IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 16/10/2003 CORAM THE HONOURABLE MR. JUSTICE D. MURUGESAN WRIT PETITION No.18077 of 2003 and W.P.Nos.118013,18659,18971,18598, 19188,19262,19471,20822 and 21238 of 2003 W.P.No.18077/2003 Namakkal Mavatta Anaithu Tourist Maxicab Van Urimaiyalargal and Ootunargal Kootamaipppu Represented by its Secretary K. Udyakumar No.218, Main Road, Namakkal. .. Petitioner -Vs- 1. The State of Tamil Nadu rep. By its Secretary, Home(Transport) Department Fort St. George, Chennai.9. 2. The Transport Commissioner-cum-State Transport Authority Chennai.5. 3. Regional Transport Officer Namakkal. 4. Regional Transport Officer Tiruchengodu 5. Regional Transport Officer Salem 6. Regional Transport Officer Tiruchi .. Respondents Petition filed under Article 226 of The Constitution of India, praying this Court to issue a Writ of Declaration declaring that Section 4 of the Tamil Nadu Motor Vehicles Taxation Amendment Act 13 of 2003 insofar as it purports to substitute the rate of tax from Rs.250/- to Rs.500/- per seat per quarter for Maxicabs in respect of vehicles of the members of the Petitioners Association is arbitrary, illegal unconstitutional and void. !For petitioners .... Mr.G.Rajagopalan in W.P.No.18077& Senior Counsel for 18598 &19262/2003 Mr. K. Uppili For petitioner in WP 19471/2003 .... Mr. G. Karthikeyan For petitioner in WP No.18013/2003 .... Mr. S. Govindaraman For petitioner in WP No.18659/2003 .... Mr.T.R. Rajagopalan Senior counsel for Mr.R.N.Amarnath For petitioner in WP No. 19188/2003 ... Mr.M. Thivijayapandian For petitioner in WP No. 18971/2003 ... Mr. N.Gopalakrishnan For petitioner in WP No. 20822/2003 ... Mr.P. Rajendran For petitioner in WP No.21238/2003 ... Mr.V. Ramesh ^For respondents in all W.Ps. .. Mr. R. Muthukumaraswamy Addl.Advocate General assisted by Mr.P.Chandra- sekaran Special Govern- ment Pleader, Mr. Sanjay Ramaswamy Addl.Govt. Pleader and Mr. P.D.Audikesavalu :COMMON ORDER Since the issues involved in these Writ Petitions are one and the same, all the Writ Petitions are taken up together and disposed by this Common Order. 2. The petitioners are Associations of various Maxicabs owners. They have filed these Writ Petitions for declaration declaring Section 4 of the Tamil Nadu Motor Vehicles Taxation Amendment Act 13 of 2003 insofar as it purports to substitute the rate of tax from Rs.250/- to Rs.500/- per seat per quarter for Maxicabs in respect of the vehicles of the Members of the Petitioners Associations is arbitrary, illegal, unconstitutional and void. 3. The Petitioners are Registered Associations registered under Societies Registration Act. The Members of the petitioners-Associations are owning Maxicabs covered by Contract Carriage Permits to ply throughout the State of Tamil Nadu as well in other States, pursuant to All India Tourist Maxicabs Permits. The Government of Tamil Nadu enacted Tamil Nadu Motor Vehicles Taxation Act, 1974 (hereinafter called as "The Act") to consolidate and amend the law relating to the levy of tax on motor vehicles in the State of Tamil Nadu. As per Section 3 of the Act, tax is levied on every motor vehicle used or kept in the State of Tamil Nadu at the rate specified for such vehicle in the first schedule or in the second schedule or in the third schedule as the case may be. The Government may, by notification, from time to time, increase the rate of tax specified in the Schedules, provided that such increase,shall not exceed 50% of the rate specified in the Schedules. 4. In the year 1983, by amendment Act 27/1983, Rs.150/- was fixed per seat per quarter for Maxicabs with 6+1 capacity. By the subsequent amendment Act 25/1989, the quarterly tax was fixed at Rs.1000/- for Maxicabs with seating capacity 12+1. Again by amendment Act 33/199 1, the rate was fixed at Rs.125/- per seat per quarter. In terms of sub-section 2 of Section 3 the tax was increased to Rs.150/ per seat per quarter by amendment Act 36/1994 and to Rs.175/- per seat per quarter by the subsequent amendment Act 23/1999. In all these amendments, the increase was only less than 50% of the tax already collected, presumably on the basis of sub section 2 of Section 3 of the Act. By issuance of G.O.Ms. No.1184/2001 Transport Department dated 30.1.200 1, the Government issued the notification enhancing the tax from Rs.1 75/- per seat per quarter to Rs.250/- per seat per quarter. This enhance was also did not exceed 50% of the existing Tax. However, by the impugned Amendment Act 13/2003, which came into force on 19.5.2003 , the Government enhanced the tax from Rs.250/- per seat per quarter to Rs.500/- per seat per quarter viz.,an enhancement of 100%. The 10 0% enhancement is contrary to sub-section 2 of Section 