writ petitions are Haryana, Punjab, Gujarat, Rajasthan and Madhaya Pradesh . There is  a common  Act- the Punjab   Motor  Vehicles  Taxation   Act,  1924-  which   is applicable to the States Punjab  and Haryana. In each of the other States there is a similar separate legislation.  Under the taxing power in the several Act provision has been  made for taxation  as also for levy of additional tax. It  is the contention of  the petitioners that the demand of additional tax is neither  compensatory nor regulatory and , therefore, the levy is violative of Article 10(1)(g) read with  Article 301  of the Constitution. In regard to the State  of  Punjab and Haryana  a special contention has been raised to  effect that rule 8(v) of the Punjab Motor Vehicles Taxation  Rules, 1925  provide total exemption from liability of tax  if  the vehicle is brought into Punjab  and kept for use within  the State  for a period not exceeding 30 days in a year  and  it is  the  contention of  the    petitioners  that  since  the vehicles registered outside the State of Punjab and  Haryana are not kept  within State for more than 30 days a year, the demand of tax in the face of rule 8(v) is contrary to law.      In the State of Gujarat, the Bombay Motor Vehicles  Tax Act, 1958 has been  amended, Section 3A of the Amending  Act provides that:                "3A  (1) On and from the first day  of  April 1982 there shall                                                        527 be  levied  and  collected.  on  all  ominibuses  which  are exclusively used or  kept for use in  the State as  contract carriages  (hereinafter in this section referred to as   the omnibus)  a tax (hereinafter referred to as " the additional tax") in addition to the tax levied under section 3, at  the rates  fixed by the State Government by notification in  the official  Gazettte  but  not  exceeding  the  maximum  rates specified in the table  below:           Description of            Maximum rate of           an omnibus                additional tax. ------------------------------------------------------------           A.  ordinary         (i)  Monthly  rate of Rs.               Omnibuses             240 per  passenger                                     permitted to be carried.                                (ii) Weekly rate of  Rs.  80                                     per passenger permitted                                     to be carried.                                (iii)Daily rate of Rs. 16 per                                     passenger permitteed  to                                     be carried.           B.   Luxury or  tourist(i) Monthly rate of Rs. 360                Omnibuses             per passenger permitted                                      to be carried.                                  (ii)Weekly rate of Rs. 120                                      per passanger permitted                                      to be  carried.                                  (iii)Daily   rate  of   Rs.                                       24    per    passenger                                       permitted to be carried.     The  validity  of  levy  of  this  type  came  up   for consideration  before  this  Court  in  the  case  of   the Automobile   Transport  (Rajasthan) Ltd.v.  The  State   of Rajasthan  and   Ors.,  [1963] 1  S.C.R.491.  Four  learned Judges who constitued the ,majority held that the provisions of Rajasthan  Motor  Vehicles Taxation  Act,  1951  did  not

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violate  the provisions of Article 301 of  the  Constitution and  the  taxes imposed under the Act  were  compensatory  or regulatory  in nature which did not hinder the freedom  of trade, commerce and intercourse assured by that Article, At page 586 of the  Report the following test was indicated:                                                        528               "It   seems  to  us  that  working  test   for               deciding  whether  a tax  is  compensatory  or               not  is to inquire whether the  trades  people               are  having the use of certain facilities  for               the  better  conduct  of  their  business  and               paying  not  patently much more than  what  is               required  for providing the facilities  .   It               would be impossible to judge the  compensatory               nature of a tax by meticulous test, and in the               nature of things that cannot be done.           The same question came up for consideration before      a   Two-Judge  Bench  in  M/s.  International   Tourist      Corporation  and  Ors. v. State of Haryana  and  Ors,.,      [1981]  2  SCC 318. This Court  followed  the  decision      referred to above of the larger group and observed:               "There cannot be the slightest doubt that  the               State    of   Haryana   incurs    considerable               expenditure  for the maintanance of roads  and               providing  facilities for   the  transport  of               goods  and  passengers  within  the  State  of               Haryana  . The maintenance of  highways  other               than the National Highways is exclusively  the               responsibility of the State Government.  While               the maintenance of National Highwauyys is  the               responsibility of  the Union Government, under               section  5 of the National Highways Act,  that               very provision empowers the Central Government               to direct that any function in relation to the               developement   and maintenance of  a  National               Highway  shall  also be  exercisable   by  the               concerened State Government. Section 6 further               empowers   the  Central  Government  to   give               directions  to the State Government as to  the               carrying out of the provisions of the Act  and               section 8 authorises the Central Government to               enter  into  an  agreement  with  the    State               Government   in relation to  the  developement               and  maintenance  of the whole or  part  of  a               National  Highway  situated within  the  State               including   a   provision   for   sharing   of               expenditure.  Therefore, the State  government               is not altogether devoid of responsibility  in               the  matter  of  developement  maintenance  of               National    Highway,   though   the    primary               responsibility   is   that   of   the    Union               Government. It is under a statutory obligation               to  obey the directions given by  the  Central               government  with respect to  the   development               and  maintenance of National Highways and  may               enter   into   an  agreement  to   share   the               expenditure. That part of the    Highway which               is  within a municipal area is  excluded  from               the definition of a National                                                        529               highway  and therfore, the responsibility  for               the development and maintenace of that part of               the   Highway  is  certainly  on   the   State               Government   and   the   Municipal   Committee               concerned.    Since   the   development    and

