1973 (11) TMI 97 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the Kerala Motor Vehicles (Taxation of Passengers and Goods Amendment) Act, 1970 (Act 18 of 1971).
2. Validity of the Motor Vehicles (Kerala Third Amendment) Act, 1971 (Act 34 of 1971).
3. Whether Act 18 of 1971 levies a tax on passengers or on the income of operators.
4. Legality of the retrospective validation of levy and collection of taxes by Act 18 of 1971.
5. Competency of the legislature to amend Section 43 of the Motor Vehicles Act, 1939, to include retrospectively tax within fare.

Detailed Analysis:

1. Validity of the Kerala Motor Vehicles (Taxation of Passengers and Goods Amendment) Act, 1970 (Act 18 of 1971):
The primary issue was whether Act 18 of 1971 levies a tax on passengers or on the income of operators. It was held that the tax is on passengers and goods, not on the income of the operators. The Kerala High Court in Thomman case and the Supreme Court in Sainik Motors case supported this view, stating that the tax is on passengers and goods, and the operators act as agents to collect the tax. The amendment clarified the tax collection mechanism, making it explicit that passengers and consignors of goods pay the tax to the operators, who then pay it to the government.

2. Validity of the Motor Vehicles (Kerala Third Amendment) Act, 1971 (Act 34 of 1971):
Act 34 of 1971 amended Section 43 of the Motor Vehicles Act, 1939, adding Sub-section (1A), which allowed fares and freights to be inclusive of the tax payable by passengers or consignors of goods. This amendment was validated retrospectively, ensuring that directions regarding fares issued from 1 March 1963 were inclusive of the tax. The Supreme Court upheld this amendment, stating that it was within the legislature's competence to amend the Motor Vehicles Act to include tax in the fare.

3. Whether Act 18 of 1971 levies a tax on passengers or on the income of operators:
The Supreme Court confirmed that the tax is on passengers and goods, not on the income of operators. The measure of the tax is based on the fare and freight charged, but the incidence of the tax falls on passengers and consignors of goods. The operators are merely agents collecting the tax on behalf of the government.

4. Legality of the retrospective validation of levy and collection of taxes by Act 18 of 1971:
The retrospective validation was challenged on the grounds that operators did not collect the tax from passengers between July 1966 and October 1971. The Court held that the fare fixed from 1 July 1963 included the tax, and operators collected the tax along with the fare. The retrospective validation was deemed reasonable and necessary to render the levy and collection lawful. The Supreme Court cited Rai Ramkrishna case, stating that retrospective recovery of tax does not alter its character and remains a tax on passengers and goods.

5. Competency of the legislature to amend Section 43 of the Motor Vehicles Act, 1939, to include retrospectively tax within fare:
The Supreme Court held that it was within the legislature's competence to amend Section 43 of the Motor Vehicles Act, 1939, to include tax within fare retrospectively. The amendment clarified that fares fixed could include the tax payable by passengers or consignors of goods. This validation was necessary to address the issues raised in Thomman case and ensure the proper collection of tax.

Conclusion:
The Supreme Court upheld the validity of Acts 18 and 34 of 1971, confirming that the tax is on passengers and goods, not on the income of operators. The retrospective validation of levy and collection of taxes was deemed lawful and reasonable. The legislature was competent to amend Section 43 of the Motor Vehicles Act, 1939, to include tax within fare retrospectively. The petitions and appeals were dismissed, and the decision of the Kerala High Court was upheld.