Judgment:
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :- 13.08.2013 Coram The HONOURABLE MRS.JUSTICE R.BANUMATHI and The HONOURABLE MR. JUSTICE T.S.SIVAGNANAM W.P.Nos.36373 to 36375 of 2007; W.P.Nos.19882, 20166 to 20169, 20785 to 20792, 20793 to 20800, 21069 to 21076, 21573 to 21576, 21600 to 21602, 21615, 21692 to 21695, 21714, 21715, 21917 to 21919, 21920 to 21922, 21961, 21964, 22210, 22283, 22284, 22366, 22367, 22484, 22952 to 22955, 23036 to 23038, 23361, 23362, 23511, 23830, 23831, 25817, of 2009; W.P.Nos.557, 1203, 1383, 3078, 5192, 5435, 5436, 6190 to 6193, 9083, 9419,10225, 11708, 14778, 16616, 17970, 20341 to 20343, 21011, 25300, 26193, 26194, 26955, 26956, 27515, 28572, 28573, of 2010; W.P.Nos.352, 353, 474, 672, 3609, 9013, 9014, 14263 to 14266, 14818, 14819, 14824, 14825, 15033, 15034, 15193, 15194, 15220, 15221, 20961, 20962, 22129, 22202, 22203, 23335, 23712, 25395, 25783, 26132, 26407, 26408, 28840 to 28842, 29186 of 2011; and W.P.Nos.2129, 9956, 14541, 16500, of 2012 W.P.No.36373 of 2007: Tamil Nadu Omni Bus Owners Association rep. by its President Afsal, Egmore, Chennai-8. ... Petitioner vs. 1.The State of Tamil Nadu, rep. by its Secretary to Government, Home (Transport) Department, Chennai. 2.The State Transport Authority, Chennai-5. ... Respondents. For Petitioners in : Mr.V.T.Gopalan W.P.Nos.36373 to 36375 Senior Counsel of 2007; 19882/2009; for 14818, 14819, 14824, M/s.Radha Gopalan 14825, 22202, 22203, 15193, 15914, 15220, 15221 of 2011 For Petitioners in : Mr.R.Natesan W.P.Nos.20166 to 20169, 21069 to 21076, 21714, 21715, 22210, 20785 to 20792, 20793 to 20800 of 2009; 11708, 20341 to 20343, 26193, 26194, 26955, 26956 of 2010; 474, 15033, 15034 of 2011 For Petitioners in : Mr.K.Hariharan W.P.Nos.21600 to 21602, 21917 to 21919, 21920 to 21922, 21964, 22484, 22952 to 22955, 23036 to 23038, 23361, 23362, 23511, 23830, 23831, 25817 of 2009; 1203, 1383, 3078, 5192, 5435, 5436, 6190 6193, 9419, 10225,14778, 16616, 17970, 21011, 25300, 28572, 28573 of 2010; 25395, 26407, 26408, 26132, 28840 to 28842 of 2011 2129, 9956, 14541, 16500 of 2012 For Petitioners in : Mr.A.Ganesan W.P.Nos.14263 to 14266 of 2011 For Petitioners in : Mr.T.Padmanabhan W.P.Nos.20691, 20962, 23712, 25783, 29186 of 2011 For Petitioner in : Mr.M.Palani W.P.No.3609 of 2011 For Petitioner in : Mr.P.Sukumar W.P.Nos.9013 and 9014 of 2011 For Petitioners in : Mr.S.Govindaraman W.P.Nos.22283, 22284, 21961, 22366, 22367, 21573 to 21576, 21692 to 21695, 21615 of 2009; 9083 of 2010; 352, 353 of 2011 For Respondents in : Mr.AL.Somayaji Writ Petitions Advocate General assisted by Mr.S.T.S.Murthy Government Pleader COMMON
ORDERR.BANUMATHI,J.
These cases have had a long journey commencing from 1998. The question which arises for consideration in W.P.No.36375 of 2007 is whether the enhancement of Motor Vehicle Tax on contract carriages (Omni buses) from Rs.1,500/- to Rs.2,000/- per seat per quarter and in W.P.Nos.36373 and 36374 of 2007, further increase from Rs.2,000/- to Rs.3,000/- per seat per quarter is disproportionate infringing Article 14 of the Constitution, as Motor Vehicle Tax has been held to be compensatory.
2. The petitioners are all contract carriage operators/permit holders who are conscious of the settled legal principle that if tax is attacked on the ground that it is excessive, the burden of proof is upon the one attacking its validity. It is their case that they have discharged their initial burden and it is for the State to show before this Court as compensatory tax is a recompense for the measurable benefit provided to the tax payer. We have mentioned it is a long journey which the cases have covered as the challenge to the increase in tax per seat per quarter commenced in 1998, the levy was upheld by the Division Bench of this Court and the Special Leave Petitions filed against the judgment of the Division Bench were withdrawn with liberty being granted by the Hon'ble Supreme Court to file proper writ petition before this Court giving requisite data to the satisfaction of the Court. While granting the aforesaid liberty, the Hon'ble Supreme Court held that the judgment of the Division Bench of this Court is not being interfered, as there was no infirmity in it.
3. In the light of the above fact, we would have been justified in first addressing the question as to whether the petitioners are entitled to re-agitate the matter and whether they have given requisite data to the satisfaction of this Court. Yet, we propose to examine all contentions raised in the light of the arguments advanced before us and bearing in mind the development of law as indicated by the Hon'ble Supreme Court in Jindal Stainless Ltd., (2006) 7 SCC241 In the second set of cases, the petitioners have challenged the validity of the amendment to the Tamil Nadu Motor Vehicle Tax by which the contract carriages having not more than 35 seats to be taxed on floor area of the vehicle. With this brief prelude we proceed.
4. Brief facts that led to filing of the writ petitions are as follows:- The rate of tax for omni bus from 1.4.1989 to 31.3.1994 was Rs.500/- per seat per quarter. Subsequently, the First Schedule of Tamil Nadu Motor Vehicles Act, 1974 was amended in which the tax for Omni Bus were classified as Contract Carriages and fixed at the rate of Rs.1,000/- which was challenged by the omni bus operators in a writ petition. Under order of the Government in G.O.Ms.No.1203, Home Department, dated 30.7.1991, the same was restored to the original fixation of Rs.500/- per seat per quarter. The tax in respect of contract carriages (omni buses) increased to Rs.1,000/- with effect from 1.4.1994; Rs.1,500/- with effect from 1.4.1996 and again to Rs.2,000/- by Tamil Nadu Motor Vehicles Taxation (Amendment) Act, 1998 (Tamil Nadu Act No.27 of 1998) with effect from 1.7.1998.
