Case: A. S. Karthikeyan Etc Vs. State Of Kerala &amp; Anr

owners could not recover tax from passengers carried by them between 1 April, 1950 and the date of the retrospective validation of the Act in 1961. Therefore, the tax was unreasonable. It may be stated here that future recoveries were not challenged in that case. As a matter of fact, the right to make future recoveries was conceded. In the present case, the prospective future recoveries are also not challenged. The challenge is confined to retrospective validation only.This Court said in that case:"If the scheme of Section 3 for, the levy and recovery of the tax is valid under entry 56 of List II so far as future recoveries are concerned, it is not easy to see how it can be said that the character of the tax is radically changed in the present circumstances, because it would be very difficult, if not impossible, for the owner to recover the tax from the passengers whom he has carried in the past. The tax recovered retrospectively like the one which will be recovered prospectively still continues to be a tax on passengers and it adopts the same machinery for the recovery of the tax both as to the past as well as to the future".35. The decision in Rai Ramkrishna case, (1964) 1 SCR 897 =(AIR 1963 SC 1667 ) (supra) does not support the contention of the operators. The decision on the other hand shows that tax recovered retrospectively as well as recovered prospectively is the same tax. The character of the tax is not altered. The position is identical in the present case.36. The contention of the operators is fallacious for these reasons.No tax is imposed or collected under Act 34 of 1971. The tax is imposed by Act 25 of 1963. The character as well as incidence of the tax is determined by Act 25 of 1963. The machinery for collection of the tax which was implicit in Act 25 of 1963 was made explicit by Act 18 of 1971. The State Government under Chapter IV of the Motor Vehicles Act, 1939 having regard to various factors mentioned in Section 43(1) of the 1939 Act issues directions to the State Transport Authority relating to the fixing of fares and freights including the maximum and minimum in respect thereof for stage carriages, contract carriages and public carriers. The provisions of Act 34 of 1971 are that while fixing the fares, the Government may take into account the tax, if any, imposed on the passengers and that such fares may be inclusive of the tax payable by the passengers or consignors of goods to the operators under any law dealing with the matter.Under Section 44 of the 1939 Act the State Transport Authority shall give effect to the directions issued by the State Government under Section 43 of the Act. Fare could be fixed either exclusive or inclusive of tax. The State Government fixed the fare on 1 July, 1963 after taking into account the element of tax on passengers and goods imposed by Act 25 of 1963. The operators in collecting fare from passengers in fact collected the tax due from passengers under act 25 of 1963 along with the fare. Section 43 (1A) of the Motor Vehicles Act, 1939 was, therefore, introduced with retrospective effect to clarify the factual basis. There was neither imposition of any new tax by Act 34 of 1971 nor was there any alteration of the character of the tax which had already been imposed. In the present case, the principal Act 25 of 1963 levied the tax. Acts 18 and 34 of 1971 were for the purpose of dispelling the doubts expressed in Thomman case, ILR (1968) 2 Ker 153 = (AIR 1969 Ker 130 ) (supra).37. In the recent decision in B. Srikantiah v. The Regional Transport Authority, Anantapur (1971) Supp SCR 816 = (AIR 1971 SC 1705 ) this Court considered the validity of a notification under Section 43 of the Motor Vehicles Act, 1939. The Madras Vehicles (Taxation of Passengers and Goods) Act, 1952 became applicable to Andhra Pradesh. In 1959 the Andhra Pradesh legislature enacted the Motor Vehicles (Taxation of Passengers and Goods) Andhra Pradesh (Amendment) Act. By that amendment, the rates were increased. The State Authority was directed by the Government to fix maximum fares inclusive of the leviable tax under the Act for the stage carriages. The Andhra Pradesh Amendment Act was challenged. The Andhra Pradesh High Court struck down the Act as unconstitutional. The Legislature thereafter passed a validating Act in 1961. The operators again questioned the Amendment Act on the ground that they had not collected the fare on the enhanced rate fixed by the Transport Authority. The contention in that case was that the enhanced surcharge which became operative on coming into force of 1961 Act could not be sustained without amending the conditions of the permit dealing with the fares leviable by the operators. This Court held that the notification under the Motor Vehicles Act in that case issued under Section 43 of the Act fixing the maximum fare inclusive of the tax had the effect of incorporating the maximum fare as notified including the tax leviable as a condition of the permit. Therefore, it is competent to the Legislature to amend the Motor Vehicles Act by enacting that directions regarding fares can be inclusive of tax.38. The arguments advanced on behalf of the operators fall in view of the cardinal fact that tax was an element included in the fare structure. The retrospective validation cannot be said to be unjust because the operators collected the entire amount. The tax has always been paid by passengers and owners of goods. The tax is not on the income of the operators. There was and is no lack of machinery for collection of these taxes. The operators collected tax as well as fare. The directions regarding fare were validated by Act 34 of 1971 by reason of the litigation between the operation and the State.39.