NAZEERIA MOTOR SERVICE ETC. ETC. v. STATE OF ANDHRA PRADESH & ANR.

52 NAZEERIA MOTOR SERVICE ETC. ETC. A _v._ STATE OF ANDHRA PRADESH & ANR. _August_ 21, 1969 (J. C. SHAH,ACTING C.J., V. RAMASWAMI AND A. N. GROVER, B JJ.J _Constitution_ _of_ _India, Arts,_ 301, 304(b) _and_ 19(l)(g) _and Andhra_ _Pradesh Motor Vehicles (Taxation_ _of_ _Passengers and Goods) An1endn1ent_ _a11d_ _Validatio11_ _Act_ _XXXIV_ _of_ _196!-Constit1o!io11a/ity_ _of_ _fares_ _and_ _freights imposed by the Act._ The appellants, motor transport operators, challenged the increase in C surcharge of the fares and f:><ights imposed by the Andhra Pradesh Motor Vehicles (Taxation of Pas5"ngers and Goods) Amendment and Validation Act, 1961. They uraed : (i) the Act was neither rel!Ulalory nor compensa· tory in nature and it fell directly within the mischief of Art. 301 of the Constitution; (ii) the imposts exceeded the limils 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 appli. able D to the Andhra area and (b) the vehicles on inter-State routes on permits granted by other States h;:d not bc·on subjected to tax. HELD : · (i) It was not the contentio;1 of the State that the i'lpugned Act imposed a tax by way of a regulatory or compensatory measure. There· fore, it had to be ~cen \Vhether the restrictions imposed were reasonr.ble,.. and in the public interest within the n1eaning of Art. 304(b); these questions were open to examination by the court notwithstanding the fact that E the sanction of the Pre~ident was obtained :n- compliance with the ArfcJe. [55 E-FJ _Mathurai Pii/ay_ v. _S:ate_ _of_ _Madras._ (1954) I M.L.J. 110, Automobile _Tran.roort (Raia<tlwn) Ltd._ v. _Stat.e_ _of_ _Rajasthan_ _&_ _Ors._ [1963] I S.C.R. 49-1, _Khyerbari Tea Co. Ltd._ _&_ _Anr._ v. _State_ _of_ _Assam._ [1964] _5_ - S.C.R. 975 and _Atiahari_ _Tea_ _Co. Ltd._, .. _State_ _of_ _Asram,_ [1961] 1 S.C.R. 809, referred to. F (ii) There was no material which would justify the view that the tax \Vhich had been imposed exceeded the limit of permissible re.asonabI~ness or was not in the public ~inte~st. Thz argun1ent that by raising the. rate of tax the burden hod been increa•ed to 1uch an extent that the business of the appellon:s had been virtually annihilated had no substance. The operators hnd been permitted to enhance the freights and if the freights could be enhanced, obviously, the burdeo would not fall on them. If the G operators were not prepared to charge higher rates as a matter of p·JJicy or for the purpose of business cornpetifrJn that could not impin_ge on the reasonab}l:ness of the restrictions. This disposed of the challen.'!:e under Art. 19(1 ){g) also and even on the assumption that th' pcofits would be diminished or greatly reduced it could not -he held that there was any infrin· gement of Art. 19( 1 )(g). [57 A-DJ (iii) Under Act XVI of 1952 as amended by Act X of 1958 the H G·ove.rnment could grant exemption fron1 payment of tax, by means of a notification, in respect of any motor vehicle. running in a particular area, and such an exemption was .i:i:iven to the operators in the Telengana region **A** **B** NAZEERIA MOTOR SERVICE v. A. P. STATE _(Grover,_ J.) 53 for the reason that before the extension of the Act XVI of 1952 to this **area no tax similar to the one levi·!d under that Act was payable in that** **area** **and** **that** **thh** **exemption** **was** **granted** **under** **a** **different** **enactment.** Therefore, the challenge Under Art. 14 could not sucee<l. [58 A-CJ **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** **Aodhra** **Prade"'h** **were** **different** **and** **persons** **having** **primary permits from Madras were naturally governed by the laws operat-** ing in that State [58 C-D] CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 69, 112 and 113 of 1968. Appeal from the judgment an:! order dated October 25, 1962 ### c of the Andhra Pradesh High Court in Writ Petitions Nos. 1307, 1305 and 1353 of 1961. _K. Srinivasamurlhy_ and _Naunit Lal,_ for the appellants (in all the appeals) . _P._ _Ram Reddy_ and _P._ _Parmeshwara Rao,_ for the respondent #### o No. 1 (in all the appeals). # E F G 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 XX:Xlv of 1961. 