5. The enhancement of tax from Rs.1,500/- to Rs.2,000/- per seat per quarter was challenged in batch of writ petitions W.P.No.9553 of 1998 etc., and those writ petitions were dismissed by order dated 24.9.1998. The said judgment has been challenged in Writ Appeals No.1293 to 1297 of 1998 and while the appeals were pending, the tax on the contract carriages was further increased from Rs.2000/- to Rs.3,000/- with effect from 1.12.2001 and the said increase was also challenged in a batch of writ petitions W.P.No.212 of 2002 etc., batch. The Writ appeals filed against the Order dated 24.9.1998 and the writ petitions were taken up together and all the writ appeals as well as writ petitions were dismissed by the Judgment dated 29.11.2005. Being aggrieved by the same, the contract carriage operators filed Special Leave Petitions including Civil Appeal Nos.1177 and 1178 of 2006 before the Supreme Court.
6. The Constitution Bench of the Supreme Court in the case of Jindal Stainless Ltd., (2) and another vs. State of Haryana and others, ((2006) 7 SCC241 in the context of Article 301 of the Constitution of India has set out the difference between a tax, a fee, a compensatory tax and the parameters of compensatory tax, vis-a-vis Article 301. The Supreme Court in the said judgment has reiterated the doctrine of direct immediate effect of the law on trade and commerce under Article 301 as propounded in Atiabari Tea Co., Ltd. Vs. State of Assam, ((1961) 1 SCR809 and the working test enunciated in Automobile Transport (Rajasthan) Limited v. State of Rajasthan, (1963) 1 SCR491. The test of some connection indicated in Para 8 of the Judgment in Bhagatram Rajeevkumar v. CST (1995 Supp (1) SCC673 and State of Bihar v. Bihar Chamber of Commerce (1996) 9 SCC136 was held to be no longer a good law.
7. The batch of S.L.Ps and Civil Appeals filed by the petitioners herein were dismissed by the Supreme Court (vide (2009) 2 SCC309and (2009) 2 SCC312. However, holding that in the light of later development of law as indicated by the Court in Jindal Stainless Steel Limited (2), ((2006) 7 SCC241, the question of public importance arises in the context of principles of proportionality under Article 14 of the Constitution of India and granted liberty to the petitioners to file proper writ petition in the High Court giving requisite details and available data. The Supreme Court granted liberty to the petitioners to file a proper writ petition if so advised giving requisite details and available data to the satisfaction of this Court. The Hon'ble Supreme Court made it clear that there is no infirmity in the Judgment of the Division Bench of this Court, which is based on the petitions originally filed by the petitioners.
8. On the liberty granted by the Supreme Court, W.P.Nos.36375 and 36373 and 36374 of 2007 are filed to quash the enhancement of levy from Rs.1,500/- to Rs.2,000/- and further increase from Rs.2,000/- to Rs.3,000/-. During the pendency of those writ petitions vide Tamil Nadu Motor Vehicles Taxation (Amendment) Act, 2009 (Act No.33 of 2009) there is levy of tax based on the floor space at Rs.4,900/- for every square meter of floor area in respect of motor vehicles plying solely as a contract carriages and carry not more than 35 persons and levy of tax at the rate of Rs.3,000/- for every person where the seating capacity is more than 35 persons. Challenging the Amendment Act No.33 of 2009, the present batch of writ petitions in W.P.No.19882 of 2009 etc., are filed by the Contract Carriage operators.
9. Case of the petitioners is that contract carriages have been discriminated by levy of five or six times the tax of the stage carriages. The petitioners contend that there can be only three heads under which the motor vehicle tax, which is compensatory can be levied - (i) laden weight of the vehicles using the roads; laden weight of the contract carriages and all India Omni bus is the least when compared to other categories/types of vehicles/permits and in particular, stage carriages. When the laden weight of the stage carriage is more than that of the laden weight of the contract carriage, the levy of tax in respect of contract carriage six times more than the stage carriage is arbitrary and unreasonable and confiscatory in nature. (ii) in the matter of total number of Kilometers, generally, stage carriages in Tamil Nadu State travels upto 750 Kms and beyond 750 Kms also with the permission from the authorities, whereas a contract carriage is generally engaged to visit the places as a tour package and the distance travelled per day in respect of contract carriage will not exceed maximum of 300 Kms on an average per day and no contract carriage can run 750 Kms per day as is in the case of stage carriage. This relevant criterion/factor in levying the compensatory Motor Vehicles tax has been totally lost sight of in levying six times the tax leviable in respect of stage carriage; (iii) most of the routes travelled by the contract carriages lie on National Highways. Usage of contract carriage on State roads is very minimal and perhaps nil in many cases. On the other hand, Stage carriages generally ply on State Highways providing facilities to all rural areas and depending on the usage of State Highways there has to be proportional levy of tax on the stage carriage.
10. Further case of petitioners is that public carriage permits of various vehicles given to more than 2,55,000 (figure as furnished in the Writ Petition filed in 2007) and the contract carriages in all are numbering only 452 in Tamil Nadu and form a minuscule proportion of the total number of vehicles operated and while so levy of Rs.3,000/- per seat per quarter is highly burdensome and this discrimination cannot be justified by any standard of reasonableness and as such cannot be countenanced in law. Alleging that by levy of impugned tax of Rs.3,000/- per seat per quarter is in violation of Article 14 of the Constitution of India and the principles of proportionality, the petitioners pray to quash G.O.Ms.No.1184 Home (Transport.I) Department dated 30.11.2001 enhancing the rate of tax from Rs.2,000/- to Rs.3,000/- per seat per quarter.
