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TMI Blog1973 (11) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... lants in Civil Appeals are operators of stage carriages in the State of Kerala. 3. The questions which fall for consideration in these matters are these. First, does Act 18 of 1971 levy a tax on passengers or does it levy a tax on the income of operators ? Second, is the retrospective validation of levy and collection of taxes by Act 18 of 1971 legal ? Third, is it competent to the legislature to amend Section 43 of the Motor Vehicles Act, 1939 called the 1939 Act by Act 34 of 1971 to include retrospectively tax within fare ? 4. Section 43 of the 1939 Act lays down that the State Government may, from time to time by notification in the Official Gazette, issue directions to the State Transport Authority regarding fixing of fares and freights for stage carriages, contract carriages and public carriages. Section 44(3) of the 1939 Act requires the State Transport Authority to give effect to such directions issued by the Government. It is in exercise of these powers that the fare structure for stage carriages is fixed from time to time. 5. The State of Kerala came into existence with effect from 1 November, 1956 by the Reorganisation of States comprising the Malabar area of the forme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le tax in the three neighbouring States of Madras, Mysore and Andhra Pradesh. In Madras, the total incidence of vehicle tax per seat per quarter was ₹ 40/- and composition fee under Taxation of Passengers and Goods Act was ₹ 25/- aggregating ₹ 65/- in 1962. In Mysore, the rate was ₹ 57.50 per seat per quarter comprising vehicle tax and composition fee under Taxation of Passengers and Goods Act. In Andhra Pradesh, the total comprising the taxation of passengers and vehicle tax was ₹ 67.50 in 1963. 10. In 1963 the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, 1963 for the sake brevity called Act 25 of 1963 was enacted. Section 3 of Act 25 of 1963 provided that "there shall be levied and paid to the Government a tax on all passengers, luggage and goods carried by stage carriages and on all goods transported by public carrier vehicles at the rate of 10 nP. in the rupee on the fares and freights payable to the operators of such stage carriages and at the rate of 5 nP. in the rupee on the freights payable to the operators of such public carrier vehicles." The Act 25 of 1963 was published on 15 April, 1963 in the Kerala Gazette Extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 10 Ps. 15. From the year 1963 to 1966, the operators paid to the Government taxes under Act 25 of 1963. The operators collected tax on passengers and goods. 16. But in 1966 the operators agitated for enhancement of fare. Eventually the operators went before the Kerala High Court. The operators challenged Act 25 of 1963. The main contention of the operators was that Act 25 of 1963 imposed the tax not on the passengers or consignors of the goods but on the operators who carry the passengers or the goods. The decision of the Kerala High Court in Thomman and Ors v. The Regional Transport Officer, Ernakulam reported in I.L.R. (1968) Ker 153 was on 4 March, 1968. The High Court held that the tax is a tax on the passengers and goods. The High Court expressed the view that there was no satisfactory provision for the collection of the tax. The High Court observed that provision must be made for the collection of the tax from the passenger as tax specifying the quantum calculated and computed on the basis of the provision of the Act. 17. Soon after the decision in Thomman case (supra) the State Government issued a notification dated 29 April, 1968 and published it on 30 April, 1968. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further orders from the Government "the operators shall not be required to pay the tax under Act 25 of 1963 for the period from 5 January, 1970 in rendering services in respect of the concerned vehicle such as issue and renewal of permits etc." 21. The impugned Act 18 of 1971 was passed by the Legislature on 28 February, 1970 and received the assent of the Governor on 1 June, 1971. Act 18 of 1971 introduced two sub-sections to Section 3 of the Act 25 of 1963. Act 18 of 1971 was enacted to clarify the position with regard to levy of and collection of taxes from passengers and consignors of goods in accordance with the observations of the Kerala High Court in Thomman case (supra). The High Court observed in that case that provision should be made for the collection of the tax from the passenger as tax specifying the quantum calculated and computed on the basis of provision in the Act. The High Court also observed that the tax would be payable to the operator who was liable to pay the same to the State. It is in this background that Act 25 of 1963 was amended by Act 18 of 1971. Act 25 of 1963 contained inter alia the provisions that "there shall be levied and paid to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Act. 24. The validating section in Act 18 of 1971 stated that taxes levied or collected shall be deemed to be and to have always been levied or collected in accordance with law as if Section 3 of Act 25 of 1963 as amended by act 18 of 1971 was in force at all material times. The validating section became necessary to render levy as well as collection lawful. 25. Act 18 of 1971 received the assent of the Governor on 1 June, 1971. On the same day, Ordinance No, 15 of 1971 was passed. This Ordinance was replaced by Act 34 of 1971. Act 34 of 1971 effected two principal changes. First it amended Section 43 of the Motor Vehicles Act, 1939 by adding Sub-section (1A) to Section 43 of that Act. The amended Sub-section (1A) stated principally that any direction regarding the fixing of fares and freights prospectively or retrospectively might provide that such fares and freights "shall be inclusive of the tax payable by passengers or consignors of goods". The other change effected by Act 34 of 1971 is that it validated inter alia the directions relating to fares issued on or after 1 March, 1963 or thereafter to be inclusive of the tax payable under Act 25 of 1963. 26. