vil Appeal Nos
1631 33 of 1987 etc
From the judgment and order dated 1071987 of the Bombay High Court in WP Nos 941 986 and 1012 of 1987
AS Bobde
General
section K Dholakia and AS Bhasme for he Appellants
Soli J Sorabjee RN Sachhar Mrs Aruna Mathur J Wad KJ John and AK Sanghi for the Respondents
The judgment of the Court was delivered by SABYASACHI MUKHARJI J
These civil appeals and special leave petitions centre around one point namely the validity of the Bombay Motor Vehicles Tax Act 1958 as amended by Section 3 of the Maharashtra Act XIV of 1987 as well as Section 6 of the said Act as amended by Maharashtra Act XXXlll of 1987 as well as the Maharashtra Act IX of 1988
PG NO 486 The Bombay Motor Vehicles Tax Act 1958 prior to its amendment in 1987 provided for levy of tax on vehicles annually or quarterly
In 1987 by Section 3 of the Maharashtra Act No XIV of 1987 sub section IC was added to provide for levy of one time tax at 15 times the annual rate on all motor cycles used or kept for use in the State
The said provisions further provided that in case of motor cycles used or kept for use by a company or other commercial organisation the one time tax was to be levied at thrice the rate
Section 6 of the Maharashtra Act 14 of 1987 added sub section 6 to Section 9 of the principal Act
The new sub section 6 enabled a registered owner of motor cycle or tricycle to obtain refund of one time tax in cases where a the vehicle is removed outside the State and b the registration of vehicle is cancelled due to scrapping of the vehicle or for a similar reason
The refund was to be paid in accordance with the Fourth Schedule
The Third and Fourth Schedules were introduced by the Maharashtra Act 14 of 1987
In the case of Luna Mopeds the one time tax comes to Rs2925 which according to the petitioners in the StP Nos
1 1673 7587 is 86 of the ex factory price of the Moped
In that view the petitions were filed by the respondents in the first batch of appeals and the petitioners in the second batch challenging the amended provisions of the Bombay Motor Vehicles Tax Act 1958
On or about 910th July 1987 a Division Bench of the Bombay High Court Nagpur Bench held that the levy of one time tax was beyond the legislative competence of the State Legislature and also beyond Entry 57 of List II of the Seventh Schedule
It further held that the provisions for imposition of levy at thrice the rates so far as the vehicles owned by the firm or the company were neither discriminatory nor arbitrary
The High Court however in view of the fact that the refund was restricted to the circumstances mentioned above
struck down Act 14 of 1987
According to the High Court the absence of provisions for refund in cases of temporary non user made the Maharashtra Act XlV of 1987 confiscatory in character and not regulatory or compensatory which alone was in the competence of the State Legislature
The State preferred applications for leave to appeal against the impugned judgment and the special leave having been granted are the subject matter of Civil Appeals Nos
1631 33877
The petitioners also filed special leave applications which are the subject matter of Special Leave Petitions Nos 11673 7587 which have been heard along with these appeals
While the State s appeal against the High Court s judgment was pending before this Court the Maharashtra Legislature enacted Maharashtra Act XXXIII of 1987
It deleted Section 34 of the principal Act as PG NO 487 amended by Maharashtra Act XIV of 1987
That provision made the existing provisions of refund for temporary non user inapplicable in cases of motor cycles and tricycles restricting the right of refund to Section 96 in contingencies mentioned above
It also introduced sub section 7 to Section 9 conferring right of refund in respect of motor cycles and tricycles in accordance with the rates specified in the Fifth Schedule and prescribed the rates of refund in the Fifth Schedule
But the said Schedule did not prescribe a separate rate of refund for company owned vehicles
Therefore the refund in respect of company owned vehicles would be same as that payable to individual owned vehicles even though the tax paid on former class of vehicles was three times
Soon thereafter the Maharashtra Legislature enacted Act 9 of 1988 The only relevant change for the present purpose was that the rate of refund was enhanced to three times in respect of company owned vehicles
Before the contentions are judged it is imperative to reiterate that the tax imposed on motor vehicles or a class of motor cycles would not be valid unless it is compensatory or regulatory or does not have any nexus with the vehicles using the public roads
In such a case the levy would be violative of Act
301 of the Constitution and would not be protected by Act
304 of the Constitution
In this connection reference may first be made to the observations of this Court in Bolani Ores Ltd vs State of Orissa  where at page 155 this Court observed that Entry 57 of List II of the Seventh Schedule was subject to the limitations namely the power of taxation cannot exceed the compensatory nature which must have some nexus with the vehicles using the roads
If the vehicles do not use the roads notwith standing that these are registered under the Act these cannot be taxed
