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TMI Blog1967 (4) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... ndhra Pradesh has no legal authority to cancel the exemption given under section 9(1)(b) of the Andhra Pradesh Act retrospectively and levy tax as from the date. Gopalakrishnan Nair, J., observed that in the large majority of the petitions, no plea of discrimination under Article 14 was at all taken and that though it was taken for the first time in the reply affidavits of the petitioners, he nonetheless considered the same, and held that the provisions of law and the notification are not discriminatory and do not offend Article 14, nor do they offend Article 301 or 304(b) of the Constitution. He further held that the notification withdrawing the exemption retrospectively was bad and therefore the Government could not legally impose a tax on that basis. Against this judgment, 8 operators, petitioners in Writ Petition Nos. 1275, 1262, 1252, 1242, 1399, 1445, 1637 and 1238 of 1964 have a filed writ appeals, while the Government has filed writ appeals in all the 21 writ petitions in so far as it went against the Government viz., declaring the retrospective withdrawal of exemption as invalid. 2. Mr. S. Srinivasamurthy on behalf of the appellants in W.A. Nos. 29, 30, and 121 of 1965, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year 1963 the Andhra Pradesh Legislature passed an Act called the Motor Vehicles Taxation Act 1963 (Andhra Pradesh Act V of 1963) by section 18 of which the Motor Vehicles (Taxation of Passengers and Goods) Act which prevailed in that State was repealed. It may be stated that under the Madras Motor Vehicles Taxation Act, originally a sum of ₹ 30 per seat per quarter was being paid by operators who have both the routes. Similarly under the Motor Vehicles (Taxation of Passengers and Goods) Act, ₹ 25 was being paid. But subsequently by an Andhra Amendment in 1961, a sum of ₹ 37-50 per seat was being charged from Andhra operators. By Act V of 1963, what was being paid at the time of repeal under both the Acts namely ₹ 30 under the first Act and ₹ 37-50 under the second Act, were consolidated and a sum of ₹ 67-50 per seat became payable as tax. In February, or March, 1964, the Madras Government took the view that under the inter-State agreement, motor vehicles tax alone was exempt and since under the new Andhra Act, the tax payable is ₹ 67-50, that would be exempt, but the Andhra operators would have to pay a surcharge under the Motor Vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to tax under that Act. But the Regional Transport Officer, Vellore, construing that Government Order as only exempting tax under that Act, called upon certain inter-State lorry operators to pay surcharge under the Madras Motor Vehicles (Taxation of Passengers and Goods) Act on the assumption that the exemption in the Government Order did not cover their liability under the Act of 1952. Some of the inter-State owners filed writ petitions in 1963 which were allowed on the ground that so long as sub-rule (5) of Rule 1, in the Schedule to the Act of 1952 was in force, no surcharge could be collected from inter-State lorry owners. This impediment was got over by the Madras Government by passing G.O.Ms. No. 3724, Home, dated 24th August, 1963 issued in exercise of its powers under section 4(2) of the 1952 Act, whereby sub-rule (5) of rule 1, was omitted with effect from 1st April, 1962. Similarly, rules 3 and 4 were also omitted. Thereafter, in or about August, 1963, the Regional Transport Officer, Chingleput, demanded from the petitioner in W.P. No. 823 of 1963 (on the file of the Madras High Court), a sum of ₹ 1,663-20 as surcharge due under the 1952 Act for the period Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided on 25th October 1962, it was contended that the Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods) Act 1961, which validated the Andhra Pradesh Act XXI of 1959 empowering the Government to levy tax at the rate of 20 naya paise in the rupee from 8th May, 1959 to 16th January, 1961, as the rate of 5 naye paise in the rupee between 17th January, 1961 and 3rd November, 1961 (the date of commencement of the said Act) and there after at the rate of 15 naye paise in the rupee on the fares and freights payable to the operators of such stage carriages and on all goods transported by public carrier vehicles on and from 8th May, 1959 at the rate of 6 naye paise in the rupee on the freight payable to such operators of public carriers, was illegal, being in conflict with the concept of freedom of trade and commerce envisaged in Part XIII of the Constitution, and further that it invades the fundamental rights guaranteed under Articles 14 and 19 of the Constitution and that it was not competent for the State Legislature to validate a statute which was struck down as being void. It may be Stated that the Madras Motor Vehicles (Taxation of Passengers and Goods) Act, 1952 (her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enact it. It was to get over this difficulty created by that judgment that a Bill was introduced in the Andhra Pradesh Legislature after obtaining the previous sanction of the President under the proviso to Article 304(b). This Bill, which was later enacted as the Andhra Pradesh Motor Vehicles (Taxation of Passengers and Goods) Amendment and Validation Act 1961 validated the Andhra Pradesh Act XXI of 1959. In the Chittor Motor Transport Service etc. v. The State of Andhra Pradesh W.P. Nos. 1297 and batch the Constitutionality of this Act was questioned. 