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PETITIONER: STATE OF MAHARASHTRA & ORS. ETC.

       Vs.

RESPONDENT: MADHUKAR BALKRISHNA BADIYA & ORS. ETC.

DATE OF JUDGMENT17/08/1988

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) SHARMA, L.M. (J)

CITATION:  1988 AIR 2062            1988 SCR  Supl. (2) 482  1988 SCC  (4) 290        JT 1988 (3)   381  1988 SCALE  (2)376

ACT:     Bombay  Motor  Vehicles  Tax Act, 1958  (as  amended  by Maharashtra Act XIV of 1987, Maharashtra Act XXXIII of  1987 and  Maharashtra  Act lX of  1988)-Challenging  validity  of amended provisions of-Whether levy of one-time tax on  motor cycles or tricycles in the State was beyond the  legislative competence of State Legislature and beyond Entry 57 of  List II of Seventh Schedule.

HEADNOTE:     These Civil appeals and special leave petitions  centred round  one point, namely, the validity of the  Bombay  Motor Vehicles  Tax  Act,  1958 as amended by  Section  3  of  the Maharashtra Act XIV of 1987 and Section 6 of the said Act as amended   by  Maharashtra  Act  XXXIII  of  1987   and   the Maharashtra Act IX of 1988.     Section 3 of the said Act XIV of 1987 added  sub-section (IC) to provide for the levy of one-time tax at 15 times the annual  rate  on  all motor cycles in the  State.  The  said provisions further provided that in the case of motor cycles owned  by  a company or other commercial  organisation,  the one-time tax was to be levied at thrice the rate.     Section 6 of the said Act XIV of 1987 added  sub-section (6)  to  section 9, enabling a registered owner of  a  motor cycle or tricycle to obtain refund of ‘Lone_time tax"  under certain conditions.     Petitions   were  filed  in  the  High  Court   by   the respondents  in the appeals and petitioners in  the  special leave  petitions, challenging the amended provisions of  the principal Act. The High Court held that (i) the levy of  the one-time  tax was beyond the legislative competence  of  the State Legislature and also beyond Entry 57 of List II of the Seventh  Schedule, and (ii) the provision for imposition  of levy at thrice the rates on the vehicles owned by a firm  or company,  were  neither discriminatory  nor  arbitrary.  The High Court struck down Act XIV of 1987. The appeals by leave were filed by the State and the special leave petitions were fixed by the petitioners in this Court against the  decision of  the  High  Court.  In  the  meanwhile,  the  Maharashtra Legislature  enacted Maharashtra Act XXXIII of  1987,  which deleted Section 3(4) of the principal Act as amended by  the