More or less the same view was echoed in G K Krishnan vs The State of Tamil Nadu  Anr 1975  2 SCR 715
See also Malwa Bus Service P Ltd vs State of Punjab  Ors
1983 2 SCR 1009
On behalf of the appellant State the learned Advocate General submitted that the amendments enacted by the Maharashtra Act No 33 of 1987 and No 9 of 1988 have brought the principal Act as amended by the Maharashtra Act No XIV of 1987 within the constitutional requirements of making one time tax  a regulatory and compensatory tax
It was submitted by him that this development had made it unnecessary for this Court to decide if the Act as it stood when it was challenged before the High Court was beyond the legislative competence of the State Legislature
It was PG NO 488 further emphasised that the fact that the Act at present does not provide for refund in the 14th  v 15th years does not make the law outside the competence of the State Legislature
It was urged that the concept of regulatory and compensatory tax does not imply mathematical precision
In this context one may refer to the observations of this Court in International Tourist Corpn
vs State of Haryana  Ors
   where at page 374 Justice Chinnappa Reddy speaking for this Court observed as follows  But to say that the nature of a tax is of a compensatory and regulatory nature is not to say that the measure of the tax should be proportionate to the expenditure incurred on the regulation provided and the services rendered
If the tax were to be proportionate to the expenditure on regulation and service it would not be a tax but a fee
While in the case of a fee it may be possible to precisely identify and measure the benefits received from the Government and levy the fee according to the benefits received and the expenditure incurred in the case of a regulatory and compensatory tax it would ordinarily be well high impossible to identify and measure with any exactitude the benefits received and the expenditure incurred and levy the tax according to the benefits received and the expenditure incurred
What is necessary to uphold a regulatory and compensatory tax is the existence of a specific
identifiable object behind the levy and a nexus between he subject and he object of he levy
 Earlier this principal had been sated in Income tax officer Shillong  Anrv
N Takim Roy Rymbai etc
1976 3 SAC 413 where this Court observed though taxation law could not claim immunity from the equality clause i n Article 14 of the Constitution it must be remembered that in view of the intrinsic complexity of fiscal adjustments of diverse element he State has a considerably wide discretion in the matter of classification of taxation purposes
the fact that the tax falls more heavily on some in the same category is by itself no ground to render the law invalid
Similar are he observations of this Court in Mrs Meenakshi  Ors
vs State of Karnataka  Ors AIR 1983 Sc 1283 Anant Mills Co Ltd vs State of Gujarat  Ors1975 3 SC 220 and Khhandige Sham Bhat  Ors
V The Agricultural Income ax Office  PG NO 489 In the instant case the impugned legislation had been subsequently amended to provide for the refund of a proportionate part of the one time tax in the event of the vehicle not being used for a period of quarter or more than a quarter of a year as mentioned before
This was provided by substituting a new sub section 7 to section 9 of the Act and also substituting new Fifth Schedule
Even after the amendment however no refund is available in respect of a vehicle which has been registered for more than 13 years
The effect of the same is that no refund at all is available in respect of the tax paid for a vehicle for the 14th and 15th years it was urged on behalf of the respondents in the appeals and the petitioners in the SLPs
It was submitted on their behalf that so far as four wheelers are concerned Section 91 of the act provided for refund of the proportionate amount of tax for every completed calendar month for which the vehicle has not been used
It was urged on behalf of the respondents in the appeals and the petitioners in the SLPs
that there is no justification what so ever for the non grant of the refund of the proportionate amount of tax paid in respect of a two wheeler or three wheeler which is not used in its 14th andor 15th year
On this score it was urged on their behalf that the impugned levy of tax ceases to be compensatory or regulatory and as such is void under Entry 57 of List II and thus violative of Article 301 of the Constitution
In our opinion the fact that the Act as at present does not provide for refund in the 14th and 15th years does not make the law outside the competence of the State Legislature
The concept of regulatory and compensatory tax does not imply mathematical precision of quid pro quo
This aspect was emphasised in International Tourist Corporation etc
vs State of Haryana  Ors
 supra as noted before
It was further submitted on behalf of the owners of two wheelers that the impugned one time levy of Rs975 has been worked out at Rs65 per two wheeler per annum for 15 years and is sought to be recovered from the two wheeler owner as a one time down payment at the time the two wheeler is purchased by him
On behalf of the respondentspetitioners it was contended that having regard to the extent of road user by a two wheeler in comparison with the road user by a four wheeler the Legislature considered that