11. The respondents resisted the writ petitions contending that the writ petitions filed earlier challenging the enhancement of rate of tax from Rs.2,000/- to Rs.3,000/- were dismissed upholding the levy. According to the respondents, while dismissing the S.L.Ps the Supreme Court granted liberty to file fresh writ petitions only on any new grounds available. The petitioners instead of filing new grounds raised the same grounds what were raised earlier and settled in the earlier proceedings before the Division bench and the Honourable Supreme Court and without any basis prayed for reduction of tax. The respondents justify the levy by referring to the expenditure incurred by the Highways Department in respect of construction of roads and bridges and maintenance cost and in order to increase the quantum of deficit and to manage the expenditure to some extent, the rate of tax in respect of contract carriage (omni bus) was enhanced. According to the respondents, it has been consistently held that the classification between the stage carriage and contract carriage is based on intelligible differentia and the challenge to the increase of tax is without basis.
12. On behalf of the petitioners, Mr.V.T.Gopalan, learned Senior Counsel submitted that the factors (i) laden weight of stage carriage is more than the contract carriage; (ii) total daily kilometerage (iii) nature of the roads; (iv) total number of contract carriages using the roads when compared to other classes of vehicles, were ignored and levied exorbitant tax of Rs.3,000/- per seat per quarter on the contract carriages. When the same road is used by all kinds of vehicles, levy of tax has to be compensatory and must be proportional to the extent of user of the roads. The learned Senior Counsel contended that the plea of unlimited number of trips for contract carriages is unacceptable in view of labour legislation and the nature of contract carriage engaged for tour package. The learned Senior Counsel further submitted that as per the decision of the Jindal Stainless Limited (2) Vs. State of Haryana (2006) 7 SCC241 the burden is on the State to prove that the levy is compensatory and the Government has not furnished the quantifiable data as to what are the facilities extended to the contract carriage for levy of tax six times more than that of the stage carriage. The learned Senior Counsel contended that in the light of the decision of Jindal Stainless Limited (2) Vs. State of Haryana (2006) 7 SCC241 the Government must prove that the increase in levy of tax on contract carriages is re-compensatory and the Government must succeed in establishing how the increase is compensatory and the Government failed to discharge its burden.
13. The learned Advocate General submitted that the classification of contract carriages and stage carriages was held to be a reasonable classification and all the points now raised by the petitioners were already considered and rejected by the Division Bench of this Court in the case of A.Aariff Vs. The State of Tamil Nadu rep.by Secretary to Government, Home (Transport)Department, Chennai-9 and another, (2006(1) CTC91 and no new grounds are raised by the petitioners. Drawing our attention to the statement showing the actual expenditure incurred in respect of construction of roads and bridges and maintenance cost and also the total revenue collection of Home Transport Department, the learned Advocate General submitted that the State has discharged the burden that the levy is compensatory in nature. The learned Advocate General contended that already there is a huge deficit and to decrease the quantum of deficit, the Government increased the rate of tax among other classes of vehicles and the rate of tax in respect of contract carriage was enhanced. The learned Advocate General also submitted that it is well within the legislative competence of the State as to what should be the rate of tax and from whom it should be collected. The learned Advocate General submitted that how the expenditure is to be distributed among the users depends on the legislative wisdom and the petitioners cannot make grievance of the increase.
14. We have considered the rival submissions. The points falling for consideration are, whether increase of tax for contract carriages from Rs.2,000/- to Rs.3,000/- is arbitrary and unreasonable and whether State has proved the increase of tax for contract carriages as compensatory.
15. As per Section 2(40) of the Motor Vehicles Act, 1988 (Central Act No.59 of 1988), stage carriage means a motor vehicle constructed or adopted to carry more than six passengers excluding the driver for hire or reward, at separate fares paid by or for individual passengers, either for the whole journey or for stage of the journey. Contract carriage is defined in Section 2(7) of the Motor Vehicles Act. Section 2(7) reads as under: ".contract carriage". means a motor vehicle which carries a passenger or passenger or passengers for hire or reward and is engaged under a contract, whether expressed or implied, for the use of such vehicle as a whole for the0 carriage of passengers mentioned therein and entered into by a person with a holder of a permit in relation to such vehicle or any person authorised by him in this behalf on a fixed or an agreed rate or sum-- a.on a time basis, whether or not with reference to any route or distance; or b.from one point to another, and in either case, without stopping to pick up or set down passengers not included in the contract anywhere during the journey, and includes-- i.a maxicab; and ii.a motor cab notwithstanding that separate fares are charged for its passengers; 16. Insofar as stage carriages, restriction is imposed by not allowing them to increase the fares or make more trips or exceed the permitted route. The rate of tax fixed for stage carriages is lower than that of contract carriages since in the case of contract carriages there are no such restrictions on the fares to be charged, the routes to be taken, the distance to be covered and the number of trips to the maintained. A contract carriage is engaged for the whole of the journey between the two points for carriage of a person or persons hiring it, but it has no the right to pick up other passengers en route. The Stage carriage on the other hand runs between two points irrespective of any prior contract and it is boarded by passengers en route who pay the fare for the distance. The stage carriages and contract carriages are two different classes of vehicles for the levy of tax and contract carriages cannot be compared with the stage carriages.
17. It has been laid down in a large number of decisions by the Honourable Supreme Court that a taxation statute for the reasons of functional expediency and even otherwise select the persons or object it will tax. Coming to the power of the State in legislating taxation law, the court should bear in mind that the State has a wide discretion in selecting the persons or objects it will tax and thus a Statute is not open to attack on the ground that it taxes some persons or the objects and not others. It is also well-settled that a very wide latitude is available to the Legislature in the matter of classification of objects, persons and things for the purpose of taxation. While considering the challenge and nature that is involved in these cases, the courts will have to bear in mind the principles laid down by the Hon'ble Supreme Court in the case of M/s. Murthy Match Works etc. etc. v. The Asstt. Collector of Central Excise (AIR1974SC497 wherein while considering different types of classifications, the Supreme Court Court held that a pertinent principle of differentiation, which was, visibly linked to productive process, had been adopted in the broad classification of power-users and manual manufacturers. It was irrational to castigate this basis as unreal. The failure however, to mini- classify between large and small sections of manual match manufacturers could not be challenged in a Court of law, that being a policy decision of Government dependent on pragmatic wisdom playing on imponderable forces at work. Though refusal to make rational classification where grossly dissimilar subjects are treated by the law violates the mandate of Article 14, even so, as the limited classification adopted in the present case was based upon a relevant differentia which had a nexus to the legislative end of taxation, the Court could not strike down the law on the score that there was room for further classification.".
