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PETITIONER: NAZEERIA MOTOR SERVICE ETC. ETC.

       Vs.

RESPONDENT: STATE OF ANDHRA PRADESH & ANR.

DATE OF JUDGMENT: 21/08/1969

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C. (CJ) RAMASWAMI, V.

CITATION:  1970 AIR 1864            1970 SCR  (2)  52  1969 SCC  (2) 576  CITATOR INFO :  RF         1971 SC1705  (4)  RF         1972 SC1804  (2,5,10,14)  R          1976 SC 182  (21)

ACT: Constitution  of India, Arts, 301, 304(b) and  19(1)(g)  and Andhra  Pradesh Motor Vehicles (Taxation of  Passengers  and Goods)   Amendment  and  Validation  Act  XXXIV  of    1961- Constitutionality   of  fares  and freights imposed  by  the Act.

HEADNOTE: The  appellants, motor transport operators,  challenged  the increase  in surcharge of the fares and freights imposed  by the  Andhra Pradesh Motor Vehicles (Taxation  of  Passengers and  Goods) Amendment and Validation Act, 1961. They  urged: (i)  the  Act  was neither regulatory  nor  compensatory  in nature and, it fell directly within the mischief of Art. 301 of the Constitution; (ii) the imposts exceeded the limits of permissible reasonableness, were not in the public  interest and,  therefore,  violated Arts. 304(b)  and  19(1)(g);  and (iii)  the Act violated Art. 14 (a) inasmuch as it  had  not been  made applicable to the Telegana area although  it  was applicable to the Andhra area and (b) the vehicles on inter- State routes on permits granted by other States had not been subjected to tax.     HELD:  (i) It was not the contention of  the State  that the  impugned Act imposed a tax by way ’of a  regulatory  or compensatory measure.  Therefore, it had to be been  whether the  restrictions imposed were reasonable and in the  public interest within the meaning of Art. 304(b); these  questions were  open to examination by the court  notwithstanding  the fact  that  the sanction of the President  was  obtained  in compliance with the Article. [55 E--F]     Mathurai Pillay v. State of Madras, (1954) 1 M.L.J. 110, Automobile Transport (Rajasthan) Ltd. v. State of  Rajasthan JUDGMENT: v.  State  of  Assam.  [1964]  5 S.C.R. 975 and Atiabari Tea Co.  Ltd. v. State of Assam, [1961] 1 S.C.R.  809,  referred to.

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(ii) There was no material which would justify the view that the  tax  which  had  been imposed  exceeded  the  limit  of permissible  reasonableness      or was not  in  the  public interest.  The argument that by raising the rate of tax  the burden  had  been  increased  to such  an  extent  that  the business  of the appellants had been  virtually  annihilated had  no   substance.  The operators had  been  permitted  to enhance the freights and if the freights could be  enhanced, obviously,  the  burden  would not fall  on  them.   If  the operators  were  not prepared to charge higher  rates  as  a matter of policy or for the purpose of business  competition that  could  not  impinge  on  the  reasonableness  of   the restrictions.   This  disposed of the challenge  under  Art. 19(1)(g)  also and even on the assumption that  the  profits would be diminished or greatly reduced’ it could not be held that there was any infringement of Art. 19(1)(g). [57 A--D]     (iii) Under Act XVI of 1952 as amended by  Act X of 1958 the Government could grant exemption from payment of tax, by means  of  a notification, in respect of any  motor  vehicle running  in  a particular area, and such  an  exemption  was given to the operators in the Telengana region 53 for  the reason that before the extension of the Act XVI  of 1952  to this area no tax similar to the ,one  levied  under that  Act was payable in that area and that  this  exemption was  granted  under a different  enactment.  Therefore,  the challenge Under Art. 14 could not succeed. [58 A---C]     No  question  of discrimination arose  when  taxes  were being imposed under two different sets of laws in  different States or geographical  areas The laws in Madras and  Andhra Pradesh  were different and persons having  primary  permits from Madras were naturally governed by the laws operating in that State. [58]