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                                                 PG NO 482                                                   PG NO 483 Maharashtra Act XIV of 1987, whereby the existing provisions of  refund for temporary non-user were made inapplicable  in cases  of motor cycles and tricycles, restricting the  right of  refund  to Section 9(6) in the  contingencies  mentioned therein.  It  also introduced sub-section (7) to  section  9 conferring  the right of refund in respect of  motor  cycles and tricycles in accordance with the rates specified in  the Fifth  Schedule. But the said schedule did not prescribe   a separate  rate  of refund for  the  company-owned  vehicles. Therefore,  the  refund  in  respect  of  the  company-owned vehicles  was the same as that payable to individual   owned vehicles  even  though  the  tax paid  on  former  class  of vehicles was three times. Soon  thereafter, the  Maharashtra Legislature  enacted  Act  IX  of  1988,  whereby  the  only relevant change for the present purpose was that the rate of refund  was  enhanced  to  three times  in  respect  of  the company-owned vehicles.     Before  this Court, the appellant-State  submitted  that the  amendments  enacted by the Maharashtra Acts  XXXllI  of 1987 and IX of 1988 had brought the principal Act as amended by the Maharashtra Act XIV of 1987 within the constitutional requirements   of  making  one-time  tax’s  regulatory   and compensatory tax and that it was not necessary to decide  if the  Act as it stood when it was challenged before the  High Court?  was beyond the legislative competence of  the  State Legislature.     The  respondents in the appeals and the  petitioners  in the  special  leave petitions urged that as even  after  the amendment  no refund was available in respect of  a  vehicle which had been registered for more than 13 years? the effect of that was that no refund al all was available in  respect. of  the  tax  paid  for a vehicle  for  the  14th  and  15th years.The impugned levy of tax ceased to be compensatory  or regulatory  and was void under Entry 57 of List II  and  was violative of Article 301 of the Constitution.     Disposing  of  the appeals and  dismissing  the  special leave petitions the Court.     HELD:  The tax imposed on the motor vehicles or a  class of motor cycles would not be valid unless it is compensatory or  regulatory or does not have any nexus with the  vehicles using  the roads. In such a case. the levy would be  Section of  the  said  Act XIV of 1987  added  sub-section  (IC)  to provide for the levy of one-time tax at 15 times the  annual rate  on all motor cycles in the State. The said  provisions further provided that in the case of motor cycles owned by a company  or other commercial organisation, the one-time  tax was to be levied at thrice the rate.     The  fact that the act, as at present, did  not  provide for  refund in the 14th and 15th years, did no make the  law outside the competence of the State Legislature. he  concept                                                   PG NO 484 of   "regulatory  and  compensatory"  tax  does   no   imply mathematical precision  of quid pro quo. [489E]     After   the  amendment,  the  Act  came  with   in   the constitutional  requirements  of making he  one-time  tax  a regulatory  and compensatory tax. It was true that  the  Act has  no  provided  for refund in the 14h and 15h  years  but that  does  no make he law out sides the competence  of  the State  Legislature. It is no mathematical precision that  is necessary  nor  can  it be. there is in  the  provisions  as amended,  as  amended,  a discernible  and   an identifiable object  behind the levy and a nexus between the subject  and the object of the levy, [491E-F]

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   Two principles have to be emphasised, firstly, that  the tax must be regulatory and compenstaory and secondly,  there must  be  no  discrimination. A taxation  law  cannot  claim immunity  from  the  equality clause in Article  14  of  the Constitution,  but  in view of the intrinsic  complexity  of fiscal adjustments of diverse elements, a considerable  wide discretion and latitude in the matter of classification  for taxation  purpose is permissible. The life of  Motor  cycles and  tricycles  normally exceeds 25  years.  Non-refund  for certain  period  is  no conclusive of the  matter.  Even  if mathematical  provision  is no possible, it cannot  be  said that it is wholly unmathematical. The collection of ax for a period  of  15  ears at one point of time  is  a  convenient method enabling the owner o use he vehicle for more than  25 years without having to pay the tax periodically and pay the enhanced  tax at  may be levied during the 25 years of  life of  the  vehicle.  Regulatory and compensatory  tax  can  be levied  to  the  extent  e State  is  required  to  pay  for rendering the services. [491G;492A-C]     The Act, as at present, is not violative of Article  145 of  the  Constitution.  The  fact  that  the   company-owned vehicles  are  taxed  that three times the  rate payable  by individuals,  does  not  make the legislation  violatvie  of Article  14.  Histrocially, the company-owned  vehicles  are always  been taxed at a rate higher that  the  individually- owned  vehicles. he legislature has he power  to  distribute tax  burden  in  a flexible manner and the  Court  would  no interfere with the same. It could not be said that there was differentiation  without  any basis and as  such  there  was discrimination. [492E-H]     In  view  of the principles applicable to  the  taxation laws  and  various  other factors, the  Maharashtra  Act  as amended  from time to time does not suffer from any vice  of being  not regulatory or compensatory taxation nor from  the vice  of being violative of Article 14 of the  Constitution, and  the challenge to the provisions of the Act  as  amended                                                   PG NO 485 after   the  judgment  of  the  High  Court  could  not   be maintained. [494G-;495A]     After  the  amendments afore-mentioned the Act  does  no suffer  from the vice mentioned in the judgment of the  High Court  .  The appeals were allowed thus, and  the  challenge made in the special leave petitions was dismissed. [495]     The  taxes would be realised in accordance with the  Act and  the  necessary adjustments would be  made  accordingly. [495C]     Bolani  Ors. Ltd. v. State of Orissa. [1975] 2 SCR  138; G.K.  Krishnan v. The State of Tamil Nadu & Anr.,  [1975]  2 S.C.R.  715; Malwa Bus Service (P) Ld.  v. State  of  Punjab and  Ors.,  [1983]  2  S.C.R.  1009;’  International   ouris Corporation v. State of Haryana & Ors., [1981] 2 S.C.R. 364; Income tax Officer, shillong & Anr. v. N. Takim Roy  Rymbai, etc., [1976] 2 SCR 413;  Mrs. Meenakshi & Ors. v., State  of Karnataka & Ors., AIR 1983 SC 1283; Anant Mills Co. Ltd.  v. State  of Gujarat and Ors., [1975] 3 S>.C.R.  220;  Khandige Sham  Bhat  & Ors. v. The Agricultural Income  tax  Officer, [1963] 3 SCR 809 and State of Karnataka v. K.  Gopalakrishna Shenoy and Another, A.I.R. 1987 S.C. 1911, refered to.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal Nos.  1631-33 of 1987 etc.     From  the  judgment  and order dated  10.7.1987  of  the

