Case: B. A. Jayaram and Others Etc Vs. Union of India and Others

Prior to 1969 there was no concept of what may be termed as An All India permit which would be valid for the whole of India and which would enable the holder of the permit to ply his contract carriage throughout India. Section 63 (1) of the Motor Vehicles Act, provides that, except as may be otherwise prescribed, a permit granted by the regional transport authority of any one region shall not be valid in any other region, unless the permit has been counter signed by the regional transport authority of that other region, and a permit granted in any one state shall not be valid in any other state unless counter-signed by the State Transport Authority of that other state or by the regional transport authority concerned. The procedure prescribed for obtaining the counter-signature of the transport authorities of other regions and states was cumbersome and was not conducive to the development of all India or inter-state tourist traffic. In order to remedy the situation and promote all India and inter-state tourist traffic, the Parliament amended the Motor Vehicles Act and introduced sec. 63 (7) by amending Act 56 of 1969. This new provision enables the State Transport Authority of ever y state to grant permits valid for the whole or any part of India, in respect of such number of tourist vehicles as the Central Government may, in respect of that state specify in that behalf. Preference is to be given, to applications for permits from the India Tourism Development Corporation, a State Tourism Development Corporation, a State Tourist Department and such operators and tourist cars or such travel agents as may be approved in that behalf by the Central Government. This was but . the first basic step towards encouraging all India or inter-state tourist traffic. There were other hurdles to be cleared before any scheme for grant of all India permits could be effectively implemented. One of the hurdles w as this: Under Entry 57 of List II of the Seventh Schedule to the Constitution, the State Legislature is empowered to levy "Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of entry 35 of list III". Entry 35 of list III reads:"Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied".A coherent reading of Entry 57 of list II and Entry 35 of list III makes it abundantly clear that the power to levy taxes on vehicles suitable for use on roads vests solely in the State Legislature though it may be open to the Parliament to lay down the principles on which taxes may be levied on mechanically propelled vehicles. In other words the Parliament may lay down the guide lines for the levy of taxes on mechanically propelled vehicles but the right to levy such taxes vests solely in the State Legislature. Now there are twenty t wo States and nine Union Territories in India, specified in the first schedule to the Constitution. Each of the States has the right, within its territory. to levy a tax on motor vehicles. If a tourist vehicle holding an All India Permit under s ec. 63 (7) of the Motor Vehicles Act chooses to visit half a dozen states in the course of a round trip from, say, Delhi to . Kanyakumari or Srinagar to Hyderabad tax will ordinarily have to be paid in all the half a dozen or so States. The burde n will surely be intolerable and the whole object of sec. 63 (7), namely promotion of all India or-inter-state tourist traffic will be frustrated. The Central Government was alive to the problem and referred the matter to the Transport Development Council for its advice. The Transport Development Council is a non-statutory body constituted by the Central Government and consists of the representatives of the Governments of all the States. The Transport Advisory Council advised the Central Government that there should be a single-state taxation on tourist vehicles holding permits under sec. 63 (7), that is, tax should be paid in the home state and the vehicle should be exempted from payment of tax in states other than the home state. This could be done by the respective State Governments issuing notifications under their taxation legislation exempting tourist vehicles registered in other states from payment of tax, if tax has already been paid in the home state. The Government o f India accepted the E- suggestion and requested the State Governments and Union Administrations to issue necessary notifications. The suggestion ran into trouble right from the start. While the Governments of Andhra Pradesh, Bihar, Goa, Daman and Diu, Maharashtra, Nagaland and Uttar Pradesh readily agreed to issue such notifications on the basis of reciprocity, there was no such ready response from some other states. The Government of Karnataka was in particular opposed to the grant of any such exemption. Finally, the Government of Karnataka and the Governments of other states too were persuaded to agree to issue such notifications. In the meanwhile the Government of India, in exercise of its power under sec. 63 (7) of the Motor Vehicles Act, issued notifications specifying the number and class of tourist vehicles in respect of which each of the State Transport authorities of the States could grant All India permits. The last of the notifications specifie d that each State Transport authority could issue 50 permits for tourist omnibuses.Pursuant to the request of the Central Government to which all the State Governments finally agreed, notifications were issued exempting tourist vehicles holding permits under sec. 63 (7) from payment of tax, if tax had been paid in the home state. We are particularly concerned in these cases with the notifications issued from time to time by the Government of Karnataka, since that is where the trouble started. The first of the notifications issued by the Government of Karnataka was on September 18, 1972 and it exempted, from payment of taxes payable under the Karnataka Motor Vehicles Taxation Act 1957, tourist motor C abs and tourist omnibuses registered in the States other than the State of Karnataka and plying in the State of Karnataka under permits which were valid without counter signature in the state of Karnataka, provided that the tax payable in respect of such vehicles had been paid to the State in which the vehicles were registered and provided further that the said State granted similar exemption to tourist motor cabs and tourist omnibuses whose permits were endorsed in the State of Karnataka under Rule 123-A of the Karnataka Motor Vehicles Rules. On July IS, 1976, the