& CIVIL  APPELLATE JURISDICTION:  Civil Appeals Nos.  69,  112 and 113 of 1968.     Appeal  from  the judgment and order dated  October  25, 1962 of the Andhra Pradesh High Court in Writ Petitions Nos. 1307, 1305 and 1353 of 1961.     K.  Srinivasamurthy and Naunit Lal, for  the  appellants (in all the appeals).     P. Ram Reddy and P. Parmeshwara Rao, for the  respondent No. 1 (in all the appeals). The Judgment of the Court was delivered by     Grover, J.  These appeals by certificate from a judgment of  the Andhra Pradesh High Court which disposed of  several petitions  under Art. 226 of the Constitution including  the petitions  filed by the appellants involve the  question  of the  constitutionality of the Andhra Pradesh Motor  Vehicles (Taxation of Passengers and Goods Amendment and  Validation) Act, 1961, Andhra Pradesh Act XXXIV of 19 61.     The appellants hold permits either for stage carriage or for  public. carriers issued under the Motor  Vehicles  Act, 1939.  They  ply these vehicles on different routes  in  the State as also on some of the inter-State routes.  They  were subject  to  tax  levied  under  the  Madras  Motor  Vehicle Taxation Act, 1931.     1952  the Madras Motor Vehicles (Taxation of  Passengers and Goods) Act, 1952 (Act XVI of 1952) was enacted by  which every operator had to pay Rs. 12.50 per seat per quarter  or 37  naye  paise  per seat per mile over and  above  the  tax payable under the Madras Motor Vehicles Taxation Act,  1931.

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Under  that Act the operators were paying tax of Rs. 30  per seat  per  quarter.  The  validity of Act  16  of  1952  was challenged before the Madras High Court.  In Mathurai Pillai v. The State of Madras(1) its  validity was upheld except as to. the proviso to s. 3 of the Act.  After the formation  of Andhra  Pradesh State the Governor promulgated an  Ordinance amending Madras Act 16 of 1952 in the light of the (1) (1954) I.M.L.J. 110. 54 above  judgment.  The provisions contained in the  Ordinance were  subsequently reenacted as President’s Act 11 of  1954. The operators, therefore, paid taxes imposed under Act 16 of 1952 as amended in the State of Andhra Pradesh.  By means of Act 21 of 1959 the legislature of Andhra Pradesh amended Act 16 of 1952.  Section 3 of Act 16 of 1952 as amended read  as follows:                     "In cl. (a) of sub-rule (i) of rule 1 in               the  schedule  to the Principal Act,  for  the               words  37 np. per seat per year per  mile  the               words Rs. 1.48 np. per seat per year per  mile               and  for the words Rs. 12.50 np. per seat  per               quarter  the  word  Rs.  50/-  per  seat,  per               quarter  shall be substituted and cl.  (b)  of               the said Sub-rule for the words Rs. 22.50  np.               per  month the words Rs. 45/- per month  shall               be substituted." The  validity of the Amending Act 21 of 1959 was  challenged by means of writ petitions before the High Court. A Division Bench.    struck   down   the   impugned    provisions    as unconstitutional  and ultra vires on the ground  that  since that Act imposed a restriction on the operators’ freedom  of trade  and commerce under Art. 301 of the  Constitution  the previous  sanction of the President was necessary under  the proviso  to  Art.  304(b)  and because  that  had  not  been obtained  the Act was legally inoperative: Venson  Transport v.  The State of Andhra  Pradesh(1). Subsequently Act 34  of 1961  was  enacted after the sanction of the  President  was obtained  to the Bill under the proviso to Art. 304(b).   It validated  two  acts, namely, Act 21 of 1959 and Act  22  of 1959 and also amended Act 16 of 1952 and substituted  sub-s. (3)  of s. 3 of that Act by a new sub-section.   It  further validated the realisation of the tax paid or payable and the fee  paid or payable and other action taken under Act 21  of 1959  and  Act 22 of 1959.  It empowered the  Government  to levy   additional  tax at the rate of Rs. 50/- per seat  per quarter  from May 8, 1959 to January 16,  1961.   Thereafter from January 17, 1961 to November 3, 1961 the rate was fixed at  Rs. 12.50 per seat per quarter.  After the  commencement of  the  Validating Act 34 of 1961 the rate was  to  be  Rs. 37.50  per seat per quarter.  This was to be operative  till April 1, 1962 when the Act would cease to have any effect.     The validity and constitutionality of Validating Act  34 of 1961 were challenged by means of various petitions  under Art. 226 of the Constitution.  It was sought to be contended before the High Court that the impugned legislation was  not regulatory in character.  The sole object was to augment the revenues of the State.  This brought the statute within  the mischief of Art. (1) [1961] I. An. W.R. 351. 55 301  of  the Constitution.  The High Court was of  the  view that  the  question whether the statute  was  regulatory  or compensatory was relevant in the context of Part XIII of the Constitution  only in the event of non-compliance  with  the proviso to Art. 304(b) of the Constitution.  As the previous