a tax of Rs65 per two wheeler per annum would be a reasonable and adequate compensatory levy
While the maximum annual rate of tax was fixed at Rs 200 per annum for motor cars weighing not more than 750 kg and Rs36O per annum for motor cars PG NO 490 weighing between 750 kg to 1500 kg it may be noted that the tax on four wheelers has not been increased
But as far as two wheelers are concerned the one time tax for the period of 15 years is exactly 15 times the amount of tax of Rs65 per year
It is clear from these factors it was submitted by the owners of the two wheelers that the Legislature continues to consider the tax of Rs65 per two wheeler per year to be an adequate compensatory tax
However by recovering the tax for the future period of 15 years in advance as a one time levy the taxing authorities are in fact recovering not Rs65 per two wheeler per year but in reality about Rs35679 per two wheeler per year
The respondentspetitioners sought to explain the position by submitting that if the two wheeler owner has an amount of Rs975 with him at the time of purchase of the vehicle and is not compelled to make one time payment then he would initially pay only Rs65 as the tax for the first year
That would leave a balance amount of Rs910 which could be invested by him at an interest yield of 15 per annum
It was urged that the rate of interest that is recoverable as well as paid under the Income Tax Act is 15 per annum
The said amount of Rs910 would yield an interest of Rs 13650 in the first year
Out of that amount of Rs 13650 an amount of Rs65 would be paid by the two wheeler owner as tax at the beginning of the second year
Consequently an amount of Rs7150 would be available from out of the said interest earning of Rs 13650 which also could be invested at a yield of 15 per annum
Consequently the amount of interest that would be earned by the vehicle owner in the second year would come to Rs 147
23 out of which only Rs65 would have to be paid as tax in the beginning of the third year leaving a balance of Rs8223 available for further investment
It was submitted that by compelling the vehicle owner to make the one time down payment of Rs975 at the time of the purchase of the vehicle the owner is in reality being deprived of a total amount of Rs4376
19 over the said period of 15 years
If this amount is divided by 15 the resultant figure will be Rs29179
The effective tax burden has thus in fact been multiplied by about 5 times only as a result of the one time levy it was urged
It was submitted that the said one time levy was unreasonable discriminatory and not regulatory or compensatory
The fact that a tax on motor vehicles must be compensatory and regulatory in order to be valid was emphasised in the decision of this Court in Stare of Karnataka vs K Gopalakrishna Shenoy and another AIR 1487 SC 1911 where at page 1915 of the report it was observed that tax on motor vehicles is a compensatory tax levied for the use of the roads and it is not a tax on ownership or possession of motor vehicles
It was emphasised on behalf of the owners of the vehicles that the impugned legislation is based on PG NO 491 the assumption that two wheelers and three wheelers have an approximate life of 15 years
It is on that basis and footing that the rates of tax have been fixed
It was contended that the life of two wheelers and three wheelers is as much as 25 to 30 years and therefore the recovery of the one time tax for the period of 15 years actually constitutes the conferment of a benefit on the owners of two wheelers and three wheelers
In this connection on the other hand it is of importance to note that the Department of Heavy Industry Ministry of Industry Government of India had commissioned a report from an eminent firm of Chartered Accountants on Long Term Demand Projections for Automotive Vehicles including two wheelers and three wheelers
The said report concludes after an exhaustive analysis of statistical data including the data provided by vehicle manufacturers and also studies made in the past that the average life of scooters is 10 years that of motor cycles c years and that of mopeds 5 years
But what was emphasised was that one time levy of tax compelled owners of two wheelers to incur a further expenditure of about 70 of the cost of the vehicles purchased by them at the time they acquire the vehicle and that imposes heavy additional liabilities
It was therefore submitted that it was neither compensatory nor regulatory and further more it was discriminatory
It was further submitted that section 3ICc exempts public trusts and recognised institutions
That was bad
In our opinion after the amendment the mischief mentioned in the judgment and order of the High Court of Bombay has been remedied
On an examination of the various provisions of the Act as amended we have come to the conclusion that after the amendment the Act comes within the constitutional requirement of making the one time tax a regulatory and compensatory tax
It is true as was emphasised that the Act has not provided for refund in the 14the and 15th years but does not make the law outside the competence of the State Legislature
It is not mathematical precision that is necessary nor can it be