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Bombay High Court in W.P. Nos. 941, 986 and 1012 of 1987.     A.S. Bobde. Adv. General. S. K. Dholakia and A.S, Bhasme for he Appellants.     Soli  J. Sorabjee, R.N. Sachhar, Mrs. Aruna  Mathur,  J. Wad, K.J. John and A.K. Sanghi for the Respondents.     The judgment of the Court was delivered by     SABYASACHI MUKHARJI, J. These civil appeals and  special leave  petitions  centre  around  one  point,  namely,   the validity  of  the  Bombay Motor Vehicles Tax  Act,  1958  as amended by Section 3 of the Maharashtra Act, XIV of 1987  as well as Section 6 of the said Act as amended by  Maharashtra Act  XXXlll  of  1987 as well as the Maharashtra Act  IX  of 1988.                                                   PG NO 486     The  Bombay  Motor Vehicles Tax Act, 1958 prior  to  its amendment  in  1987  provided for levy of  tax  on  vehicles annually  or  quarterly.  In  1987,  by  Section  3  of  the Maharashtra Act No. XIV of 1987, sub-section (IC) was  added to  provide for levy of one time tax at 15 times the  annual rate on all motor cycles used or kept for use in the  State. The  said provisions further provided that in case of  motor cycles used or kept for use by a company or other commercial organisation,  the one time tax was to be levied  at  thrice the rate. Section 6 of the Maharashtra Act 14 of 1987, added sub-section  (6) to Section 9 of the principal Act. The  new sub-section (6) enabled a registered owner of motor cycle or tricycle  to obtain refund of "one time tax" in cases  where (a)  the vehicle is removed  outside the State; and (b)  the registration of vehicle is cancelled due to scrapping of the vehicle, or for a  similar reason. The refund was to be paid in  accordance  with  the  Fourth Schedule.  The  Third  and Fourth  Schedules were introduced by the Maharashtra Act  14 of 1987.     In  the case of Luna Mopeds, the one time tax  comes  to Rs.2925  which  according to the petitioners in  the  S.t.P. Nos.  1  1673-75/87, is 86% of the ex-factory price  of  the Moped.  In  that  view  the  petitions  were  filed  by  the respondents   in  the  first  batch  of  appeals   and   the petitioners  in  the second batch  challenging  the  amended provisions of the Bombay Motor Vehicles Tax Act, 1958. On or about 9/10th July. 1987, a Division Bench of the Bombay High Court, Nagpur Bench held that the levy of one  time tax  was beyond  the legislative competence of the State  Legislature and also beyond Entry 57 of List II of the Seventh Schedule. It  further held that the provisions for imposition of  levy at thrice the rates so far as the vehicles owned by the firm or  the company, were neither discriminatory nor  arbitrary. The High Court, however, in view of the fact that the refund was restricted to the circumstances mentioned above.  struck down  Act  14  of 1987. According to  the  High  Court,  the absence of provisions for refund in cases of temporary  non- user  made the Maharashtra Act XlV of 1987, confiscatory  in character and not regulatory or compensatory which alone was in  the  competence  of the  State  Legislature.  The  State preferred  applications  for  leave to  appeal  against  the impugned  judgment  and   the  special  leave  having   been granted, are the subject-matter of Civil Appeals Nos.  1631- 33/877.   The   petitioners  also,   filed   special   leave applications  which are the subject-matter of Special  Leave Petitions Nos. 11673-75/87 which have been heard along  with these  appeals.  While the State’s appeal against  the  High Court’s   judgment  was  pending  before  this  Court,   the Maharashtra  Legislature enacted Maharashtra  Act XXXIII  of 1987.  It  deleted  Section 3(4) of the  principal  Act,  as                                                   PG NO 487