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             maintenance  of the part of the Highway  which               is   within  a  municipal  area   is   equally               inportant  for the smooth flow  of  passengers               and goods along the National Highway it has to               be  said that in  developing  and  maintaining               the Highway which is within a municipal  area,               the State Government  is surely   facilitating               the  flow  of passengers and goods  along  the               National  Highway.  Apart from  this  ,  other               facilities provided by State Government  along               all Highways including National Highways, such               as  lighting, traffic  control, amenities  for               passengers,  halting  places  for  buses   and               trucks   are  available for  use  by  everyone               including those travelling along  the National               Highways . It cannot, therfore, be said   that               the  State Government confers no benefits  and               renders no service in connection with  traffic               moving   along  National  Highways   and   is,               therfore, not entitled to levy a  compensatory               and  regulatory  tax on passengers  and  goods               carried on National Highways.We are  satisfied               that there is sufficient   nexus   between the               tax   and  passengers and  goods   carried  on               National Highways to justify the imposition."      This  view has been appoved in B.A. Jayaram and  Ors.v. Union  of  India and Ors.,[1984] 1   S.C.C. 168.  That  case also  relates to permit holders under section 63(7)  of  the Motor Vehicles Act, 1939, and challenge of the present  type was  negatived in the case. Law is settled that uphold  levy of a tax of this type, what is necessary is  existence of  a nexus  between the subject  and the object  of the levy  and it  is not necessary to show that the whole  or  substantial part  of the tax  collected is utilised. We are,  therefore, satisfied  that the demand of tax is not open  to  challenge and  the  plea raised against the levy, whether  of  tax  or additional tax, is not  justified.under the taxing provision a  statutory outer limit has been provided  and  the  actual amount  is left to be determined by the State Government  by notification. Obviously, discretion is left with the   State Government  to demand  at a rate which  in a given situation would  be justified. Once it is held that the tax is  either compensatory or regulatory that forms the guideline  for the State  Government to keep in view to determine  the rate  at which within the upper limit fixed by law the demand has  to be made.     The  second  contention  which  has  been  raised is applicable  to  the                                                        530 State of punjab and Haryana and that depends upon the  scope of   rule  8(v)  of  the  Punjab  Motor  Vehicles   Taxation Rules,1925.  We  note that the provision perscribes  that  a motor  vehicle temporarily brought into Punjab and kept  for use therein for a period not exceeding  30 days is  entitled to total exemption and that is not in dispute before us. Nor is  it  in dispute that the rule applies to  Haryana  .  The words  ’Kept for use’ came up for consideration in the  case of  International  Tourist Corporation  (supra)  where  this Court held that once a vehicle is  used within the State the Taxable event occured and it must be taken for use. In State of  Mysore and Ors.v. M/s. T.V. Sundaram Iyengar  &  Sons(P) Ltd.,  (1980) 1 S.C.C. 66 the meaning of ’kept’was  examined at  length  and  this Court held that  vehicle  in   transit through  the  State of Mysore, or even  making  a  necessary halt  for a short interval, during transit , cannot be  said

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to  be  a vehicle ’kept’ for use on roads in the   State  of Mysore. The word ’kept’ has not been defined in the Act.  It must  ,  tharefore, be interpreted in its  ordinary  popular sense  consistent with the context. The ordinary  dictionary meaning of the word ’kept’  is ’to retain’, ’to maintain’ or ’cause   to stay or remain in place’ or ’to detrain’ or  ’to stay  or continue in specified condition, position etc.’  It is  something  different from a mere state of transit  or  a course  of journey through the State. It is  something  more than a mere stoppage or halt for rest, food or  refreshment, etc. in the course of  transit through the territory of  the State.  That  being the position rule 8(v) which  uses   the terms  ’kept for use’ may not cover a case of bare   transit and in terms of the rule  exemption is available for vehicle kept  upto  30 days  in a year. In that view  of the  matter tourist vehicles registered outside the State of Punjab  and Haryana  when brought into these two States for regular  use and  not by way of transit and when used for more  than   30 days  in  a  year would attract  taxability  otherwise   the exemption  provision  in rule 8(v) would be available  .  We have  settled  the  legal position and we leave  it  to  the individual  taxing  authorities  as also  the  operators  of tourist vehilces to work out their respective rights.      We  would , therefore , like to clarify that the  first aspect  being  a  challenge  against  the  taxing  provision whether by way of tax or additional tax is rejected and  the question of exigibility of tax in the States of Punjab   and Haryana  with  reference to rule 8(v) of  the  Punjab  Motor Vehicles  Taxation  rules, 1925 is left to be determined  in individual cases as and when raised. There would be no order as to costs. G.N.                                  Petitions deposed of.                                                        531