There is in the provisions as amended a discernible and an identifiable object behind the levy and a nexus between the subject and the object of the levy
In this matter two principles have to be emphasised firstly
that the tax must be regulatory and compensatory and secondly there must be no discrimination
About discrimination it is well to remember that a taxation law cannot claim immunity from the equality clause in Article 14 of the Constitution
But in view of the intrinsic complexity of fiscal adjustments of diverse elements a considerably wide discretion and latitude in the matter of classification PG NO 492 for taxation purpose is permissible
See the observations of this Court in Income Tax Officer Shillong and Anr
vs N Takim Roy Rymbai etc
 supra
Also see the observation in Mrs Meenakshi and others vs State of Karnataka supra Anant Mills Co Ltd vs State of Gujarat  Ors supra and Khandige Sham Bhat and Ors
vs The Agricultural Income tax Officer supra
The evidence on record shows that the life of motor cycles and tricycles normally exceeds 25 years
The so called non refund for certain period is not conclusive of the matter
Even if mathematical precision is not possible we cannot say that it is wholly unmathematical
The collection of tax for a period of 15 years at one point of time is a convenient method enabling the owner to use the vehicle for more than 25 years without having to visit the office to pay the tax periodically and pay enhanced tax that may be levied during the 25 years of life of the vehicle
Regulatory and compensatory tax can be levied to the extent the State is required to pay for rendering the services
According to the State the evidence on record shows that the cost of services is twice the total amount recovered from all types of vehicles
The balance of expenditure is met by the State from the general revenues
Even from this half collection the motor cycles and tricycles contribute only 64 per cent
The percentage of motor cycles and tricycles is 56 to 58 percent of all vehicles
Thus even insubstantial increase in their rates cannot be said to be not a regulatory or compensatory tax measure
The Act as at present is not violative of Article 14 of the Constitution
The fact that company owned vehicles are taxed at three times the rate payable by individuals does not make the legislation violative of Article 14
Historically the company owned vehicles have always been taxed at a rate higher than the individually owned vehicles
As appears from the records produced
the motor cycles and tricycles constituting 56 to 58 per cent of all types of vehicles contribute only 64 per cent of the total revenue earned through the tax imposed by the Act
It is well settled that the Legislature has the power to distribute tax burden in a flexible manner and the Court would not interfere with the same
This principle has been reiterated in GK Krishnan etc
vs The State of Tamil Nadu  Anr
 supra where this Court observed that in the context of commercial regulation Article 14 is offended only if the classification rests on grounds wholly irrelevant to the achievement of the objective and this lenient standard is further weighted in the State s favour by the fact that a statutory discrimination will not be set aside if a state of facts may reasonably be conceived by the PG NO 493 Court to justify it
Tax laws have to respond closely to local needs and Court s familiarity with these needs is likely to be limited
Therefore the Court must be aware of its own remoteness and lack of familiarity with the local problems
Classification is dependent upon peculiar needs and specific difficulties of the community
The needs and the difficulties of a community are constituted out of facts and information beyond the easy ken of the Court
It appears that in the instant case the State Government has specifically averred that the company owned vehicles travel more and use roads more often
No evidence have been produced to the contrary
In view of the well settled principles we cannot say that there was without any basis and as such there was discrimination
It further appears that the Government of lndia has liberalised the licensing policy and granted large number of industrial licences for the manufacture of two wheelers
In Maharashtra itself following is the new registration of two wheelers during the last four and five year  1983 84 113949 1984 85 124877 1985 86 166124 1986 87 201904 In 1986 87 per working day on an average 929 new two wheeler have been registered
There was tremendous strain on Motor Vehicles Department due to increase in the number of two wheeler
The following statistics and figures indicate the position that one time tax on two wheelers have beneficient effect As on 141987 there were 1093170 two wheelers in Maharashtra and total number of vehicles was 1841 lakhs
In 1985 86 the total revenue by way of Motor Vehicles Tax was Rs98 crores out of which only Rs 6 to 7 crores was from two wheelers
That means 58 vehicles 3 wheelers used to give only 64 Motor Tax for which 22000 man days were required to be spent
All the two wheeler owners were required to come to RTO for payment of tax every year
PG NO 494 Almost 70 to 75 Motor Vehicle Tax arrear cases were of 2 wheelers