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sanction of the President had been obtained in terms of  the proviso  such  points  could no longer  be  canvassed.   The challenge  on  the ground of Art. 14 before the  High  Court also  failed.  An argument was addressed that  the  impugned Act was repugnant to Art. 19(1)(g) of the Constitution.  The reasonableness of the restriction within the meaning of Art. 304(b)  also came up for consideration.  The High Court,  in the  light of the facts and figures placed before  it,  held that  the  increase in surcharge of the fares  and  freights contemplated  by  the  impugned Act did  not  constitute  an impediment  to  the trade of the transporters and  that  the restriction  in  the  shape of additional  imposts  was  not unreasonable.   It  is  unnecessary to refer  to  the  other points agitated before and decided by the High Court.     Counsel  for  the, appellant has  urged  the   following points before us:                   (1)  The  impugned Act imposed a  tax  for               augmenting the revenues of the State.  It  was               neither regulatory nor compensatory in  nature               and  it fell directly within the  mischief  of               Art. 301 of the Constitution.                   (2) Even though there had been  compliance               with the proviso to Art. 304(b) in the  matter               of  obtaining  the requisite sanction  it  was               open  to the court to go into the question  of               reasonableness  both  with  reference  to  the               aforesaid  provision  and Art.  19(1)(g)  read               with  clause (6) of that Article.   The  court               was equally entitled to determine whether  the               imposition was in the public interest.                   (3)  The impugned Act violated Art. 14  of               the   Constitution  and   was   discriminatory               inasmuch   as  (a)  it  had  not   been   made               applicable  to the Telengana area although  it               was applicable to the Andhra area and (b)  the               vehicles  on  inter-State routes  on  ’permits               granted by other States had not been subjected               to tax.     In  order  to decide these points the  principles  which have been settled by this Court with regard to Art. 301  and Art.  304(b) may be noticed. According to the majority  view in  Automobile  Transport (Rajasthan Ltd. v.  The  State  of Rajasthan & Others(1) if a tax is compensatory in  character it  cannot be said to fall within the mischief of Art.  301. Subba Rao J., (as he then was) (1) [1963] 1 S.C.R. 491. 56 who  concurred  in  the majority decision  but  delivered  a separate  judgment  preferred  to  rest  his  view  on   the regulatory nature of such taxing statute as would escape the mischief  of Art. 301.  In Khyerbari Tea Co. Ltd. & Anr.  v. The  State  of  Assam(1) the  difference  between  the  view expressed  in the Automobile Transport  (Rajasthan)  case(2) and  an  earlier decision in Atiabari Tea Co.  Ltd.  v.  The State  of  Assam & Others(3) with regard to  the  scope  and effect of the provisions of Art. 304(b) was noticed . It was observed  that according to the majority view  expressed  in Atiabari  Tea  Co. case(3) if the Act is passed  under  Art. 304(b)  and its validity is impeached the State may seek  to justify the Act on the ground that the restrictions  imposed by it are reasonable and in public interest and in doing  so it  may  rely  on  the fact that the  taxes  levied  by  the impugned  Act  are compensatory in character. On  the  other hand,  according to the majority decision in the  Automobile Transport (Rajasthan)(2) case compensatory taxation would be

