1961 (3) TMI 96 - SC - VAT and Sales Tax

main objection- is that the tax has not been laid upon passengers and goods as authorised by Entry No. 56 but upon fares and freights , which are different entities.

Issues Involved:
1. Constitutionality of the Rajasthan Passengers and Goods Taxation Act, 1959.
2. Repugnance to Articles 301 and 304 of the Constitution.
3. Violation of Article 19 of the Constitution.
4. Violation of Article 14 of the Constitution.
5. Delegation of power to fix lump sum payments without guidance.
6. Compulsory nature of lump sum payment under Rules 8 and 8-A and the notification.
7. Extra-territorial operation of the proviso to sub-section (3) of Section 3.

Detailed Analysis:

1. Constitutionality of the Rajasthan Passengers and Goods Taxation Act, 1959:
The petitioners argued that the Act taxes "fares and freights" rather than "passengers and goods," which is beyond the scope of Entry No. 56 of the State List. The Court held that the Act, in its pith and substance, taxes passengers and goods, even though the measure of the tax is based on fares and freights. The Explanation to Section 3(1) clarifies that the tax is levied on passengers and goods, irrespective of whether fare or freight is charged. Thus, the Act does not exceed the authority provided by Entry No. 56.

2. Repugnance to Articles 301 and 304 of the Constitution:
The petitioners contended that the Act restricts inter-State trade, commerce, and intercourse. The Court found that the tax is limited to the portion of the journey within the State and does not affect inter-State trade, commerce, or intercourse. Rule 8-A ensures that tax is not charged for routes outside the State, except as provided in the proviso to sub-section (3) of Section 3. Therefore, the Act does not violate Articles 301 and 304.

3. Violation of Article 19 of the Constitution:
The petitioners claimed that the Act imposes an unreasonable restriction on their business. The Court noted that the tax is a matter of policy and does not inherently restrict the petitioners' business. The lump sum payment option is designed for administrative convenience and does not compel operators to choose it. The Act, therefore, does not violate Article 19.

4. Violation of Article 14 of the Constitution:
The petitioners argued that the Act discriminates between road transport and rail transport and between operators using different types of roads. The Court held that the Constitution itself classifies taxes on road transport and rail transport separately. The differentiation in tax rates based on road types is justified by the varying costs of construction and maintenance. Therefore, the Act does not violate Article 14.

5. Delegation of power to fix lump sum payments without guidance:
The petitioners contended that the Act grants the State Government unguided power to fix lump sum payments. The Court observed that the lump sum rates are based on average earnings and are not obligatory. Operators can choose to pay tax based on actual fares and freights. Hence, the delegation of power is not unconstitutional.

6. Compulsory nature of lump sum payment under Rules 8 and 8-A and the notification:
The petitioners argued that the Rules and the notification make lump sum payment compulsory, contrary to the permissive language of Section 4. The Court interpreted the Rules and the notification as prescribing the amount of lump sum payment, retaining the permissive character of the section. The mandatory language in the Rules and the notification is limited to fixing the lump sum rates, not making the payment compulsory.

7. Extra-territorial operation of the proviso to sub-section (3) of Section 3:
The petitioners argued that the proviso to sub-section (3) of Section 3 imposes tax on fares and freights attributable to another State's territory. The Court noted that no affidavit was provided to show the extent of such routes. In the absence of adequate averments, the Court rejected this contention.

Conclusion:
The Supreme Court dismissed the petition, upholding the constitutionality of the Rajasthan Passengers and Goods Taxation Act, 1959, and its associated Rules and notification. The Court found no violation of Articles 14, 19, 301, and 304 of the Constitution and rejected the arguments regarding the delegation of power and the extra-territorial operation of the Act. The petitioners were ordered to bear the costs.

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