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amended by Maharashtra  Act XIV of 1987. That provision made the  existing  provisions of refund for  temporary  non-user inapplicable  in  cases  of  motor  cycles  and   tricycles, restricting   the  right  of  refund  to  Section  9(6)   in contingencies  mentioned  above.  It  also  introduced  sub- section  (7)  to  Section 9 conferring right  of  refund  in respect of motor cycles and tricycles in accordance with the rates  specified  in the Fifth Schedule and  prescribed  the rates of refund in the Fifth Schedule. But the said Schedule did  not  prescribe a separate rate of refund  for  company- owned vehicles. Therefore, the refund in respect of company- owned vehicles would be same as that payable to  individual- owned vehicles, even though the tax paid on former class  of vehicles  was three times. Soon thereafter  the  Maharashtra Legislature  enacted Act 9 of 1988 The only relevant  change for  the  present purpose was that the rate  of  refund  was enhanced   to  three  times  in  respect  of   company-owned vehicles.     Before  the contentions are judged, it is imperative  to reiterate that the tax imposed on motor vehicles or a  class of motor cycles would not be valid unless it is compensatory or  regulatory or does not have any nexus with the  vehicles using  the  public roads. In such a case the levy  would  be violative  of Act. 301 of the Constitution and would not  be protected   by  Act.  304  of  the  Constitution.  In   this connection  reference may first be made to the  observations of this Court in Bolani Ores Ltd. v. State of Orissa, [1975] 2  SCR 138 where at page 155 this Court observed that  Entry 57  of  List II of the Seventh Schedule was subject  to  the limitations, namely, the power of taxation cannot exceed the compensatory  nature  which must have some  nexus  with  the vehicles  using  the roads. If the vehicles do not  use  the roads, notwith-standing that these are registered under  the Act,  these cannot be taxed. More or less the same view  was echoed in G. K. Krishnan v. The State of Tamil Nadu &  Anr., [1975 ] 2 SCR 715.     See also Malwa Bus Service (P) Ltd. v. State of Punjab & Ors.,[1983] 2 SCR 1009.     On behalf of the appellant-State, the learned  Advocate- General  submitted  that  the  amendments  enacted  by   the Maharashtra  Act  No.  33 of 1987 and No. 9  of  1988,  have brought the principal Act as amended by the Maharashtra  Act No.  XIV of 1987 within the constitutional  requirements  of making ‘one time tax’ a regulatory and compensatory tax.  It was  submitted  by  him that this development  had  made  it unnecessary for this Court to decide if the Act, as it stood when it was challenged before the High Court, was beyond the legislative  competence  of the State  Legislature.  It  was                                                   PG NO 488 further  emphasised that the fact that the Act  at  present, does not provide for refund in the 14th & v 15th years, does not  make  the  law  outside the  competence  of  the  State Legislature.  It was urged that the concept  of  "regulatory and compensatory tax" does not imply mathematical precision. In  this context one may refer to the observations  of  this Court in International Tourist Corpn. v. State of Haryana  & Ors., [1981] 2 SCR 364, where at page 374 Justice  Chinnappa Reddy speaking for this Court observed as follows :     "But  to  say  that  the  nature  of  a  tax  is  of   a compensatory  and regulatory nature is not to say  that  the measure   of  the  tax  should  be  ’proportionate  to   the expenditure  incurred  on the regulation  provided  and  the services  rendered. If the tax were to be  proportionate  to the expenditure on regulation and service it would not be  a tax but a fee.

