1983 (4) TMI 290 - SC - Indian Laws

Summary

Issues Involved:
1. Constitutional Validity of Section 3 of the Punjab Motor Vehicles Taxation Act, 1924 as amended by the Punjab Motor Vehicles Taxation (Amendment) Act, 1981 and the Notification dated March 19, 1981.
2. Violation of Articles 14, 19(1)(g), and 304(b) of the Constitution.
3. Nature of the Tax: Whether Compensatory or Expropriatory.
4. Alleged Hostile Discrimination.
5. Reasonableness of the Levy and its Impact on Business Operations.

Summary:
1. Constitutional Validity of Section 3 of the Punjab Motor Vehicles Taxation Act, 1924 as amended by the Punjab Motor Vehicles Taxation (Amendment) Act, 1981 and the Notification dated March 19, 1981:
The petitioners challenged the constitutional validity of Section 3 of the Punjab Motor Vehicles Taxation Act, 1924 as amended by the Punjab Motor Vehicles Taxation (Amendment) Act, 1981, and the Notification dated March 19, 1981. The amendment raised the maximum limit of the tax to Rs. 35,000 per year and the Notification increased the tax to Rs. 500 per seat.

2. Violation of Articles 14, 19(1)(g), and 304(b) of the Constitution:
The petitioners contended that the levy of Rs. 500 per seat imposed by the impugned Notification was violative of Article 14, Article 19(1)(g), and Article 304(b) of the Constitution. They argued that the tax was expropriatory, not compensatory, and was collected to augment the State Government's general revenues, which is forbidden by the Constitution.

3. Nature of the Tax: Whether Compensatory or Expropriatory:
The State Government justified the levy, arguing that it was compensatory in character and not violative of Article 301 or Article 304(b) of the Constitution. The Court examined whether the tax was compensatory by considering if the tradespeople were using certain facilities for their business and paying not patently much more than what was required for providing those facilities. The Court concluded that the tax was indeed compensatory, as the State Government substantiated that a substantial part of the levy was spent on providing facilities to motor vehicle operators.

4. Alleged Hostile Discrimination:
The petitioners argued that the Act was discriminatory as it levied Rs. 35,000 annually on stage carriages but only Rs. 1,500 per year on goods carriers. The Court held that a legislature could adopt a reasonable classification of persons and things in imposing tax liabilities. The Court found that stage carriages and public carriers belonged to distinct and separate groups, and there was a reasonable nexus between the classification and the object to be achieved by the imposition of different rates of taxation.

5. Reasonableness of the Levy and its Impact on Business Operations:
The petitioners argued that the levy was confiscatory and would force them to close down their business. The Court noted that the passenger fares were permitted to be raised by about 43% before the levy was increased and that it was open to the operators to move the State Government to increase the rates if needed. The Court concluded that the impugned levy did not impose an unreasonable restriction on the petitioners' freedom to carry on business and dismissed the petitions.

Conclusion:
The petitions were dismissed, and the Court upheld the constitutional validity of the impugned levy, finding it to be compensatory and not violative of Articles 14, 19(1)(g), and 304(b) of the Constitution.