Kambli 1 wp1729.03 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.1729 OF 2003 ... 1.Ford India Limited 2.Mr.Kasturi Wasan ...Petitioners v/s. 1.State of Maharashtra 2.Transport Commissioner 3.The Regional Transport Officer, Mumbai ...Respondents ... Mr.Danus Shroff, Sr.Advocate with Ms.Neetu Sampat Jai i/b Crawford Bayley & co. for the Petitioners. Mr.S.K.Nair for the Respondents. ... CORAM: D.K.Deshmukh & K.K.TATED, JJ DATED: 11th February,2011 P.C.: 1. By this petition the Petitioner challenges the provisions of Section 3(1D) (c)(ii) of the Bombay Motor Vehicles Tax Act, 1958. That provision reads as under:- (c)Notwithstanding anything contained in clause (a), there shall be levied and collected the one time tax Kambli 2 wp1729.03 specified in Part I or Part II of the Third Schedule on a motor car or Omni bus- (i) manufactured in India or imported into India and used or kept for use in the State by a person, not being an individual, a local authority, a public trust, university or an educational institution, at thrice the rate. (ii) Imported into India and used or kept for use in the State by a person, being an individual, a local authority, a public trust, university or an educational institution, at twice the rate. 2. It is common ground before us that by the provision which is impugned in this petition, the Petitioner who is an individual owning a imported motor vehicle has to pay motor vehicle tax at twice the rate. In other words, had the Petitioner an individual been owner of a vehicle which is manufactured in India, he would be required to pay motor vehicle tax at one time. But only because the motor vehicle owned by him is imported into India, he has to pay double amount as motor vehicle tax and the amount of tax at that rate has already been recovered from the Petitioner. 3. By this petition, the Petitioner challenges the Kambli 3 wp1729.03 provision, which obliges him to pay tax at twice the rate, on the ground that the provision is violative of the guarantee of Article 14 of the Constitution, because there is no justification for classifying vehicles on the basis of the country in which they are manufactured for the purpose of imposing the motor vehicle tax. 4. The learned Counsel appearing for the Petitioner submits that according to above quoted provision, the vehicles whether manufactured in India or imported into India, but which are owned by a company or any body corporate, which is not a University or a local authority or Educational Institution has to pay tax at twice the rate. This provision was under challenge before the Nagpur Bench of this Court. After the Division Bench of this Court at Nagpur disposed of those petitions, appeals were carried to the Supreme Court. Those appeals were decided by the Supreme court by its judgment in the case of State of Maharashtra v/s. Madhukar Balkrishna Badiya and ors, AIR 1988 SC 2062 . In that judgment, according to the learned Counsel the Supreme Court upheld Kambli 4 wp1729.03 imposition of double tax on the company owned vehicles on the ground that the company owned vehicles use the road more than the vehicles which are owned by the individual. The learned Counsel, thus, submitted that the amount which is being recovered is a tax which is regulatory and compensatory. The purpose of tax is to collect money for maintenance of the existing roads and construction of new road, and therefore, the criteria which is adopted must have nexus with that purpose to be achieved by imposition of the tax. The learned Counsel submits that keeping that purpose in view, classification of the vehicles as imported vehicle and Indian made vehicle is violative of guarantee of Article 14 of the Constitution. 5. The learned Counsel appearing for the Respondents, on the other hand, submits that the tax is valid and legal. The learned Counsel submits that historically under the provisions of the Bombay Motor Vehicles Tax Act, foreign made vehicle/imported vehicle had to pay more tax. The tax levied on the imported vehicle was 200 times since 1975. The Kambli 5 wp1729.03 learned Counsel relying on the judgment of the Supreme Court submits that while levying tax the Legislature has wide power to classify for that purpose to pick and choose. The learned Counsel submits that this tax is being imposed for the purpose of augmenting revenue of the State. In the submission of the learned Counsel, therefore, classification can be made between Indian made vehicles and imported vehicles. The learned Counsel relied on the judgment of the Supreme Court in the case of Mrs.Meenakshi and ors, v/s. State of Karnataka and ors, AIR 1983 SC 1283 to submit that the Supreme Court by that judgment has upheld recovery of tax from passengers vehicles while not imposing that tax on the goods vehicles. When both the goods vehicles and passengers vehicles use the road. The learned Counsel, thus, submits that the State