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The heart of the matter is whether tax was included in the fare and, therefore, paid by passengers particularly in the disputed period between July, 1966 and October, 1971. If no tax has in fact been paid by passengers or owners of goods the retrospective validation by Acts 18 and 34 of 1971 of levy and collection of tax and retrospective inclusion of tax within fare could be contended to be unreasonable, unworkable and unconscionable according to the operators.The representation of the operators was in answer to draft directions contained in notification dated 4 March, 1963 containing proposals to revise the fare rates. The draft notification proposed maximum fare at the rate of 3.75 nP per head per kilometre for fast passenger services in the case of Ghat roads and 3 nP per head per kilometre as a maximum fare for ordinary services in the case of other roads. The operators set out the wide disparity between increase in operational cost on the one hand and the inadequacy of the proposed fare rates, on the other. The operators estimated their daily expenses under several heads. One of the heads estimated by the operators was "increase in tax at the revised rate as envisaged by State budget". That is referable to tax on passengers and goods. The operators stated that the maximum fare should be raised to 3.5 nP per kilometre. This was after taking into account the tax element.The representation of the operators shows that the tax on passengers and goods was one of the elements in the fare structure. This becomes apparent in the hearing notes of the Carriage Fare Revision File prepared by the Secretariat. It was calculated that the proposal to increase from the then existing fate of 2.5 nP per kilometre to 3 nP per kilometre would bring an additional income of Rs.40 per day for an ordinary bus of 40 seats operating 200 kilometres per day. The occupation ratio worked out between 60 to 80 per cent. Leaving out margin for occupation ratio the average additional income worked at Rs.30 per vehicle of 40 seats. The existing motor vehicles tax per seat per quarter at the time of the fixation of fare was Rs.37.50 per seat per quarter. The then proposed enhanced tax on vehicles was at Rs.60 per seat per quarter. The existing motor vehicles tax worked at 41.6 nP per day. The enhanced tax worked out at 66.6 nP per day. The increase in motor vehicles tax would impose an additional tax burden of 25 nP per seat per day. The increase in motor vehicles tax would be at Rs.10 per bus of 40 seats a day. The additional cost of operation on account of increase in cost of fuel, spare parts came to 12 nP per mile or 8 nP per kilometre. The operational cost of a bus of 40 seats came to Rs.16 per day. The total additional cost per day of 40 seats on account of vehicles tax and cost of fuel and spare parts came to Rs.26. The additional income as already indicated came to Rs.30 per day. Therefore, the operator was not hit by the proposal for taxation which was taken into consideration. The operators and the Chairman of the State Transport Board demanded further increase in the rate of fare. The entire evidence at the time of the fixation of fare is ample proof of the fact that the incidence of the increase in motor vehicles tax, the increase in tax liability on account of tax on passengers and goods, and additional cost of operation on account of increase in cost of fuel and spare parts were all taken into consideration in fixing the fare with effect from 1 July, 1963.The contention of the operators is fallacious for these reasons.No tax is imposed or collected under Act 34 of 1971. The tax is imposed by Act 25 of 1963. The character as well as incidence of the tax is determined by Act 25 of 1963. The machinery for collection of the tax which was implicit in Act 25 of 1963 was made explicit by Act 18 of 1971. The State Government under Chapter IV of the Motor Vehicles Act, 1939 having regard to various factors mentioned in Section 43(1) of the 1939 Act issues directions to the State Transport Authority relating to the fixing of fares and freights including the maximum and minimum in respect thereof for stage carriages, contract carriages and publicprovisions of Act 34 of 1971 are that while fixing the fares, the Government may take into account the tax, if any, imposed on the passengers and that such fares may be inclusive of the tax payable by the passengers or consignors of goods to the operators under any law dealing with the matter.Under Section 44 of the 1939 Act the State Transport Authority shall give effect to the directions issued by the State Government under Section 43 of the Act. Fare could be fixed either exclusive or inclusive of tax. The State Government fixed the fare on 1 July, 1963 after taking into account the element of tax on passengers and goods imposed by Act 25 of 1963. The operators in collecting fare from passengers in fact collected the tax due from passengers under act 25 of 1963 along with the fare. Section 43 (1A) of the Motor Vehicles Act, 1939 was, therefore, introduced with retrospective effect to clarify the factual basis. There was neither imposition of any new tax by Act 34 of 1971 nor was there any alteration of the character of the tax which had already been imposed. In the present case, the principal Act 25 of 1963 levied the tax. Acts 18 and 34 of 1971 were for the purpose of dispelling the doubts expressed in Thomman case, ILR (1968) 2 Ker 153 = (AIR 1969 Ker 130  ) (supra).Therefore, it is competent to the Legislature to amend the Motor Vehicles Act by enacting that directions regarding fares can be inclusive ofarguments advanced on behalf of the operators fall in view of the cardinal fact that tax was an element included in the fare structure. The retrospective validation cannot be said to be unjust because the operators collected the entire amount. The tax has always been paid by passengers and owners of goods. The tax is not on the income of the operators. There was and is no lack of machinery for collection of these taxes. The operators collected tax as well as fare. The directions regarding fare were validated by Act 34 of 1971 by reason of the litigation between the operation and the State.