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   While  in  the  case  of a fee it  may  be  possible  to precisely  identify and measure the benefits  received  from the  Government and levy the fee according to  the  benefits received  and  the expenditure incurred, in the  case  of  a regulatory and compensatory tax it would ordinarily be  well high   impossible   to  identify  and  measure,   with   any exactitude,  the  benefits  received  and  the   expenditure incurred  and  levy  the  tax  according:  to  the  benefits received and the expenditure incurred. What is necessary  to uphold a regulatory and compensatory tax is the existence of a specific. identifiable object behind the levy and a  nexus between he subject and he object of he levy."     Earlier  this  principal  had been  sated  in  Income tax officer  Shillong & Anr.v. N. Takim Roy Rymbai etc.,[1976] 3 SAC  413,  where this Court  observed  though  taxation  law could  not  claim  immunity from the  equality  clause  i  n Article  14 of the Constitution, it must be remembered  that in view of the intrinsic complexity of fiscal adjustments of diverse element, he State has a considerably wide discretion in  the  matter of classification of  taxation purposes. the fact  that  the tax falls more heavily on some in  the  same category, is by itself  no ground to render the law invalid. Similar are he observations of this Court in Mrs.  Meenakshi & Ors. v. State of Karnataka & Ors., AIR 1983 Sc 1283; Anant Mills Co Ltd. v. State of Gujarat & Ors.,[1975] 3 SC 220 and Khhandige  Sham  Bhat & Ors. V. The Agricultural  Income  ax Office, [1963] 3 SCR 809.                                                   PG NO 489     In  the instant case, the impugned legislation had  been subsequently  amended  to  provide  for  the  refund  of   a proportionate  part of the one-time tax in the event of  the vehicle not being used for a period of quarter or more  than a  quarter of a year as mentioned before. This was  provided by  substituting a new sub-section (7) to section 9  of  the Act and also substituting new Fifth Schedule.     Even   after  the  amendment,  however,  no  refund   is available in respect of a vehicle which has been  registered for  more than 13 years. The effect of the same is  that  no refund  at all is available in respect of the tax paid for a vehicle for the 14th and 15th years, it was urged on  behalf of the respondents in the appeals and the petitioners in the S.L.Ps.  It  was submitted on their behalf that  so  far  as four-wheelers  are  concerned,  Section  9(1)  of  the   act provided  for refund of the proportionate amount of tax  for every completed calendar month for which the vehicle has not been used. It was urged on behalf of the respondents in  the appeals and the petitioners in the S.L.Ps. that there is  no justification  what so ever for the non-grant of the  refund of the proportionate amount of tax paid in respect of a  two wheeler  or  three wheeler, which is not used  in  its  14th and/or  15th  year.  On this score, it was  urged  on  their behalf   that  the  impugned  levy  of  tax  ceases  to   be compensatory  or regulatory and as such is void under  Entry 57  of  List  II and thus violative of Article  301  of  the Constitution.     In  our  opinion the fact that the Act, as  at  present, does not provide for refund in the 14th and 15th years, does not  make  the  law  outside the  competence  of  the  State Legislature.  The concept of "regulatory  and  compensatory" tax  does not imply mathematical precision of quid pro  quo. This   aspect  was  emphasised  in   International   Tourist Corporation etc. etc. v. State of Haryana & Ors., (supra) as noted before.     It was further submitted on behalf of the owners of  two wheelers that the impugned one-time levy of Rs.975 has  been