3 of the Act. 5. Mr.G. Rajagopalan, learned senior counsel appearing for the petitioners in some of the Writ Petitions submitted that the tax is compensatory in character and the same is collected,considering the usage of the road of the vehicle, the amounts spent by the Government for laying the road and maintaining the same. The Tax levied should not be confiscatory in character. In this regard, the learned counsel would contend that considering the compensatory nature of the tax, the Legislature thought it appropriate to enable the Government to enhance only by 50% of the existing tax at a time by notification under subsection 2 of Section 3 of the Act. By amending the Schedule to enhance the tax from Rs.250/- per seat per quarter to Rs.500/- per seat per quarter, the respondents had devised a method to achieve the confiscatory purpose inasmuch as the tax was increased from Rs.175/- per seat per quarter to Rs.250/- per seat per quarter only in the year 2001 and within a span of two years, by invoking sub-section2 of Section 3 of the Act, the Government could enhance only by 50% viz., from Rs.250 /- per seat per quarter to Rs.375/- per seat per quarter. By such devised method and the cloak adopted by the Legislature by amending the Schedule, the right of the members of the petitioners-Associations guaranteed under Article 19(1)(g) of the Constitution of India is deprived. Inasmuch as the schedule in respect of the tax applicable to other vehicles including Omni bus (Contract Carriage) is not amended and the tax are not enhanced, by amendment to the schedule only in respect of Maxicabs, the members of the Petitioners-Associations are alone discriminated offending Article 14 of the Constitution of India. Further, the enhancement of tax is unreasonable and arbitrary. 6. The learned counsel would further submit that as per Section 10 and 17 of the Act, the State of Tamil Nadu should constitute a fund called the Tamil Nadu Rural Development Fund to which such percentage of tax not exceeding ten per cent as may from time to time, be fixed by the Government shall be credited. As per Section 17,after deducting the amount credited to the Tamil Nadu Rural Road Development Fund and the expenses for collecting the tax under the Act and the costs incurred by the Government in exercising the administrative functions in regard to control of motor vehicles, the balance shall be apportioned between the Government and the local authorities . However, the enhancement of tax is only on the ground that the Government have decided to constitute a road maintenance fund. The allocation of tax to the road maintenance fund, would be outside the Provisions of the Act,viz., the enhancement of tax was only for different purpose and not to achieve the object of the Act. Hence it is not compensatory but is confiscatory. 7. Mr.T.R. Rajagopalan, learned Senior Counsel appearing for the petitioner in W.P.No.18659/2003, submitted that the Government had not taken into consideration while enhancing the tax, the cost of the vehicle, cost of petrol, cost of spare parts etc., and the reasons adopted to the vehicles used in Chennai, cannot be made applicable to the vehicles used in Mofussil. All vehicles irrespective of the fact that they are used in Chennai/Cities or mofussil have been treated alike. He would also contend that the Government had not taken into consideration the numbers of Maxicabs permitted in the State of Tamil Nadu and the actual usage of roads while enhancing the tax. Unless exercise is taken by considering the above before the enhancement of tax, the enhancement of Tax at 100% must be held to be unreasonable as the enhancement is not supported by any reason or material. Mr.R.N. Amarnath, learned counsel on record for the petitioner in W.P.No.18 659 of 2003 submitted that inasmsuch as more than 50% of the enhancement of tax is to be paid from the profit made by the members of the Petitioner associations, it must be considered as confiscatory and hence, the amendment should be declared as illegal. 8. Mr.S. Govindaraman, learned counsel appearing for the petitioner in W.P.No.18013/2003, submitted that there was no proper discussion on the amendment on the floor of the House and in the absence of proper discussion, this Court can reconsider such decision of the Legislature in enhancing the tax. All other learned counsel appearing for other petitioners adopted the arguments by learned senior counsel Mr. G. Rajagopalan and Mr. T.R. Rajagopalan. 