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. In 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. Under that Act the operators were payin[ tax of Rs. ~0 per seat per auarter. The validity of Act 16 of 1952 was challenged before the Madras High Court. In _Mathurai Pillai_ v. _The State of Mad•as(')_ its validity was upheld excent 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 SUPREME COURT REPORTS (1970] 2 S.C.R. above judgment. The provisions contained in the Ordinance were A subsequently re-enacted as President's Act 11 of 1954. The ope-. rators, 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: B "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 C Rs. 22.50 up. 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 n.ecessary under the proviso to Art. 304 (b) and because that had not been obtained the Act was legally inoperative : _Venson Trans-_ _port_ v. _The State_ _of_ _Andhra Pradesh(')._ 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 th~. 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) [19611 I. An. W.R. 351. D E F G H ,. A Il ### c E F G H NAZEERIA MOTOR SERVICE _v._ A. P. STATE _(Grover,_ _J.)_ 5 5 301 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 sanction of the President had been obtained in terms of _the_ proviso such pc•ints 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 wiihin 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 th~ following points before us : (I) 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) m 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 violate_: 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 ~tatBs 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 (Rrzjasthan Ltd._ v. _The State_ _nf_ _Rajasthan_ _&_ _Others(')_ 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]• l S.C.R. 491. 56 SUPREME COURT REPORTS (1970]2 S.C,R. who concurred in the majority decision out delivered a separate judgment pre{erred to rest his view on the regulatory nature of such taxing statute as would escape the mischief of Ari. 301. In _Khyerbari Tea Co. Ltd._ & _Anr._ v. _The State of Assam(')_ _the dif-_ ference between the vi.ew expressed in the _Automobile Transport_ _(Rajasthan) case(')_ and an earlier decision in _Atiabari Tea_ _Co._ _Ltd._ v. _The State of Assam_ & _Others(')_ with regard to the scope and effect of the provisions of Art. 304(b) was noticed . It was ooserved that according to the majority view expressed in Atiabari _Tea Co. ca>e(')_ 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 Co'llpensatory in cbnacter. On the other hand, according to the majority decision in the _Automobile Transport (Rajasthan)_ (') case con;pensatory taxation would be 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.(')_ 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 th~ 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 open 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 appellant< 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 th~· trnnsporters 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) [19641 5 S.C.R.975. (2) [196312· S.C.R. 491. (3) [19611 l S.C.R. 809. A B ## c D E F G H ·' .__,., A B ### c D E F NAZEERIA MOTOR SERVICE _v._ A. P. STATE _(Grover,_ _J.)_ 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 >1ere much higher than Rs 2,000/-. #### If 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 fall on the transporters. It was urged that owing to competition from the railways and from operators whose vehicles had beer. 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 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(l)(g'. Coming to the attack on the ground of violation of Art. 14 reference may be made to the background relaCn~ 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 Reorganisation Act, 1956. By Act X of 195~ the State of Andhra ff Pradesh amended Act XVI of 1952 _inter alia_ extending that Act to the Telengana area. This Act (Act X of 1958) also amended the Principal Act by adding s. 19 according to which the LI Sop. Cf/70-5 SUPREME COURT REPORTS [1970) 2 S.C.lt. -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 pi:..:ent Act to this area no tax similar to the one levied under the parent Act was payable in that area and that th:s exemption was granted under a different enactment. It is .apparent that for these reasons the challenge under Art. 14 can not 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 baving primary permits from Madras are naturally governed by 1he 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._ A. B ### c D