18. It could be seen that from the inception the rate of tax for contract carriages was higher than that of stage carriages. The contract carriage operators acquiesced themselves of such distinction, which even according to them, was different as they are not stage carriages. In 1971 when the Government of Tamil Nadu enhanced the tax from Rs.30 to Rs.100/- per seat per quarter challenge was made contending that the increase was neither compensatory nor regulatory. Such contentions were rejected and the classification between stage carriages and contract carriages in levy of enhanced rate of tax was upheld by the Hon'ble Supreme Court in G.K.Krishnan vs. State of Tamil Nadu, (AIR1975SC583, wherein it was held as under: 36. It cannot be said that a classification made on the basis of the capacity of the contract carriages to run more miles is unreasonable because those carriages will be using the road more than the stage carriages which have got a time schedule, specified routes and minimum and maximum number of trips. A person who challenges a classification as unreasonable has the burden of proving it. There is always a presumption that a classification is valid, especially in a taxing statute. The ancient proposition that a person who challenges the reasonableness of a classification, and therefore, the constitutionality of the law making the classification, has to prove it by relevant materials, has been reiterated by this Court recently. xxx xxx 39. ..... Therefore, when the Government, in the exercise of its power to tax, made a classification between stage carriages on the one hand and contract carriages on the other and fixed a higher rate of tax on the latter, the presumption is that the Government made that classification on the basis of its information that contract carriages are using the roads more than the stage carriages because they are running more miles. Therefore, this Court has to assume, in the absence of any materials placed by the appellants and petitioners, that the classification is reasonable. 19. Referring to G.K.Krishnan's case, earlier, before the Division Bench of this Court (2006(1) CTC91, on plea of discrimination between stage carriages and contract carriages, after referring to G.K.Krishnan's case, (AIR1975 SC583 and other decisions, it was held that the two belong to different categories and pointed out that the classification has already been upheld by the Supreme Court. It was held that the amended provisions of Motor Vehicles Taxation (Amendment) Act, 1998 (Act No.27 of 1998) do not affect Articles 14 or 19(1)(g) as well as Article 301 of the Constitution of India and the enhanced rate of Motor Vehicles Tax in respect of contract carriages was held to be not discriminatory or unreasonable so long as the classification is not arbitrary or unreasonable, the Court will not interfere with the classification, which is the prerogative of the Legislature.
20. Now coming to the nexus of classification with the object of taxation, it will have to be traced to public interest. The learned Advocate General submitted that the stage carriage, which by and large, belong to State owned Corporation are governed by the Government regulations, regulated number of trips, regulated fare structure and fixed passenger capacity. In view of such restrictions imposed on the Stage Carriage by not allowing them to increase the fares, to make more trips or exceed the permit route, the rate of tax is fixed lower than that of contract carriages. Barring a few, stage carriages are also to provide service to community. Stage carriages have no choice about the fares to be fixed. In furtherance of directions of the Government, stage carriages are to give concession in ticket fare to be given to students, senior citizens, physically handicapped and freedom fighters. The stage carriages are to operate with the restrictions even if operation is uneconomical. Whereas in the case of contract carriages, they have no restrictions on fare, number of trips, total Kilometres run and their area of operation is throughout the State and also operate beyond the boundaries of the State. As pointed out by the Advocate General, most of the contract carriages/omni buses are operated as sleeper coaches/ A/c or Non-AC collecting huge fare. Having regard to the service rendered to the community by stage carriages, it is within the prerogative of the Legislature to classify Contract Carriages as a separate class and levy higher tax on the contract carriages. Therefore, stage carriages cannot be compared with that of contract carriages. So long as the classification is not arbitrary or unreasonable, the Courts will not interfere with the classification on the rate of tax, which is the prerogative of the Legislature.
21. The liberty granted by the Honourable Supreme Court to file fresh writ petition is the basis for filing of the writ petitions W.P.Nos.37373 to 36375 of 2007. We may usefully refer to the decision of the Supreme Court in Tamil Nadu Omni Bus Owners Association vs. State of Tamil Nadu and another, ((2009) 2 SCC312, wherein it was held as under: 3. In the present case we find that the initial burden on the appellant-petitioners itself has not been discharged in the sense that the petition filed before the High Court was very sketchy. A challenge of this nature requires the appellant-petitioners to furnish greater details before the State could be called upon to submit quantifiable and measurable data justifying the impugned rate. Ultimately, it is the State which has to meet the allegations made in the writ petition and if those allegations made in the writ petition are vague, inaccurate or insufficient then it would not be possible for the State to submit its reply/data to the Court.
4. One more aspect in this case also needs to be mentioned. It has been argued before us that the tax in question is a compensatory tax. Certain judgments of this Court are also relied upon in this regard, the latest being the judgment in Jindal Stainless Ltd. (2) v. State of Haryana(2006) 7 SCC241 5. In our view, this repeated increase in the rate of tax, particularly the incidence of which is more on the contract carriage vis-`-vis stage carriage raises questions of public importance. At the same time the State can certainly rely upon the data available to show cross-subsidisation, if it so exists in a given case, by which stage carriage gets subsidised in public interest. Keeping in mind the gamut of the dispute involved, we are of the view that we cannot interfere with the impugned judgment of the High Court, particularly when the pleadings at the initial stage were insufficient.
6. Realising this difficulty, Mr R. Venkataramani, learned Senior Counsel appearing on behalf of the appellant-petitioners fairly stated that he would seek permission of this Court to withdraw the civil appeals and special leave petitions with liberty to file a proper writ petition in the High Court giving requisite details and available data. Normally, we would not have granted such permission. However, as stated above, questions of public importance arise in these matters, particularly in the context of the principles of proportionality under Article 14 of the Constitution and the later development of law as indicated by this Court in Jindal Stainless Ltd. (2) (2006) 7 SCC241 7. In the circumstances, we permit the appellant-petitioners herein to withdraw the civil appeals and special leave petitions with liberty to file a proper writ petition, if so advised. We make it clear that we do not find any infirmity in the impugned judgment of the High Court which is based on the petition originally filed by the petitioners.