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worked  out at Rs.65 per two wheeler per annum for 15  years and is sought to be recovered from the two wheeler owner  as a  one-time  down  payment at the time  the  two-wheeler  is purchased  by him. On behalf of the  respondents/petitioners it  was contended that having regard to the extent  of  road user by a two wheeler, in comparison with the road user by a four  wheeler,  the Legislature considered that.  a  tax  of Rs.65  per two wheeler per annum would be a  reasonable  and adequate compensatory levy. While the maximum annual rate of tax was fixed at Rs. 200 per annum for motor  cars  weighing not  more  than 750 kg and Rs.36O per annum for  motor  cars                                                   PG NO 490 weighing between 750 kg to 1500 kg it may be noted that  the tax  on four wheelers has not been increased. But as far  as two  wheelers are concerned the one-time tax for the  period of  15 years is exactly 15 times the amount of tax of  Rs.65 per year. It is  clear from these factors, it was  submitted by  the  owners of the two wheelers,  that  the  Legislature continues to consider the tax of  Rs.65 per two wheeler  per year  to  be  an  adequate  compensatory  tax.  However,  by recovering  the  tax for the future period of  15  years  in advance  as a one time levy, the taxing authorities  are  in fact  recovering not Rs.65 per two wheeler per year  but  in reality  about  Rs.356.79  per two  wheeler  per  year.  The respondents/petitioners  sought to explain the  position  by submitting  that if the two wheeler owner has an  amount  of Rs.975 with him at the time of purchase of the vehicle,  and is  not  compelled to make one-time payment, then  he  would initially pay only Rs.65 as the tax for the first year. That would  leave  a  balance amount of Rs.9.10  which  could  be invested  by him at an interest yield of 15% per  annum.  It was  urged that the rate of interest that is recoverable  as well as paid under the Income Tax Act is 15% per annum.  The said amount of Rs.910 would yield an interest of Rs.  136.50 in  the  first  year. Out of that amount of  Rs.  136.50  an amount  of Rs.65 would be paid by the two wheeler  owner  as tax  at the beginning of the second year.  Consequently,  an amount  of Rs.71.50 would be available from out of the  said interest earning of Rs. 136.50, which also could be invested at  a  yield of 15% per annum. Consequently, the  amount  of interest  that  would be earned by the vehicle owner in  the second  year  would come to Rs. 147. 23, out of  which  only Rs.65  would have to be paid as tax in the beginning of  the third  year,  leaving a balance of  Rs.82.23  available  for further investment. It was submitted that by compelling  the vehicle   owner to make the one-time down payment of  Rs.975 at the time of the purchase of the vehicle, the owner is  in reality being deprived of a total amount of Rs.4376. 19 over the  said period of 15 years. If this amount is  divided  by 15,  the resultant figure will be Rs.291.79.  The  effective tax burden has thus in fact been multiplied by about 5 times only as a result of the one-time levy, it was urged. It  was submitted  that  the said one-time  levy  was  unreasonable, discriminatory and not regulatory or compensatory. The  fact that  a  tax  on motor vehicles  must  be  compensatory  and regulatory  in  order  to be valid, was  emphasised  in  the decision  of  this  Court  in  Stare  of  Karnataka  v.   K. Gopalakrishna  Shenoy  and another, A.I.R.  1487  S.C.  1911 where  at page 1915 of the report, it was observed that  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. It was emphasised on behalf of the owners of  the vehicles that the impugned legislation is  based  on                                                   PG NO 491 the assumption that two wheelers and three wheelers have  an