9. In reply to the above submissions, Mr. R. Muthukumaraswamy, learned Additional Advocate General would submit that that in exercise of the power under Entry 56 of List II of Schedule VII, the Government is empowered to legislate laws levying Taxes on goods and passengers carried by road or inland water ways. In exercise of the said power only, the Tamil Nadu Motor Vehicles Taxation Act, 1974 was enacted. The power to enact law includes the power to amend the provisions of the said enactment. By exercise of such power, by the Amendment Act, the Schedule to the Act has been amended. Hence, no exception could be taken to the legislative competency of the Government to amend the schedule. Insofar as the grievance of the members of the Petitioners-Associations as to the enhancement of the tax on the ground that the enhancement is not compensatory or regulatory, but is confiscatory,the learned Additional Advocate General submitted that the enhancement was only on the basis of the actual expenses incurred for laying road,maintenance of the same, future laying of roads including the expenses incurred by the State for regulating the traffic etc., In such event,the argument as to the confiscatory nature of tax is totally misconceived. The learned Additional Advocate General further submitted that in the matter of tax, there is no question of infringement of the members of the Petitioners-Associations to carry on trade guaranteed under Article 19(1)(g) and the same is not applicable to Tax Laws. Insofar as the plea of discrimination on the ground of violation of Article 14, the learned Additional Advocate General submitted that there is no discrimination in imposing tax on the Maxicabs as the enhancement is made applicable to all the Maxicabs in Tamil Nadu. The imposition of Tax in respect of other vehicles cannot be equated to the enhancement by Tax in respect of Maxicabs. The plea of discrimination may be available to the petitioners only if there is discrimination among the members of the Petitioners-Associations. 10. The learned Additional Advocate General further submitted that inasmuch as the State Government has got power to amend the Schedule, plea as to the motive for amendment on the ground that only to avoid sub-section 2 of Section 3 of the Act for enhancement of tax by 50% , the State has brought in the amendment to enhance the tax by 100% is impermissible as the motive is immaterial in tax matters. 11. In view of the above rival submissions, the following points arise for consideration. 1) Whether the State Government is empowered to amend the Schedule to Act? 2) Whether by such amendment, the State is empowered to enhance the tax more than 50% though the Government was empowered enhance the tax by notification only by 50% under sub-section 2 of Section 3 of the Act? 3) Whether the enhanced tax is regulatory/compensatory or confiscatory in character? 4) Whether by the impugned amendment Act,the right of the members of the Petitioners-Associations to carry on trade under Article 19(1)(g) is infringed? 5) Whether by the impugned Amendment Act, the Government have discriminated the members of the Petitioners- Associations? 6) Whether the enhancement is either arbitrary or unreasonable? 12. Before entering into discussion upon the above points, it would be appropriate to first consider the circumstances this Court could interfere in Tax enactment, more particularly, the quantum of tax levied by the Governmentt. Mr.G.Rajagopal, learned senior counsel relying upon the judgment of the Apex Court reported in RAI RAMAKRISHNA VS STATE OF BIHAR ( A.I.R.1963 Supreme Court 1667) submitted that where it appears that the taxing statute is plainly discriminatory, or provides no procedural machinery for assessment and levy of the tax or that it is confistatory, Courts would be justified in striking down the impugned statute as unconstitutional. Courts would also be justified only in taking the view that in substance the taxing statute is a cloak adopted by the Legislature for achieving its confiscatory purposes. In reply, Mr. R. Muthukumaraswamy, learned Additional Advocate General relied upon the judgment of the Apex court reported in STATE OF A.P. VS MCDOWELL AND COMPANY (A.I.R. 1996 SC 1627) and contended that law made by Parliament or State Legislature can be struck down by Courts on two grounds viz., 1) lack of legislative competence and (2) violation of any of the fundamental rights guaranteed in Part III of the Constitution or any other constitutional provision. 13. From the law declared by the Apex Court, the following principles emerge. A statute can be struck down on the ground (1) lack of legislative competence and (2) violation of fundamental rights guaranteed in Part III of the Constitution or any other constitutional provision Subject to reasonable restrictions.