8. Subject to the above, the civil appeals and special leave petitions stand dismissed with no order as to costs. We make it clear that if a proper writ petition is filed giving requisite data to the satisfaction of the High Court, then any observation made in the impugned judgment will not come in the way of the appellant-petitioners. All contentions of both sides are expressly kept open. 22. As per the observations of the Supreme Court, initial burden is on the petitioners to give requisite details to establish that the levy is arbitrary and not compensatory. The question that arises for determination is as to whether the petitioners have filed necessary statistics with the supporting documents to show that the increase of tax on contract carriages is arbitrary and unreasonable when compared to stage carriages.
23. It is fairly submitted that it is neither the case of the petitioners nor the State Government that it is a case of cross-subsidisation, rather the contention of the State Government is that in spite of increase of tax there is gross deficit.
24. In the Writ Petitions, petitioners have raised the grounds of: (i) laden weight; (ii) total kilometres covered by contract carriages is less compared to stage carriages and (iii) Contract carriages mainly use National High Ways. The petitioners have not raised any new grounds but raised almost the same grounds, which were already raised and considered in the earlier batch of Writ Petitions. In support of the grounds raised, the petitioners have produced certain data and we considered those details. Insofar as the laden/unladen weight, the learned Senior counsel for petitioners contended that the laden weight of the contract carriages is less than the laden weight of stage carriages and far less than the laden weight of public carrier vehicle and while so State cannot increase the rate of tax six times in proportion of contract carriages when compared to stage carriages. In this regard, the learned Senior Counsel has drawn our attention to the Registration Certificate of a stage carriage (page No.33 of typed set filed along with Writ Petition) operated as a town bus as per which the seating capacity is 44 plus standing capacity - 40 plus two - driver and conductor. The learned Senior Counsel submitted that the laden weight of stage carriage is more when compared with the laden weight of contract carriages. Except showing the seating and standing capacity of a town bus, petitioners have not produced any material or data to show that the laden weight is more for the stage carriage.
25. Per contra, the respondents have produced the tabular column to show that the unladen weight of the stage carriage is comparatively less than the unladen weight of the contract carriage, which is as under: ------------------------------------------------------------------------------------- Sl. Vehicl Whee Make Seat Unla Sl. Vehicle Whe Make Seatin Unlad No.e No.l ing den No.No.el g en Base Capa Weig Bas Capaci Weigh city ht e ty t (in (in kgs) kgs) ------------------------------------------------------------------------------------- 1 TN22Q210quot; A/Ley 56+2 8490 1 TN45B222A/Le 41 in 10970 6566 land 7878 ". ylan all d ------------------------------------------------------------------------------------- 2 TN45N222quot; A/Ley 41+2 9800 2 TN37BS222A/Le 37 in 10776 2370 land 9508 ". ylan all d ------------------------------------------------------------------------------------- 3 TN45N222quot; A/Ley 57+2 8915 3 TN01V222A/Le 34 in 10270 2975 land 1085 ". ylan all d ------------------------------------------------------------------------------------- 4 TN45N210quot; A/Ley 55+2 8485 4 TN69Q222A/Le 32 in 10930 3035 land 3737 ". ylan all d ------------------------------------------------------------------------------------- The above tabular column is also supported by the documents/ registration certificates of those vehicles filed by the State, which would clearly show that the unladen weight of contract carriages is more than that of the stage carriages.
26. Contention of the petitioners that laden weight of stage carriage is more than that of the contract carriage and causing more stress on the road is not supported by any material and is liable to be rejected. Referring to the details furnished by the respondents, the learned Senior Counsel for petitioners contended that the difference in the weight of unladen contract carriage is only marginal and the extra weight is not so much to add stress upon the road justifying the huge levy of six times more than that of the stage carriage. Such plea was not raised in the writ petitions. Such arguments of marginal difference in the unladen weight cannot be a guideline to test the validity of a taxing statute.
27. It is then contended by the learned Senior Counsel that the total daily kilometres covered is a factor to be taken note of for levy of tax and submitted that in the State of Tamil Nadu, stage carriages travel upto 750 kms and beyond 750 kms also with the special exemption from the Government, as can be seen from G.O.Ms.No.373 Home (Transport-VII) Department, dated 13.2.1980 (vide page No.1 of the typed set in W.P.No.36373 of 2007). Learned Senior Counsel submitted that so far as contract carriages are concerned, they are engaged as a contract carriage to visit places as a tour package and contract carriage cannot travel all 24 hours. If the distance travelled per day is taken in respect of the contract carriage, the same will not exceed maximum 300 kms on an average per day. The learned Senior Counsel further contended that the purpose and object of engaging contract carriages is only for tourist purpose to visit places of historical, religious and sight seeing interest and therefore it is a short trip. It was contended that it will be physically impossible to travel all the 24 hours during the day and taking into account the total kilometrage travelled by contract carriages there is no justification for singling out the contract carriage for levying six times the tax on a stage carriage.
28. Once the vehicle becomes liable for payment of tax the extent and quantity of use by the vehicle is not a decisive factor for the purpose of levy of tax. In State of Kerala vs. Aravind Ramakant Modawdakar & Ors, (1999) 7 SCC400, the Honourable Supreme Court held as under: We think this argument of long or short usage of road is purely hypothetical and would not be a sole guideline to test the validity of a taxing Statute; even if such Statute is a compensatory/regulatory taxation. The tax levied under the legislative power found in Entry 56 or 57 of List II of the 7th Schedule is primarily a tax, though it may be compensatory and/or regulatory in nature and, therefore, while testing the constitutional validity of a taxing Statute it may not be safe to rely upon the hypothetical factors as against the wisdom of the legislature. In regard to measure of road user both the sides can give contrary arguments which may look convincing. Hence the examples of this nature would not carry the argument to any logical conclusion. Having noticed the fact that the area of judicial review is considerably limited in testing the validity of a taxing Statute... 29. The ground that the total distance covered by the contract carriages is less than that of the distance covered by the stage carriages was also raised and considered in the earlier batch of writ petitions. After referring to the decision of the Supreme Court in G.K.Krishnan vs. State of Tamil Nadu, (AIR1975SC583 and number of other decisions, and observing that the contract carriages can use the entire breadth and stretch of roads without any limit and that there can be no tariff between the contract carriages and other vehicles, while upholding the increase of levy of tax on contract carriages, in A.Aariff Vs. The State of Tamil Nadu rep.by Secretary to Government, Home (Transport)Department, Chennai-9 and another, (2006(1) CTC91 held as under: 23. ........ We are satisfied that the statistics furnished by the petitioners regarding maximum usage of road by contract carriage vehicles per day are not based on any authorised statistical data. On the other hand, the contract carriage is entitled to use the roads on the entire length and breadth of the State with heavy burden on an wear and tear of the roads in the State is substantial. Though a statistic was submitted by learned counsel for the appellants stating that a stage carriage is running upto 750-800 kms., per day and contract carriage is running 1000-1200 kms., a day, there is no material to substantiate their contention. On a common parlance, it is difficult for a stage carriage to ply 750-800 kms., per day. The stage carriage is permitted to run on a specified route with permissible trips with a charge that was fixed by the Government. Whereas for the contract carriage, it can go without any limit, thus using the roads more than the stage carriages. The petitioners have not furnished any further details for us to take a different view.