7. It may not be out of place here to state that the power of the State to impose a tax on motor vehicles cannot be denied. In Atiabari Tea Co., Ltd. v. State of Assam (1962) 2 S.C.J. 676 : (1963) 1 M.L.J. (S.C.) 14 : (1963) 1 An. W.R. (S.C) 14 : (1962) 3 S.C.R. 391 : A.I.R. 1962 S.C. 232, a majority of their Lordships of levying tax is essential for the very existence of the Government, its exercise must inevitably be controlled by the constitutional provisions made in that behalf and that it cannot be said that the power of taxation per se is outside the purview of any constitutional limitations. The power of Parliament and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution. In that case it was contended that the levy of a tax itself is a restriction on trade and commerce. The Supreme Court had to consider whether the legislation which was questioned before them was one which regulated commerce and trade and whether the taxes were compensatory in nature for providing roads and maintaining them in the State of good repairs, thereby affording additional facilities to persons called upon to pay taxes under that Act. It was held by a majority of their Lordships that the taxes imposed under the Rajasthan Motor Vehicles Taxation Act are compensatory taxes which do not hinder the freedom of trade, commerce and intercourse assured by Article 301 and hence, the Act did not violate the provisions of the Article. It was further held that regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Article 301 and such measures need not comply with the requirements of the proviso to Article 304(b) of the Constitution. S.K. Das, J., at page 1420 observed thus: "The collection of a toll or a tax for the use of a road or for the use of a bridge or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended to control the business of plying transport vehicles, its only object being to raise revenue for the State. The tax could not also be described as compensatory as by this legislation they have not been afforded additional facilities for paying these taxes. The taxes have also no relation to the manner and the extent of the user of the roads and as such, the provisions are in conflict with Part XIII of the Constitution. Repelling this contention, Chandra Reddy, C.J., speaking for the Bench said that the questions whether the statute is regulatory and whether the taxes are compensatory are relevant in the context of Part XIII, only in the absence of compliance with the proviso to Article 304(b) of the Constitution, and that the judgment of the Supreme Court was concerned only with a case where the proviso to Article 304(b) was not complied with. In Automobile Transport Ltd. v. State of Rajasthan (1963) 1 S.C.R. 491 : A.I.R. 1942 S.C. 1406, the sanction of the President was not obtained by the Legislature, but in the Chittoor Motor Transport Service case W.P. Nos. 1297 and batch the President's sanction was obtained, and it was for that reason Chandra Reddy, C.J., observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansport Service case W.P. Nos. 1297 and batch was that there has been discrimination against the petitioners in the matter of grant of exemptions from the operation of the Act. It was stated that the Government had denied to them exemption from tax payable under the Act, which was given to persons plying stage carriages on routes in the region known as Telangana and thereby infringed the principle of equal protection of laws enshrined in Article 14. This contention also was rejected, on the ground that prior to the formation of Andhra Pradesh there was no law in the Hyderabad State imposing any tax on passengers and goods carried in motor vehicles; that notwithstanding the merger of Telangana area with Andhra area, the laws in operation in the former region continued to be in force by virtue of section 119 of the States Reorganisation Act, that while this law continued to operate in Telangana, the State of Andhra Pradesh amended the Madras Motor Vehicles (Taxation of Passengers and Goods) Act, 1952 inter alia extending Madras Motor Vehicles (Taxation of Passengers and (foods) (Andhra Pradesh Amendment) Act, to the Telangana area, and also adding section 19 which gives power to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. Trade cannot be free throughout the territory of India, if there are barriers in any part of India, be it inter-State or intra-State. So long as there is impediment to that freedom, its nature or extent is irrelevant. The difference will be in degree and not in quality." The decision in Firm Mehtab & Co. v. State of Madras (1964) 1 An. W.R. (S.C.) 115 : (1964) 1 (S.C.) 115 : (1964) 1 S.C.J. 355 : A.I.R. 1963 S.C. 928, was cited in support of the proposition that imposition of sales tax, which has