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot;. Section 4 in Sainik Motors case (supra) provided that the "tax should be collected by the owner of the motor vehicles and paid to the State Government in the prescribed manner". Though there is no comparable provision in the present case of Section 4 in Sainik Motors case (supra) as to method of collection of tax the various provisions like levy and payment before amendment of Section 3 and levy and collection after amendment of that section, composition of tax in Section 4, submission of return in Section 5, procedure where no payment is made in Section 7, fares and freights escaping assessment in Section 8, penalty for non-payment of tax in Section 9 indicate that the tax is on passengers and owners of goods and the operators collect the tax. It is obvious that when passengers and owners of goods pay the tax the Government requires an agency to collect such tax because these taxes are payable to the Government. The operators of stage carriages and public carriers are agents of the Government to collect these taxes. The composition of tax which is allowed to operators also shows that it is a tax on passengers and owners of goods and the composition is a convenient m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the rate of 10 Ps in the rupee as also 5 Ps in the rupee shows that the tax is payable along with fares and freights. There is no difficulty in ascertaining or quantifying the tax payable because the rates are specified to be "in the rupee". Tax is collected by the operator with the fare from the passengers. To illustrate if the fare paid is 110 paise the tax levied is 10 paise. The fare to be appropriated by the operators is 100 paise and the tax of 10 paise is collected by the operator and paid to the Government. 33. The contemporaneous evidence on the question whether the State Authorities at the time of fixing the fare in the month of July, 1963 included the tax imposed under Act 25 of 1963 within the fare fixed is furnished first by the letter of the Director of Transport dated 2 April, 1963, second, by the representation of the operators dated 3 April, 1963 and third by the notes of hearing prepared by the Secretariat under the heading "Motor Vehicles Stage Carriages Fare Revision File". 34. The Director of Transport in his aforementioned letter set out in paragraphs 2,3 and 4 thereof as follows :- 2. At the existing rate of fares, the earning per mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity between increase in operational cost on the one hand and the inadequacy of the proposed fare rates on the other. The operators estimated their daily expenses under several heads. One of the heads estimated by the operators was "increase in tax at the revised rate as envisaged by State budget". That is referable to tax on passengers and goods. The operators stated that the maximum fare should be raised to 3.5 nP. per kilometre. This was after taking into account the tax element. 37. The representation of the operators shows that the tax on passengers and goods was one of the elements in the fare structure. This becomes apparent in the hearing notes of the Carriage Fare Revision File prepared by the Secretariat. It was calculated that the proposal to increase from the then existing fare of 2.5 nP. per kilometre to 3 nP. per kilometre would bring an additional income of ₹ 40 per day for an ordinary bus of 40 seats operating 200 kilometres per day. The occupation ratio work out between 60 to 80 per cent. Leaving out margin for occupation ratio the average additional income worked at ₹ 30 per vehicle of 40 scats. The existing motor vehicles tax per seat per qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court were validated and brought into force retrospectively by the Ordinance from the date when the earlier Act had purported to come into force. The provisions of the Ordinance were thereafter incorporated in the Bihar Taxation on Passengers and Goods Act, 1961. The validity of the Act of 1961 was challenged. The owners of vehicles contended there that retrospective operation completely altered the character of the tax proposed to be retrospectively recovered. 40. The contentions in Rai Ramkrishna case (supra) were two-fold. First, retrospective recoveries did not have legislative competence. Second, the owners could not recover tax from passengers carried by them between 1 April, 1950 and the date of the retrospective validation of the Act in 1961. Therefore, the tax was unreasonable. It may be stated here that future recoveries were not challenged in that case. As a matter of fact, the right to make future recoveries was conceded. In the present case, the prospective future recoveries are also not challenged. The challenge is confined to retrospective validation only. 41. This Court said in that case "If the scheme of Section 3 for the levy and recovery of the tax i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 43(1A) of the Motor Vehicles Act, 1939 was, therefore, introduced with retrospective effect to clarify the factual basis. There was neither imposition of any new tax by Act 34 of 1971 nor was there any alteration of the character of the tax which had already been imposed. In the present case, the principal Act 25 of 1963 levied the tax. Acts 18 and 34 of 1971 were for the purpose of dispelling the doubts expressed in Thomman case (supra). 44. In the recent decision in S. Srikantiah and Ors. v. The Regional Transport Authority, Anantapur and Ors. [1971] Suppl. S.C.R. 816 this Court considered the validity of a notification under Section 43 of the Motor Vehicles Act, 1939. The Madras Vehicles (Taxation of Passengers and Goods) Act, 1952 became applicable to Andhra Pradesh. In 1959 the Andhra Pradesh legislature enacted the Motor Vehicles (Taxation of Passengers and Goods) Andhra Pradesh (Amendment) Act. By that amendment, the rates were increased. The State Authority was directed by the Government to fix maximum fares inclusive of the leviable tax under the Act for the stage carriages. The Andhra Pradesh Amendment Act was challenged. The Andhra Pradesh High Court struck do ..... X X X X Extracts X X X X X X X X Extracts X X X X
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