30. Contending that for the purpose of levying compensatory tax like Motor Vehicle's tax, nature of use of the roads by various classes of vehicles is relevant, learned Senior counsel for petitioners submitted that the contract carriages are catering to the needs of tourist passengers, which generally lie in important locations/towns connected mainly by the National Highways. It was further submitted that the usage of State roads by contract carriages is very minimal and perhaps Nil in many cases and this relevant circumstance was not taken note of by the Legislature in levying tax on contract carriages six times more than that of a stage carriage. Learned Senior Counsel submitted that for example if the vehicle is run between Madras and Bangalore, there are in all four toll gates and there is no part of the State Highway intercepting the National Highway or form part of the route between Madras and Bangalore and while so, the levy of exorbitant tax on the contract carriages is arbitrary and unreasonable.
31. When there are no limits for running of the contract carriages, it cannot be calculated with a mathematical precision how much is the distance covered on the State Highways or National Highways. As the contract carriages are permitted to ply through the length and breadth of the State, it cannot be contended that the nature of use of State Highways is minimal and therefore higher rate of tax cannot be levied on the contract carriages.
32. In the light of the observations made by the Supreme Court in Tamil Nadu Omni Bus Owners Association case, (2009) 2 SCC312 the point to be determined is, whether the tax levied is compensatory. In the case of Jindal Stainless Limited ((2006) 7 SCC241, the Hon'ble Supreme Court held that the theory of compensatory tax is that it rests upon the principle that if the Government by some positive action confers upon individual(s), a particular measurable advantage, it is only fair to the community at large that the beneficiary shall pay for it. The basic difference between a tax on one hand and a fee/compensatory tax on the other hand is that the former is based on the concept of burden whereas compensatory tax/fee is based on the concept of recompense/reimbursement. For a tax to be compensatory, there must be some link between the quantum of tax and the facility/services. Every benefit is measured in terms of cost which has to be reimbursed by compensatory tax or in the form of compensatory tax. In other words, compensatory tax is a recompense/ reimbursement. 33. The Hon'ble Supreme Court in Jindal Stainless Steel case, (2006) 7 SCC241held that whenever a law is impugned as violative of Article 301 of the Constitution, the Court has to see whether the impugned enactment facially indicate the benefit which is quantifiable or measurable and it must broadly indicate proportionality to the quantifiable benefit. In the light of the above principles laid down in Jindal Stainless case, (2006) 7 SCC241 it is to be seen whether increase of tax from Rs.1,500/- to Rs.2,000/- and from Rs.2,000/- to Rs.3,000/- per seat per quarter on contract carriages is compensatory in nature. A compensatory tax is based on the nature and the extent of the use made of the roads, as, for example, a mileage or ton-mileage charge or the like. If the proceeds are spent for the repair, upkeep, theory of compensatory tax is that the Motor Vehicle tax so collected must be devoted to lay new roads, build bridges, repair, upkeep, maintenance and depreciation of the roads.
34. Drawing our attention to the statement showing the actual expenditure incurred and the total revenue collection of Transport Department by way of tax and fees, learned Advocate General submitted that in respect of construction of roads, bridges and maintenance cost, the expenditure incurred is more than the tax and fees collected by the Transport corporation and Government took a policy decision to increase the tax rate to be in accordance with increase in expenditure. The counter affidavit showing the actual expenditure incurred and the total revenue collection by way of tax and fees for the years 1995-96 to 1997-98 reads as under: --------------------------------------------------------------------------------------------- Sl. No.Financial Year TOTAL EXPENDITURE INCURRED BY HIGHWAYS HOME TRANSPORT DEPARTMENT FOR THE PERIOD FROM DEPART-MENT19951996 to 1997-1998 Revenue Collection of Motor vehicles Tax and Fees 1995-1996 to 1997-1998 --------------------------------------------------------------------------------------------- Towards Towards TOTAL Construction maintenance EXPENDITURE of of Roads Roads and and Bridges Bridges (Non Plan) --------------------------------------------------------------------------------------------- (in Crores) --------------------------------------------------------------------------------------------- 1 1996-1997 224.10 221.80 445.89 424.72 --------------------------------------------------------------------------------------------- 2 1997-1998 230.40 272.99 503.39 469.69 --------------------------------------------------------------------------------------------- It is stated that since the expenditure incurred is stated to be more than the tax and the fee collected by the Transport Department, the rate of tax in respect of contract carriage (omni bus) was enhanced from Rs.1,500/- to Rs.2,000/- with effect from 1.7.1998 vide Tamil Nadu Motor Vehicles Taxation (Amendment) Act, 1998 (T.N.Act No.27 of 1998). In so far as the actual expenditure incurred and the total revenue collection of the Transport Department for the years 1998-99 to 2000-2001 it reads as under: ------------------------------------------------------------------------------------------- Sl. No.Financial Year TOTAL EXPENDITURE INCURRED BY HOME TRANSPORT HIGHWAYS DEPARTMENT FOR THE PERIOD DEPART-MENT Revenue FROM19981999 to 2000-2001 Collection of Motor vehicles Tax and Fees 1998-1999 to 2000-2001 ------------------------------------------------------------------------------------------- Towards Towards TOTAL Construction maintenance EXPENDITURE of Roads of Roads and and Bridges Bridges (Non Plan) ------------------------------------------------------------------------------------------- (in Crores) ------------------------------------------------------------------------------------------- 1 1998-1999 302.55 253.69 556.24 518.14 ------------------------------------------------------------------------------------------- 2 1999-2000 480.51 252.33 732.84 581.45 ------------------------------------------------------------------------------------------- 3 2000- 2001 728.35 198.37 926.72 592.37 ------------------------------------------------------------------------------------------- It is stated that in order to decrease the quantum of deficit and manage the expenditure to some extent, tax was increased to various classes of vehicles with effect from 1.12.2001, vide G.O.Ms.No.1184, Home (Transport-I) Department, dated 30.11.2001 in which, in respect of Contract Carriage omni buses the rate of tax was increased from Rs.2,000/- per seat per quarter to Rs.3,000/- per seat per quarter.