the effect of discriminating between goods of one State and goods of another, offend Article 301. In that case the Supreme Court struck down rule 16(2) of the Madras General Sales Tax. (Turnover and Assessment) Rules as it discriminated dealers of hides and skins tanned in Madras and these tanned outside that State on the ground that it hampered trade, commerce and intercourse. The effect of that Rule was that if a dealer has purchased raw hides or skins in that State, he does not pay on the sale price of the tanned hides or skins; he pays on the purchase price only. If the dealer purchases raw hides or skins from outside that State and tans them within the State, he will be liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehicles Act is compensatory and regulatory in character and does not come within Part XIII of the Constitution. Nonetheless he contends that for the purposes of the guarantee under Article 14 there is no reasonable classification. The way in which we look at this question as we have already, during the course of the arguments, put to the learned Advocates is to take the case of transport operators from 5 surrounding States of Andhra Pradesh, without any reciprocal agreements between the respective Governments. In a situation so envisaged not only the Andhra State operators plying their buses in the 5 neighbouring States of Maharashtra, Mysore, Madhya Pradesh, Orissa and Madras are liable to pay tax under their respective Motor Vehicles Taxation Acts, but the Andhra Pradesh State is also entitled to levy tax on the operators from those States under its own Act. It should not be forgotten that inter-State operators operate on particular routes and their permits are to be counter-signed for those routes. The countersigning of the permits has nothing to do with imposition of tax which is under a different Act altogether. And as we have seen, the tax imposed under these Acts has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Andhra Pradesh: (1961) 2 An. W.R. 344 : A.I.R. 1962 A.P. 2004 : 13 S.T.C. 79, Chandra Reddy, C.J., and one of us (the present Chief Justice were considering a case of persons carrying on business in jaggery who were exporting it to several States in the country and of dealers either in groundnut oil, rice or niger seeds. While submitting sales-tax returns, they claimed exemption in respect of a part of the turnover covering sales of inter State character, on the plea that the tax had already been paid on the first sales. The exemption was disallowed on the ground that the tax was leviable as the sales were subject to tax under section 8 of the Central Sales Tax Act. It was contended that by reasons of section 8 while dealers in several kinds of goods in some of the States are exempt from sales-tax, dealers in the same commodities in this State are liable to pay tax on their inter-State sales, notwithstanding the fact that taxis leviable on these goods in this State only at a single point and in fact tax was collected in the State on the first sales. In this way, dealers of one State were given preference over those of another which it was said amounts to discrimination, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the operation of the challenged statute. As already remarked, no such effect could be attributed to the impugned section.................................................. But the position is also indisputable that while Article 14 forbids class legislation, it does not prohibit a classification based on intelligible differentia with a nexus between the basis of the classification and the object of the legislation. There can be little doubt that the two tests are satisfied in the instant case. The grouping of dealers generally exempt from tax and dealers exempted under certain conditions and under certain circumstances into separate categories is State wise and as such it is a territorial classification. It is also based on a reasonable differentia. It has a reasonable relation to the avowed object of the impugned legislation which is to levy and collect taxes for the benefit of the States and in that process acting as their agent." In this view, the contention relating to discrimination under Article 14 was rejected. In the case before us also the object of the classification is reasonable, in that the Andhra State intends to put the Andhra operators on the same footi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opositions, he relied on Subramania Iyer v. Travancore-Cochin State: (1956) 7 S.T.C. 826, Guruviah Naidu v. State of Madras (1958) 1 M.L.J. 132 : (1958) 9 S.T.C. 145, P. Basavayya & Sons v. State of Andhra Pradesh (1961) 12 S.T.C. 634, Kailash Nath v. State of U.P. A.I.R. 1957 S.C. 790, Epari Chinna Krishna Moorthy v. State of Orissa (1964) 15 S.T.C. 461 : (1964) 7 S.C.R. 185, Ujjam Bai v. State of U.P. (1963) 1 S.C.R. 778 : A.I.R. 1962 S.C., Ram Autar v. State of U.P. A.I.R. 1962 All. 328 (F.B.), Indramani v. W.R. Natu,: (1963) 2 S.C.J. 59 : A.I.R. 1963 S.C. 274, 286 Bishun Narain v. State of U.P. (1965) 2 S.C.J. 718 : A.I.R. 1965 S.C. 1567, B.N. Nagarajan v. State of Mysore, (1967) 2 S.C.J. 664 : A.I.R. 1966 S.C. 1942 and Hamp on Jr. Co. v. United States 72 Lawyers's Edn. 624, 630. 