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approximate  life  of  15 years. It is  on  that  basis  and footing  that  the  rates of tax have  been  fixed.  It  was contended  that the life of two wheelers and three  wheelers is as much as 25 to 30 years and therefore, the recovery  of the  one  time  tax  for the period  of  15  years  actually constitutes the conferment of a benefit on the owners of two wheelers  and  three wheelers. In this  connection,  on  the other  hand it is of importance to note that the  Department of  Heavy  Industry,  Ministry of  Industry,  Government  of India,  had  commissioned a report from an eminent  firm  of Chartered  Accountants on Long Term Demand  Projections  for Automotive  Vehicles  (including  two  wheelers  and   three wheelers).  The said report concludes, after  an  exhaustive analysis of statistical data including the data provided  by vehicle  manufacturers  and also studies made in  the  past, that the average life of scooters is 10 years, that of motor cycles  c)  years and that of mopeds 5 years. But  what  was emphasised was that one-time levy of tax compelled owners of two wheelers to incur a further expenditure of about 70%  of the cost of the vehicles purchased by them at the time  they acquire  the  vehicle  and  that  imposes  heavy  additional liabilities.  It  was,  therefore,  submitted  that  it  was neither compensatory nor regulatory and further more, it was discriminatory.     It  was further submitted that section 3(IC)(c)  exempts public trusts and recognised institutions. That was bad.     In  our  opinion,  after  the  amendment  the   mischief mentioned  in  the judgment and order of the High  Court  of Bombay  has been remedied. On an examination of the  various provisions  of  the  Act as amended, we  have  come  to  the conclusion that after the amendment the Act comes within the constitutional  requirement  of making the  one-time  tax  a regulatory   and  compensatory  tax.  It  is  true  as   was emphasised  that the Act has not provided for refund in  the 14the  and 15th years but does not make the law outside  the competence of the State Legislature. It is not  mathematical precision  that is necessary nor can it be. There is in  the provisions  as  amended, a discernible and  an  identifiable object  behind the levy and a nexus between the subject  and the object of the levy.     In  this  matter two principles have to  be  emphasised, firstly.  that the tax must be regulatory  and  compensatory and  secondly,  there  must  be  no  discrimination.   About discrimination  it is well to remember that a  taxation  law cannot claim immunity from the equality clause in Article 14 of the Constitution. But in view of the intrinsic complexity of  fiscal adjustments of diverse elements,  a  considerably wide discretion and latitude in the matter of classification                                                   PG NO 492 for taxation purpose is permissible. See the observations of this Court in Income Tax Officer, Shillong and Anr. etc.  v. N.  Takim  Roy  Rymbai etc. etc.,  (supra).  Also  see   the observation  in  Mrs.   Meenakshi and  others  v.  State  of Karnataka, (supra); Anant Mills Co. Ltd. v. State of Gujarat &  Ors.,  (supra)  and Khandige Sham Bhat and  Ors.  v.  The Agricultural  Income-tax Officer, (supra). The  evidence  on record  shows  that the life of motor cycles  and  tricycles normally  exceeds  25 years. The  so-called  non-refund  for certain  period  is not conclusive of the  matter.  Even  if mathematical  precision is not possible, we cannot say  that it  is  wholly unmathematical. The collection of tax  for  a period  of  15 years at one point of time  is  a  convenient method  enabling the owner to use the vehicle for more  than 25  years, without having to visit the office to  pay    the tax  periodically, and pay enhanced tax that may  be  levied

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during  the 25 years of life of the vehicle. Regulatory  and compensatory  tax can be levied to the extent the  State  is required to pay for rendering the services. According to the State,  the  evidence  on  record shows  that  the  cost  of services is twice the total amount recovered from all  types of vehicles. The balance of expenditure is met by the  State from  the general revenues. Even from this half  collection, the motor cycles and tricycles contribute only 6.4 per cent. The  percentage  of motor cycles and tricycles is 56  to  58 percent  of all vehicles. Thus, even insubstantial  increase in  their  rates cannot be said to be not a  "regulatory  or compensatory" tax measure.     The  Act, as at present, is not violative of Article  14 of  the Constitution. The fact that  company-owned  vehicles are  taxed at three times the rate payable  by  individuals, does  not  make  the legislation violative  of  Article  14. Historically,  the company-owned vehicles have  always  been taxed at a rate higher than the individually-owned vehicles. As  appears from the records produced. the motor cycles  and tricycles  constituting  56 to 58 per cent of all  types  of vehicles  contribute only 6.4 per cent of the total  revenue earned  through  the  tax imposed by the Act.  It  is  well- settled that the Legislature has the power to distribute tax burden  in  a  flexible  manner  and  the  Court  would  not interfere with the same. This principle has been  reiterated in  G.K.   Krishnan etc. etc. v. The State of Tamil  Nadu  & Anr.  etc.,  (supra) where this Court observed that  in  the context  of  commercial regulation, Article 14  is  offended only   if  the  classification  rests  on   grounds   wholly irrelevant  to  the achievement of the  objective  and  this lenient  standard is further weighted in the State’s  favour by the fact that a statutory discrimination will not be  set aside if a state of facts may reasonably be conceived by the                                                   PG NO 493 Court  to  justify it. Tax laws have to respond  closely  to local  needs  and Court’s familiarity with  these  needs  is likely to be limited. Therefore, the Court must be aware  of its  own remoteness and lack of familiarity with  the  local problems.  Classification is dependent upon  peculiar  needs and  specific difficulties of the community. The  needs  and the difficulties of a community are constituted out of facts and information beyond the easy ken of the Court.     It   appears  that  in  the  instant  case,  the   State Government  has specifically averred that the  company-owned vehicles  travel more and use roads more often. No  evidence have  been  produced to the contrary. In view of  the  well- settled  principles, we cannot say that there  was   without any basis and as such there was discrimination.     It  further  appears that the Government  of  lndia  has liberalised the licensing policy and granted large number of industrial licences for the manufacture of two wheelers.  In Maharashtra itself following is the new registration of  two wheelers during the last four and five year:    " 1983-84                 - 1,13,949      1984-85                 - 1,24,877      1985-86                 - 1,66,124      1986-87                 - 2,01,904"     In  1986-87 per working day on  an average 929  new  two wheeler have been registered. There was tremendous strain on Motor  Vehicles Department due to increase in the number  of two  wheeler. The following statistics and figures  indicate the  position  that  one  time  tax  on  two  wheelers  have beneficient effect:     "As  on  1.4.1987 there were 10,93,170 two  wheelers  in Maharashtra and total number of vehicles was 1841 lakhs.