35. By perusal of the actual expenditure incurred and the total revenue collection for the years 2001-2002 to 2011-2012, as stated in the counter, it is seen that in the total expenditure incurred by Highways Department, the deficit is constantly increasing and there is need for the Government to manage the expenditure by decreasing the quantum of deficit. Government is bound to maintain the roads. Without repair of the roads, upkeep, maintenance and provision for depreciation of roads, transportation would become impossible. In order to reduce the deficit, Government took a policy decision to increase the rate of motor vehicle tax on Contract Carriages. The impugned enactment has not been challenged on the ground it is violative of Article 301 of the Constitution. Yet by applying the test laid down by Hon'ble Supreme Court in Jindal Stainless Ltd., from the quantifiable data placed before this Court it is manifest that it apparently indicates the benefit enjoyed by contract carriages and also broadly indicate proportionality to the benefits engaged. Hence even assuming that petitioners have discharged the initial burden cast upon them (though in our view it has not been discharged by furnishing data), the State has discharged its burden to show that the increased levy is a recompense to the benefits provided to contract carriages. By furnishing the details of the actual expenditure incurred and the total revenue collection of the transport Department by way of tax and fees and that there is deficit, the State has discharged the burden of establishing that the levy is compensatory in nature.
36. Motor Vehicles tax falls within the legislative competence of the State Legislature falling under Entry 56 of List II of the Seventh Schedule. Thus, the State Legislature is competent to levy such tax on the class of vehicles as it may carve out, but subject to the condition that the classification has to be based upon intelligible differentia having reasonable nexus with an objective to be achieved. It is the prerogative of the State fixing rate of tax to be levied and the persons from whom the tax should be collected. When the State is already in deficit, how the expenditure/ compensatory tax is to be distributed among the users depends upon the legislative wisdom. The petitioners cannot complain of differential treatment. The State Legislature is well within its competence to collect more from the omni bus operators. In exercise of the judicial review, Court cannot go into the legislative wisdom.
37. Contention was raised on behalf of the petitioners by stating that the law laid down in G.K.Krishnan Vs. State of Tamil Nadu (AIR1975SC583 loses significance in the light of the authoritative pronouncement of the Constitution Bench in Jindal Stainless case, (2006) 7 SCC241 In our view, contention does not merit acceptance as the question referred for consideration in Jindal Stainless case, (2006) 7 SCC241was to decide with certitude the parameters of the judicially evolved concept of ".compensatory tax". vis-a-vis Article 301. In the earlier part of this order, we have observed that the State has discharged the burden to show that the increase in tax is a recompense for the measurable benefit provided to the contract carriages. Though the petitioners failed to place any material to the satisfaction of this Court in terms of the liberty granted to the petitioners, the moot question decided by Hon'ble Supreme Court in G.K.Krishnan's case (AIR1975SC583 pertains to the constitutional validity of the distinction between contract carriages and stage carriages in the matter of levy of vehicle tax and whether it offends Article 14 of the Constitution. Therefore, we may be well justified to cull out the legal principle laid down in G.K.Krishnan's case which approved such classification as reasonable.
38. The contention of the petitioners is that various types of vehicles running to several lakhs use the roads and contract carriages form minuscule proportion of the total number of vehicles operated and while so the rate of tax levied on the contract carriages is exorbitant and arbitrary. It is well to remember the practical administrative difficulties in imposing a tax. It is always difficult to evolve a formula which will in all cases ensure exact compensation for the use of the road by vehicles having regard to their type, weight and mileage. So long as the classification between the stage carriages and contract carriages is not arbitrary or unreasonable, the Courts will not interfere with the classification and the levy of tax which is the prerogative of the legislature. The petitioners cannot complain of differential treatment. So far as the increase of tax from Rs.2,000-3000 it cannot be stated to be arbitrary or unreasonable warranting interference by this Court.
39. Tamil Nadu Motor Vehicles Taxation (Amendment) Act, 2009 (T.N Act No.33 of 2009:- By this amendment, the Government of Tamil Nadu made a notification in the First Schedule of the Tamil Nadu Motor Vehicles Act by way of amendment in Class 2 for paragraph II for levying tax on the basis of floor basis, which reads as under: 3. In the First Schedule to the principal Act, in class 2, for paragraph II, the following paragraph shall be substituted, namely:- II. Vehicles permitted to ply solely as contract carriage, whether classified as Tourist Vehicle or not, which the vehicle is permitted to carry.- (a) not more than thirty-five persons (other Rs.4,900.00 than driver), for every square metre of floor area of the vehicle: (b) more than thirty five persons (other Rs.3,000.00 than driver), for every person (other than the driver) 40. In the counter, it is contended on behalf of the respondents that though the space available for wheel base of 222 (5640 mm) is sufficient to provide 40 seats, the petitioners are trying to evade the State Government dues by providing lesser seats (26-31) with a back to back of 92 cms space by eliminating one row on length/ by providing 2+1 or 1+1+1 seat arrangement, which leads to loss of revenue to the Government. The loss of revenue to the Government by provision of 32 seats (31+1) to the contract carriages compared to 41 seats (40+1) is Rs.1,08,000/- per annum (Rs.27,000/- per quarter).