Legislature has wide power to pick and choose the object to be charged. The learned Counsel submits that as historically on the imported vehicles higher amount of tax is being recovered, no fault can be found with that system. The learned Counsel submits that in the statement of object and reason, augmentation of the Kambli 6 wp1729.03 revenue is the reason given for imposition of the tax, and therefore, according to the learned Counsel as this is not a fee which is being charged, there is no question of showing any justification for imposing that tax. There cannot be any debate that while exercising its power to impose tax the Legislature can classify the thing. The whole debate is as to how that classification is to be brought about, whether the classification to be made should have nexus with the object which is to be achieved. 6. In our opinion, therefore, it is not necessary for us to deal with the various judgments of the Supreme Court to which the learned Counsel appearing for the Respondents wanted to refer to show that the Legislature has very wide and far reaching power to classify things for the purpose of imposition of tax. So far as the present case is concerned, it is clear that by the provision impugned in this petition, imported vehicles have been chosen to be subjected to twice the rate of tax and thus for the purpose of imposing tax the vehicles have been classified into two classes namely Kambli 7 wp1729.03 imported vehicle and Indian made vehicle. Perusal of the provisions of Section 11 of the Act shows that bulk of the amount recovered from this tax goes into the State Road fund. Sub-section 4 of Section 11 as it stood when the provision impugned in the petition was introduced on the Statute Book reads as under: 11(4)The amount standing to the credit of the State Road Fund shall be expended in the prescribed manner solely on the construction, improvement and maintenance of new and existing roads including roads vesting in, belonging to, or managed by any local authority. 7. Thus, statutorily the principal purpose of imposing this tax is construction, improvement and maintenance of new and existing roads. In our opinion, therefore, the criteria for classification that can be adopted by the Legislature must necessarily have nexus with this purpose. Before the Supreme Court provision of Section 3 (1D)(i) was challenged. While considering that provision in its judgment in the case of Madhukar Badiya referred to above, the Supreme Court in paragraph 14 of that judgment has observed thus: Kambli 8 wp1729.03 14. 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 Art.14 of the Constitution. ..........” The Supreme Court then observed 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 costs 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 revenue. Even from this half collection, the motor cycles and tricycles contribute only 6.4 per cent. The percentage of motor cycles and tricycles is 56 to 58 per cent of all vehicles. Thus, even insubstantial increase in their rates cannot be said to be not a “regulatory or compensatory” tax measure. The Supreme Court then referred to the affidavit filed on behalf of the State Government and observed thus in paragraph 16 16. 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 has been produced to the contrary. In view of the well- Kambli 9 wp1729.03 settled principles we cannot say that there was differentiation without any basis and as such there was discrimination. 8. Thus, the Supreme found that the criteria which is adopted for making classification must have nexus with the purpose to be achieved. In that case the Supreme Court was considering the motor vehicles owned by Corporation and Company as a separate and distinct class, and that classification was justified by the State Government by placing material before the Supreme Court that the company- owned vehicles use road more and therefore they are liable to be put in a separate class. In the present case, admittedly, no such material has been produced. In fact, in this case despite several opportunities given and though petition remained pending in this court for more than seven years, the State Government has not been able to place on record the material to show how criteria adopted for classification has nexus with the purpose to be achieved. We find that if the purpose of imposting tax is the one mentioned in Section 11(4), then there could be no classification between imported and Indian made vehicles for the purpose of imposing tax. Kambli 10 wp1729.03 This, we are saying on the basis of material that has been produced before us. 9. In the result, therefore, petition succeeds and is allowed. Rule is made absolute in terms of prayer clause (a). The Respondents are directed to refund the amount of tax recovered in excess from the Petitioner No.2 within a period of eight weeks from today. (D.K.DESHMUKH, J.) (K.K.TATED, J.)