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outside  Art.  301  and  cannot  fall   under  Art.  304(b). since  it was not urged that the tax was of  a  compensatory nature  in  Khyerbari  Tea  Co.  Ltd.(1)  case  this   Court proceeded to examine whether the restrictions imposed by the statute impugned in that case were reasonable and in  public interest  within the meaning of Art. 304(b).  The effect  of compliance with the provisions of the proviso to Art. 304(b) by  obtaining the previous sanction of the President to  the Bill  was  also considered and it has been  laid  down  that notwithstanding   the   sanction   the   question   of   the restrictions.  being  reasonable and in public  interest  is op.en to examination by the court.  The Act can be held  to. be  valid only if it is shown that the restrictions  imposed by it are reasonable and in public interest.     It  has not been contended on behalf of the  State  that the impugned Validating Act imposes a tax which is by way of a regulatory or compensatory measure.  It has, therefore, to be seen whether the restrictions imposed are reasonable  and in public interest within the meaning of Art. 304(b). Before the  High  Court  an  attempt was  made  on  behalf  of  the appellants  to  show  that by raising the rate  of  tax  the burden  had  been  increased  to such  an  extent  that  the business  of the appellants had been virtually  annihilated. According  to some of the affidavits filed on behalf of  the writ  petitioners, profits derived in recent years  did  not exceed  an average of Rs. 2,000/- per stage  carriage   even without the additional burden which had been imposed and the transporters  would  suffer  heavy  losses  if  the  tax  as increased  by the impugned legislation were to be  realized. The High Court referred to the computation of the income  by the Income tax department of some   (1)  [1964]  5 S.C.R.975.                  (2)  [1963]  2’ S.C.R. 491.                        (3) [1961] 1 S.C.R. 809. 57 of  the  transporters  in whose assessments  the  income  in regard  to each bus had been calculated at a figure  of  Rs. 7,000/-  annually, which showed that the profits  were  much higher than Rs 2,000/-. It was not disputed before the  High Court  that the transporters had been permitted  to  enhance the  fares.  If the fares could be enhanced it  was  obvious that the burden would not fail on the transporters.  It  was urged  that owing to competition from the railways and  from operators  whose vehicles had been registered in the  Madras State  and who could charge lower rates the appellants  were not in a position to collect extra fares which they had been permitted  to  do.  This argument also cannot hold  and  was rightly repelled by the High Court on the ground that if the operators  were  not prepared to charge higher  rates  as  a matter of policy or for the purpose of business  competition that  could  not  impinge  on  the  reasonableness  of   the restriction.   Apart from a faint attempt to repeat some  of the arguments which were addressed before the High Court  on this point nothing new has been brought to our notice  which would  justify the view that the tax which has been  imposed exceeds  the  limits  of  permissible  reasonableness.    As regards  public interest we are unable to find nor  has  any attempt  been made to satisfy us that the provisions of  the impugned Validating Act with regard to imposition of tax are not in public interest.      This  is sufficient to dispose of the  challenge  under Art.  19(1)(g),  as well. We may in  this  connection  refer briefly  to  the  conclusion of the  High  Court  which  was reached  on a consideration of the affidavits  filed  before it.  It has been found that there is no material which would

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warrant the conclusion that the increase in the surcharge of the   fares  and  freight  contemplated  by   the   impugned Validating Act would constitute an impediment to the  trade. The  utmost that could be said was that it would  result  in the diminution of profits.  Even on the assumption that  the profits would be diminished or greatly reduced it cannot  be held that there is any infringement of Art. 19(1)(g).     Coming to the attack on the ground of violation of  Art. reference may be made to the background relating to taxation of  passengers  and goods carried in motor vehicles  in  the State prior to the formation of Andhra Pradesh.  It  appears that  there  was  no law in the  erstwhile  Hyderabad  State imposing  any tax on passengers and goods. After the  merger of  Telengana and Andhra areas the laws in operation in  the Telengana  region continued to remain in force by virtue  of the  provisions of s. 119 of the States Reorganization  Act, 1956.  By Act X of 1958 the State of Andhra Pradesh  amended Act  XVI of 1952 inter alia extending that to the  Telengana area.   This Act (Act X of 1958) also amended the  Principal Act by    adding s. 19  according to  which  the 1 sup. CI/70--5 Government   could  grant  an  exemption  by  means   of   a notification  in respect of any motor vehicle running  in  a particular  area.  On November 4,  1961 a  notification  was issued  exempting passengers, luggage and goods  carried  in stage carriages from payment of tax under the aforesaid  Act within the Telengana area.  There -can be no manner of doubt that   this  exemption  was  given to the operators  in  the Telengana region for the reason that before the extension of the parent Act to this area no tax similar to the one levied under the parent Act was payable in that area and that  this exemption  was granted under a different enactment.   It  is apparent that for these reasons the challenge under Art.  14 cannot succeed.  The same is the position with regard to the tax   payable   by  the  appellants  and  that   which   the transporters  having permits for inter-State routes have  to pay.   As  has been pointed out in the affidavits  filed  on behalf  of the State the laws in the two States, Madras  and Andhra  Pradesh  are different and  persons  having  primary permits  from  Madras  are naturally governed  by  the  laws operating in that State.  No question of discrimination  can arise when taxes are being imposed under two different  sets of laws in different States or geographical areas.     The  appeals,  therefore, fail and  are  dismissed  with costs. One hearing fee. R.K.P.S.                                             Appeals dismissed. 59