Because of new system of one time tax if the owner pays it he is not required to pay the tax again during the life time of the 2 wheeler
Any further increase in one time tax rate will not be applicable to the 2 wheelers which have already paid the one time tax
Statistics show that the 2 wheelers are being used for more than 25 years
The rate of increase of 2 wheelers because of easy availability and affordability is almost 25
The total number of two wheelers projections in the State will be as follows By the end of 1986 87 1094 lakh 1987 88 1333 lakh 1988 89 1620 lakh 1989 90 1969 lakh 1990 91 2377 lakh 1991 92 2873 lakh Existing vehicles will have to pay one time tax in sliding scale rate
Older the vehicles less will be the tax
This tax system is already in existence in Karnataka since 141986 and also in Gujarat Rajasthan
This new system will definitely give relief to the two wheeler owners as they will not be required to come to RT Office for annual payment Having regard to these factors and having regard to the principles applicable to taxation laws we are of the opinion that the Maharashtra Act as amended from time to time and mentioned hereinbefore does not suffer from any vice of being not regulatory or compensatory taxation nor from the vice of being violative of Article 14 of the Constitution
In that view of the matter the challenge to the provisions of the Act as amended after the judgment of the PG NO 495 Bombay High Court cannot be maintained
In that view of the matter Civil Appeals Nos
1631 1633 of 1987 are disposed of by saying that after the amendments noted here in before the Act does not suffer from the vice mentioned in the judgment of the High Court of Bombay
The appeals are therefore allowed and disposed of accordingly
In that view of the matter the challenge made in the special leave petitions Nos 11673 75 of t987 is dismissed
In the facts and circumstances of the case there will be no orders as to costs
Interim orders if any are vacated
The taxes will be realised in accordance with the Act and necessary adjustments will be made accordingly


Summary:
A Committee consisting of Goswamy and Wadhwa JJ
was constituted on 23rd February 1988 to inquire into certain incidents involving lawyers and police officers which took place in January 1988
Pursuant to this Court s order dated 2688 to reconsider the whole question relating to the order in which the witnesses had to be examined the Committee issued an order on 29688 on the basis of which notices under Sec
8B were issued to three other officers but not to the petitioners
It was directed by the Committee that the petitioners be cross examined at the beginning of the inquiry
On their refusal the Committee directed the filing of a complaint against them for an offence punishable under Section 178 IPC
Pursuant to the complaints filed on behalf of the Committee criminal proceedings were initiated against the petitioners before the Metropolitan Magistrate
Against the above directions and complaints by the Committee the petitioners have approached this Court by way of the present Writ PetitionsSpecial Leave Petitions
The petitioners submitted that they did not either wish to delay the proceedings or to show disrespect to the Committee but only wanted to protect their own interest in making the submission before the Committee as per the legal advice given to them
Quashing the orders of the Committee directing the filing of the PG NO 518 PG NO 519 complaints and the criminal proceedings initiated against the petitioners before the Metropolitan Magistrate pursuant to the complaints this Court HELD 1
The Delhi Administration has to examine first all its witnesses as_required by Rule 55a of the Commissions of Inquiry Central Rules 1972 framed under the 
Even those witnesses who may have filed affidavits already may first be examined in chief before they are cross examined
The question whether a party hair the right of cross examination or not shall be decided by the Committee in accordance with Sec
8C of the Act
This direction does not apply to those witnesses falling under Sec
8B of the Act who have to be examined at the end of the inquiry as opined by the Committee itself
520F H 21
The petitioners are persons who fall under Sec
8B of the Act and have to be dealt with accordingly
522A B 22 If the three persons to whom notices under Sec
8B have been issued are to be examined even according to the Committee at the end or the inquiry there is no justifiable reason to deny the same treatment to the petitioners who are in the same positon as those three persons
The action of the Committee in asking them to be cross examined at the beginning of the inquiry appears to be discriminatory
Mere non issue of notices to them under Sec8B ought not to make any difference if they otherwise satisfy the conditions mentioned in Sec
The issue of such a notice is not contemplated under Sec
8B of the Act
It is enough if at any stage the Commission considers it necessary to inquire into the conduct of any person
Such person would thereafter he governed by Sec
8B of the Act
522E G 3
The Committee should not have in the circumstances of the case directed the filing of a complaint against either of the petitioners for an offense punishable under Sec
178 IPC
523C D For Judgment containing the reasons for this order please Sec 1989 1 SCR p 20