17. Sri Narasaraju, who appears in Writ Petition No. 1148 of 1965, in which the question of retroactivity is one of the points--though, we are not deciding that writ by this judgment--wanted to make submissions on this aspect of the matter; inasmuch as it is likely to affect his case also when it comes up for decision. He was accordingly heard. The learned Advocate controverts the contentions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suspend the levy of such tax so long as the notification granting the exemption remained in force. The suspension of the levy of the tax came to an end as soon as the notification granting the exemption was cancelled by another proper and valid notification................ There is therefore no force or substance in the contention urged on behalf of the appellant-petitioner that the second notification issued by Government in 18th July, 1951, is ultra vires the powers of Government under section 6(1) of the Sales Tax Act.". 20. The learned Advocate-General relies upon a decision of a Bench of this Court in P. Basavayya & Sons v. State of Andhra Pradesh (1961) 12 S.T.C. 634, in support of his proposition. In that case, the retrospective operation of rule 4 of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, which was made under the provisions of sub-sections (4) and (5) of section 3, and section 19 of the Madras General Sales Tax Act, which was introduced by G.O.Ms. 220 Finance (Commercial Taxes) dated 21st March, 1956 but which was given effect of to from the 1st of November, 1955 was called in question. Sub-section (4) of section 3 and clause 5 of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3rd September, 1955; in other words only to the period for which the rule was made retrospective by specific provision therefor. The learned Judge based the decision-in that case on the Validation Act. At page 151 he observed: "In these circumstances I hold that the objection raised by the learned counsel even if it has any force has to be repelled after the enactment of section 9 of the Madras Act I of 1957." 21. In P. Basaoayya's case (1961) 12 S.T.C. 634, there was no discussion as to the principles upon which the conclusion that retrospective effect would be given to section 4-A was based. It is rightly contended by both the learned Advocates, Sri Narasaraju and Sri Srinivasa Murty that the proviso to section 3(4) imposes a restriction on the power to make rules under section 3(4) which is mandatory. That condition imposes a fetter upon the executive authority that any rules made can only come into force if approved by a resolution of the Assembly, so much so, that the Act itself envisages the Legislature's positive concurrence to the rules made thereunder. The delegatee is not empowered to give effect to those rules unless the principal, namely the Legisla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture of gold ornaments and was therefore entitled to the benefit of the exemption under the notification. Subsequently, the Orissa Legislature passed the Orissa Sales Tax Validation Act, 1961, section 2 of which provided that notwithstanding anything contained in any judgment, decree or order of any Court the word 'manufacturer' occurring............in the Notification............shall mean and shall always be deemed to have meant a person who by his own labour works up materials into suitable forms and a person who owns or runs a manufactory for the purpose of business with respect of the articles manufactured therein the petitioner challenged the validity of this section, on the grounds that since the exemption was granted by the State Government by virtue of the powers conferred on it by section 6 of the Orissa Sales Tax Act, 1947, it was not open to the Legislature to-take away that exemption retrospectively, and that the section contravened the provisions of Articles 14 and 19(1)(g) of the Constitution. It is clear, therefore from the first objection that what was challenged was not the power conferred on the executive authority to exercise the power to give retros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcise it retrospectively. The extent of the powers of the Legislature and of the delegate of authority are not co-extensive or similar. In construing the rules made or notifications issued in exercise of the powers vested in the executive authority, the ordinary rule of construction is that effect must be given to them from the date of their promulgation. The executive authority has no power to give effect to them retrospectively, unless the terms of the grant of the power by the Legislature empower the delegate to exercise it retrospectively. It was held in India Sugars and Refineries Ltd. v. State A.I.R. 1960 Mys. 326, by a Bench of the Mysore High Court that unless the power to legislate conferred on any executive body by the Legislature, expressly mentions that such power can be exercised retrospectively, it can only be exercised prospectively. Accordingly a power conferred by a Legislature on a subsidiary body, e.g., Government, to issue notifications, if couched in general language, can unless it is expressly