(3) If the tax is confiscatory in nature. (4) When the enactment is challenged on the ground of violation of Article 14, it can be struck down only if it is found that it is violative of the equality clause/equal protection clause enshrined therein. (5) A tax law cannot be struck down on the ground of violation of clauses (a) to (g) of Article 19 as the same is immaterial while judging the validity of the Tax laws. 14. Point No.1: The power of the State Government to enact a law on tax could be traced to entry 56 of List II of Schedule VII of the Constitution of India. In fact, such power of the State Government to enact a law on tax is not disputed by the Petitioners-Associations. By exercise of such power, the State has enacted the Tamil Nadu Motor Vehicles Taxation Act, 1974 and the same is also not disputed. Section 3 of the Act enabling the State to collect Tax reads as under: Levy of Tax:(1) Subject to the provisions of sub- Section (2) tax shall be levied on every motor vehicle used or kept for use in the State of Tamil Nadu at the rate specified for such vehicle in the First Schedule or in the Second Schedule or in the Third Schedule as the case may be" (2) The Government may, by notification, from time to time, increase the rate of tax specified in the Schedules; Provided that such increase, by notification, under sub-section shall not, in the aggregate, exceed fifty per cent of the rate specified in the First Schedule or in the Second Schedule or in the Third Schedule as the case may be" 15. Insofar as the Maxicabs are concerned, Item 2 (1)(d) of the First Schedule is applicable. By the said Schedule, a sum of Rs.175/- was fixed per seat per quarter for Maxicabs with the capacity of more than six persons but not more than thirteen persons including the driver. There was a further enhancement of the tax from Rs.175/- to Rs.2 50/- by the Government Order notified on 30.1.2001,in terms of sub-section 2 of Section 3 of the Act, by the impugned amendment, the tax was enhanced from Rs.250/- to Rs.500/- per seat per quarter by amending the schedule. The power of the State Government to amend the said Schedule in fixing the quarterly tax per seat is not questioned. Hence it must be held that in exercise of power under Entry 56 of Lists II of Schedule VII the Government is empowered to enact law on Motor Vehicle Tax including the power to amend the provisions of such enactment including the schedule as was done in this case. Infact the powers of the State to levy tax was upheld by the Apex Court in the Judgment reported in A.I.R. 1975 SC 583( G.K.Krishnan vs State of Tamil Nadu) Power of the Legislature to levy Taxes on Goods and Passenger vehicles, to devise Machinery for recovery of said Taxes and exercise by the said power to levy Taxes both prospectively and retrospectively has been upheld by the Apex Court in the Judgment reported in Rai Ramakrishna and others vs State of Bihar ( A.I.R. 1963 SC 1667). Hence Point No.1 is answered accordingly. 16. Point No.2: By the impugned amendment, the State has amended the Schedule fixing the rate of tax to be collected under Section 3(1) of the Act. An argument was advanced by contending that inasmuch as sub-section 2 of Section 3 of the Act empowers the State Government to enhance the tax only by 50%, the said rest riction on the Government is equally applicable to the Legislature. This argument is totally misconceived. It is to be borne in mind that while the Legislature fixed the rate of tax in the Schedule to be collected under subsection (1) of Section 3, sub-section 2 of Section 3 also empowered the Government to issue Notification for enhancement of Tax only by 50% of Tax already fixed in the Schedule. Such restriction imposed in sub-section 2 of Section 3 is applicable only when the Government by Notification enhance the tax fixed in the Schedule to be collected under sub-section(1) of Section 3. Merely because a restriction is imposed on the Government to enhance the tax only by 50% by notification, such restriction shall not in any way either take away or curtail the power of the Government to amend the schedule. Such interpretation , if placed, would amount to curtail the very power of the Government to amend the schedule in exercise of the power conferred under Entry 56 of List II of Schedule VII. The argument of Mr.G.Rajagopalan, learned senior Counsel that even in case of amendment, the State Government is empowered only to enhance the tax by 50% of the existing Tax cannot be accepted as there is no such embargo placed on the Government in the Constitution. In the absence of such restriction on the Government while amending the schedule, placing interpretation over the power of the Government, as if a restriction is imposed to enhance the tax by 50% only by way of amendment would be adding something into the Act which would defeat the very scheme of the Tax law. Hence, I find no merit in the contention of the learned senior Counsel Mr.G. Rajagopalan that the State Government is not empowered toamend the schedule to enhance the tax more than 50% of the existing Tax. Point No.2 is answered accordingly. 