41. On behalf of the petitioners, it is submitted that the levy of tax on the basis of floor area is challenged on the ground that it is violative of the provisions of Article 14. In the same category of contract carriage operators, two methods of calculation of tax has been proposed i.e., the operators having more seats in the vehicles will be paying lesser tax and those with lesser seats will have to pay more tax and therefore the levy of tax on the basis of floor space is arbitrary.
42. On behalf of the respondents, it was submitted that 233 Omnibuses were operated by providing lesser seats. According to the respondents, there was a news item appeared in the Tamil Newspapers - (Malai Malar) on 20.6.2006 and Dinamalar on 11.06.2006 regarding the collection of more fare on omnibuses (contract carriages) from the travelling public and it was ascertained that there are 233 omnibuses operated by providing lesser seats and collecting higher fare from the travelling public. It is stated that the operators are paying lesser tax by providing less seats and enjoying more tax benefits and at the same time collecting higher fare from the travelling public which resulted in loss of revenue to the Government.
43. According to the respondents, the contract carriage operators provide 26 to 35 seats and they collect excess fare from the passengers, which is equivalent to the amount as in the case of maximum seats provided and at the same time paying lesser tax for the seats provided. Further, according to the respondents, there is no proper mechanism to regulate the tax according to the seating capacity which results in loss of revenue to the Government. Therefore, the State Government decided to levy tax on the basis of floor area i.e., as per the amendment, where the vehicle is permitted to carry not more than 35 persons other than the driver, for every square meter of floor area of the vehicle, tax of Rs.4,900/- per seat per quarter has to be paid. Where there are more than 35 persons other than the driver, tax to be paid is Rs.3,000/- per seat per quarter.
44. By interim order dated 12.10.2009 in M.P.No.1 of 2009 in W.P.No.19788 of 2009 etc., batch the learned single Judge has passed an interim order making interim arrangement that in respect of all the buses having a seating capacity of less than 36, all the operators shall pay tax at the rate calculated on the basis as though those vehicles have a seating capacity of 36 seats. In other words, if a vehicle has only 25 seats, the operators shall pay tax as though the vehicle has 36 seats. As per the said interim order, payment shall be made by the operators in respect of all the vehicles which has a seating capacity upto 35 as though the vehicle as 36 seats.
45. The learned Senior Counsel for the petitioners submitted that though the levy of tax on the basis of floor area is arbitrary, the interim arrangement as per interim order dated 12.10.2009 in M.P.No.1 of 2009 in W.P.No.19788 of 2009 etc., batch may be continued and that will safeguard the interest of the revenue also.
46. In this regard, the learned Advocate General submitted that even if the operators who provide less seats are to pay tax for 36 seats at the rate of Rs.3,000/- per seat per quarter even then there is a loss of revenue to the Government. In this regard, the learned Advocate General has drawn our attention to the calculation furnished in the counter, which reads as under: Vehicle length 10.5x2.5 mts with seating capacity 26+1 Square meter 26.25 sq.mts. Less 10% 2.62 sq.mts --------------- Net 23.63 sq mts Floor area Tax 23.7x4900 Rs. 1,16,130/- Seat provided with 26 Tax for 26x3000 Rs. 78,000/- If the permit holder comes forward to provide 36 seats Tax for 36x3000 = Rs. 1,08,000/- --------------- Difference between floor area tax and tax for 36 seats at Rs.3,000/- per seat (Rs.1,16,130 minus Rs.1,08,000): Rs.8,130.00 Loss of Revenue to Government by providing 26 seats compared ------------- with floor area Tax per quarter: Rs. 38,130 -------------- In the light of the above details/data, we are not inclined to accept the submission of the learned Senior Counsel that the interim arrangement made pursuant to the interim order passed by the learned single Judge directing payment of tax for 36 seats per quarter, regardless of the seating capacity shall be continued.
47. It is stated that floor area means total floor area inside the body of the vehicle measuring length and breadth plus 10% standard deduction of the total floor area. When sufficient space is available to provide more seats, the operators are providing less seats and collecting high fare from the travelling public. In this regard, the learned Advocate General has submitted that most of the contract carriages/omni buses are operated between the cities as A.C and Non-A.C Sleeper Coaches and high fare is being collected from travelling passengers by drawing our attention to the e'tickets issued by the certain contract carriage operators. There is no proper mechanism to regulate tax according to seating capacity which results in loss of revenue to Government. After examining the matter from various angles and also taking into consideration various factors Government has decided to levy tax on the basis of floor area for contract carriages. It is stated that the concept of levy of tax on the basis of floor area is already implemented in the State of Karnataka. The learned Advocate General had drawn our attention to the details of number of omni buses paying tax on floor area basis and other omni buses paying tax at Rs.1,08,000/- (i.e., below 36 sets, but paying for 36 seats) as per the interim order of the Court. It is stated that in the State of Tamil Nadu when 88 omni buses are paying tax on floor area basis and while so, the writ petitioners, who provided seats below 36, cannot make grievance on levy of tax on floor area basis.
48. In order to prevent evasion of tax by omni buses providing lesser number of seats, Government taken a decision to amend Tamil Nadu Motor Vehicles Taxation Act levying tax on the basis of floor area for contract carriages. We do not find any arbitrariness or unreasonableness in the amendment levying the tax on the basis of floor area.
49. In the result, all the writ petitions are dismissed. As it is stated that there is huge arrears of tax due from the petitioners, the Government is at liberty to collect the arrears of tax due from the petitioners by giving reasonable time for payment, preferably three months from the date of this order. If the petitioners fail to pay the arrears of tax within the time granted, the Government shall proceed against them in accordance with law. However, there is no order as to costs. Consequently, the connected miscellaneous petitions are also dismissed. usk ========================================================================================== After we pronounced the judgment, Mrs.Radha Gopalan, learned counsel for petitioners submitted that pursuant to the interim orders passed by the Court, the writ petitioners have paid 70% and above of the tax due payable by them and therefore submitted that the respondents may be directed to issue notices to the petitioners indicating the amount due and payable by the petitioners after giving credit to the amount actually paid by the petitioners.
2. Having regard to the submission made by the learned counsel for petitioners, the respondents are directed to issue notices to the petitioners indicating the arrears of tax payable after giving credit to the amounts which were paid during the pendency of the writ petitions. usk