stated that the same can be exercised retrospectively, only be exercised prospectively. It was further held that a legislative body unlike the executive body can always ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Lordships of the Supreme Court had occasion to consider this matter in In re Delhi Laws Act (1912) 4, where the validity of the delegation conferred by the Central Legislature which empowers the executive authority under its control to apply at its discretion the laws to an area which was also under the legislative way of the Centre. We could do no better than to adopt, as was done by Subba Rao, J., (as he then was) in Vasanlal Maganbhai v. State of Bombay: (1961) 1 S.C.J. 394 : A.I.R. 1961 S.G. 4, the summation of the majority view by Bose, J., in Rajnarain Singh v. Chairman, Patna Administration; Committee, Patna: (1954) S.C.J. 661 : (1955) 1 S.C.R. 290 : (1954) 2 M.L.J. 344 : A.I.R. 1954 S.C. 569, of the seven variations of the authority given to the executive in the Delhi-Laws Act case. (1951) S.C.J. 527 :: (1951) S.C.R. 747 : A.I.R. 1951 S.C. 332. He observed at page 574: "In our opinion, the majority view was that an executive authority can be authorised to modify either existing or future laws but not in any essential feature. Exactly what constitutes an essential feature cannot be enunciated in general terms, and there was some divergence of view about this in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 6(2) derogates from section 6(1) itself and is therefore void as it exceeds the permissible limits of delegated legislation. 28. Again in Indramani v. W.R. Natu (1963) 2 S.C.J. 59 : A.I.R. 1963 S.C. 274, the majority of the Supreme Court, Subba Rao, J., dissenting, observed on the question of whether it is legally competent to vest a particular power in a statutory body, that the proper rule of interpretation would be that unless the nature of the power is such as to the incompatible with the purpose of which the body is created, or unless the particular power is contra-indicated by any specific provisions of the enactment bringing the body into existence, any power which would further the provisions of the Act could be legally conferred on it. The majority further observed that a power conferred by a bye-law is not one conferred by the Act, for in the context the expression "conferred by the Act" would mean "conferred expressly or by necessary implication by the Act itself". Rajagopal Ayyangar, J., referred to the argument based on the decision of the Mysore High Court in India Sugar and Refineries Ltd. v. State of Mysore: A.I.R. 1960 Mys. 326, that tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cies. But there is no effective machinery to control the rule-making powers, or to prevent its diversion through authoritarian channels. If the conferment of power to make delegated legislation proprio vigore carried with it to make a rule or bye-law with retrospective operation, it may become an instrument of oppression. In these circumstances, it has been rightly held that the provision conferring such a power must be strictly construed and unless a statute expressly confers a power to make a rule or bye-law retrospectively, it must be held that it has not conferred any such power. It is said that such a strict construction may prevent a rule-making authority from making a rule in an emergency, though the occasion demands or justifies a rule with retrospective effect. The simple answer to this alleged difficulty is that if the Legislature contemplates or visualises such emergencies, calling for the making of such rules or bye-laws with retrospective effect it should expressly confer such power..........the scope or ambit of a rule cannot be made to depend upon the status of a functionary entrusted with a rule-making power. In public interest the least the Court can do is to const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of a rule whether it is declared to have effect as if enacted in the Act or otherwise is always open to challenge on the ground that it is unauthorised." We may here notice one other decision of the Supreme Court in which the question decided by the Mysore High Court was left open in B.N. Nagarajan v. State of Mysore (1967) 2 S.C.J. 664 : A.I.R. 1966 S.C. 1942, it was sought to be contended that under an Act of parliament or an Act of a State Legislature the executive cannot frame rules retrospectively unless the Act specifically empowers it to do so and that the position is the same under the proviso to Article 309, of the Constitution. Sikri, J., observed at page 1948. "In our opinion, it is not necessary to decide this point in these cases because we are of the view that the appeal can be disposed of an another ground." 29. It appears to us that the preponderance of the view is that unless a power to give effect retrospectively is conferred for making a rule or issuing a notification, it is not permissible to the delegate to exercise that power retrospectively. Their Lordships of the Supreme Court also have quite categorically, as has been seen, stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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