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   In  1985-86 the total revenue by way of Motor   Vehicles Tax was Rs.98 crores out of which only Rs. 6 to 7 crores was from two wheelers.     That  means 58% vehicles (3 wheelers) used to give  only 6.4% Motor Tax for which 22,000 man days were required to be spent.     All  the  two wheeler  owners were required to  come  to R.T.O. for payment of tax every year.                                                   PG NO 494     Almost 70 to 75% Motor Vehicle Tax arrear cases were  of 2 wheelers.     Because of new system of one time tax if the owner  pays it, he is not required to pay the tax again during the  life time of the 2 wheeler.     Any  further increase in one time tax rate will  not  be applicable to the 2 wheelers which have already paid the one time tax.     Statistics  show that the 2 wheelers are being used  for more than 25 years.     The  rate  of  increase of 2 wheelers  because  of  easy availability  and  affordability is almost  25%.  The  total number  of two wheelers projections in the State will be  as follows:     By the end of 1986-87  -10.94 lakh                   1987-88  -13.33 lakh                   1988-89  -16.20 lakh                   1989-90  -19.69 lakh                   1990-91  -23.77 lakh                   1991-92  -28.73 lakh     Existing  vehicles  will  have to pay one  time  tax  in sliding scale rate. Older the vehicles, less will be the tax.     This  tax  system is already in existence  in  Karnataka since 1.4.1986 and also in Gujarat, Rajasthan.     This  new system will definitely give relief to the  two wheeler owners as they will not be required to come to  R.T. Office for annual payment."     Having regard to these factors and having regard to  the principles  applicable  to  taxation laws,  we  are  of  the opinion  that  the Maharashtra Act as amended from  time  to time  and mentioned hereinbefore, does not suffer  from  any vice  of being not regulatory or compensatory  taxation  nor from  the  vice  of being violative of  Article  14  of  the Constitution.     In  that  view  of  the matter,  the  challenge  to  the provisions  of the Act as amended after the judgment of  the                                                   PG NO 495 Bombay High Court cannot be maintained.     In that view of the matter, Civil Appeals Nos. 1631-1633 of 1987 are disposed of by saying that after the  amendments noted  here in before the Act does not suffer from the  vice mentioned  in the judgment of the High Court of Bombay.  The appeals are, therefore, allowed and disposed of accordingly.     In  that  view of the matter the challenge made  in  the special leave petitions Nos. 11673-75 of t987 is  dismissed. In the facts and circumstances of the case, there will be no orders as to costs. Interim orders, if any, are vacated. The taxes  will  be  realised in accordance  with  the  Act  and necessary adjustments will be made accordingly. S.L.