17. Point No.3: The next point to be considered is as to whether the enhanced tax is regulatory/compensatory or confisfactory? 18. What is compensatory or confisfactory also came up for consideration in the judgment reported in AUTOMOBILE TRANSPORT LIMITED VS STATEOF RAJASTHAN (A.I.R. 1962 SC 1406) A Bench consisting of 7 learned Judges of the Apex Court has held in para 19,20 and 21 as follows: para 19: An examination of these provisions indicates clearly enough that the taxed imposed are really taxes on motor vehicles which use the roads in Rajasthan or are kept for use therein, either throughout the whole area or part of it. The tax is payable by all owners of motor vehicles,traders or otherwise. In dealing with the question whether these taxes were reasonable restrictions on the right of individuals to move freely throughout the territory of India etc., the High Court said: "In this connection it is well to remember that the State maintains old roads, and makes new ones, and these roads are at the disposal of those who use motor vehicles either for private purposes or for trade or commerce. This naturally costs the State. It has, therefore, to find funds for making new roads and maintenance of those that are already in existence. These funds cannot only be raised through taxation, and if the State taxes the users of motor vehicles in order to make and maintain roads, it can hardly be said that the State is putting unreasonable restrictions on the individuals' right to move freely throughout the territory of India, or to practice any profession or to carry on any occupation, trade or business. We have looked into figures of income and expenditure in this connection of the Rajasthan State to judge whether this taxation is reasonable. We find that in 1952-53 income from Motor vehicles taxation under the Act was in the neighbourhood of 34 lakhs. In that very year the expenditure on new roads and maintenance of old roads was in the neighbourhood of 60 lakhs In 1954-55, the estimated income from the tax was 35 lakhs, while the estimated expenditure was over 65 lakhs. It is obvious from these figures that the State is charging from the users of motor vehicles something in the neighbourhood of 50% of the cost it has to incur in maintain- ing and making roads" The High Court further pointed out that in the case of private motor cars the tax was Rs.12 per seat and for an ordinary five seater car, it came to Rs.60 per year. On payment of this amount the owner of the motor vehicle could use the car anywhere in Rajasthan and all the roads were open to him. In the case of goods vehicle, the tax was Rs.2000 per year for a goods vehicle with a load capacity of over five tonnes i.e. over 135 maunds. Assuming that such a vehicle could be reasonably used for 200 days in a year, the tax amounted to Rs.10 per day for about 140 maunds of goods carried over any length of the roads in Rajasthan. This worked out to about Rs.1 for 14 maunds i.e. almost an anna a maund. If the Act and the Schedules appended thereto are examined in this manner, it will be noticed that the tax imposed really a tax for the use of the roads in Rajasthan and it cannot be said that it hinders the free movement of trade commerce and intercourse. The taxes are compensatory taxes which instead of hindering trade,commerce and intercourse facilitate them by providing roads and maintaining the roads in a good state of repairs. Whether a tax is compensatory or not cannot be made to depend on the preamble of the statute imposing it. Nor do we think it would be right to say that a tax is not compensatory because the precise or specific amount collected is not actually used in providing any facilities. It is obvious that if the preamble decided the matter, then the mercantile community would be helpless and it would be easiest thing for the Legislature to defeat the freedom assured by Article 301 by stating in the preamble that it is meant to provide facilities to the tradesmen. Likewise, actual user would often be unknown to tradesmen and such user may at some time be compensatory and at others not so. It seems to us that a working test for deciding whether a tax is compensatory or not is to enquire whether the trades people are having the use of certain facilities for the better conduct of their business and paying not patently much more than what is required for providing the facilities. It would be impossible to judge the compensatory nature of a tax by a meticulous test, and