Government of Karnataka issued a notification reducing the tax payable under the Motor Vehicles Taxation Act, 1957, in respect of tourist vehicles for which permits had been issued under sec. 63 (7) or endorsement granted under Rule 123-A of the Karnataka Motor Vehicles Rules. On December 20, 1976, a further notification was issued in partial modification of the earlier notification datedSeptember 18, 1972. Exemption from payment of tax was given to tourist motor cabs and tourist omnibuses registered in States other than the State of Karnataka and plying in the State of Karnataka under the authority of a permit granted under sec. 63 (7), provided that the tax payable in respect of the vehicle to the State in which it was registered had already been paid and provided further that similar exemption from payment of tax was granted in respect of similar vehicles o f the State of Karnataka. This scheme for the grant of All India Permits, designed as it was to promote all India and inter-state tourist traffic. soon fell into abuse at the hands of scheming transport operators. Within the scheme itself l ay the seeds for abuse. The scheme enabled the State Transport Authority of each State, to issue fifty all India permits, uniformly, irrespective of the size of the State, its resources, its accessibility, its communications, its facilitie s, the availability of transport services and operators in the State with the necessary expertise, experience and finance to operate all-India tourist services and a host of such other factors. Apparently it was thought undesirable to make a distinction between State and State on what were perhaps thought to be elusive criteria and possibly the scheme was expected to give a boost to the transport business in the smaller and less advanced States. And, of course, it was necessary to obtain the agreement and cooperation of all the States. But, the result was that transport operators from, big and comparatively prosperous and advanced States, well versed in the intricacies of the transport business very soon flocked to small and comparatively poor and less advanced States like Manipur and Nagaland to apply for and obtain all-India permits from the State Transport Authorities of these States. It is conceded before us that a large number of persons holding all-India permits from some of these small States do not belong to these States at all, but are transport operators coming from far off States. Another factor which appears to have influenced the flocking of transport operators from other States t o States like Nagaland and Manipur is the nationalization of contract carriage service in States like Karnataka. Once the permits were obtained and the vehicles were registered, these small States saw the last of the operators. Having obtained the permits, the operators with their vehicles flocked back to the parent State of the operators (not of the vehicles) or to a State like Karnataka where all contract carriages having been nationalized no private contract carriage was available and there was therefore a great opportunity to ply the vehicles as contract carriages within the State.States like Karnataka were swamped by tourist vehicles from all over the country, registered in other States. These tourist vehicles practically colonised Karnataka and like States and started operating more or less as stage carriages within the particular State, never and rarely if ever, moving out of the State. There was no thought or Question of undertaking all India or interstate tours, and out went the worthy object of sec. 63(7). Quick and easy money with the least trouble and in the shortest time, by whatever method, was the only object. In the counter-affidavit filed on behalf of the State of Karnataka in some of t he Writ Petitions, it is stated.

Reasoning: It is true that the object of enacting sec. 63 (7) by the Parliament was to promote all-India and inter-state tourist traffic. But taxes on vehicles .. suitable for use on roads is a State legislative subject and it is for the State Legislature to impose a levy and to exempt from the levy. True again, Entry 57 of the State List is subject to Entry 35 of the Concurrent List and, as explained by us at the outset, it is therefore open to the Parliament to lay down the 17 principles on which taxes may be levied on mechanically propelled vehicles. But the Parliament while enacting S. 63 (7) of the Motor Vehicles Act refrained from indicating any such principles, eit her expressly or by necessary implication. The States power to tax and to exempt was left uninhibited. It may be that a a State legislation, plenary or subordinate, which exempts "non-home-state tourist vehicles" from tax would be advancing the object of sec. 63 (7) of the Motor Vehicles Act and accelerating inter-state trade, commerce and intercourse. But merely by Parliament legislating sec. 63 (7), the State Legislatures are not obliged to fall in line and to so arrange their tax laws as to advance the object of sec. 63 (7), be it ever so desirable. The State is obliged neither to grant an exemption nor to perpetuate an exemption once granted. There is no question of impairing the freedom under Art. 301 by refusing to exempt or by withdrawing an exemption. Not to pat on the back is not to stab in the back. True, straw by straw, the burden of taxation on tourist vehicles increases as each State adds its bit of straw, but, then, each State is concerned with its coffers and has the right to tax vehicles using its roads; and, the contribution which a tourist carriage is required to make to its treasury is no more than what other contract carriages are required to make. We are firmly of the view that there is no impairment of the freedom under Art. 301. The special submission on behalf of the Karnataka operators that the withdrawal by the Karnataka Government of the exemption granted to outsiders has resulted in the Karnataka operators having to pay tax in every State in the country and, therefore, the withdrawal has impaired the freedom under Art. 301 is but the same general sub- mission, seen through glasses of a different tint. It does not even have the merit that the withdrawal of the Karnataka exemption affects them directly. The submission is rejected.One of the submissions made to us was that if there was a misuse of the all-India permits, the remedy was to punish the wrong doers by taking appropriate action against the wrong-doers by cancelling the permit, if necessary, but not to withdraw the benefit of the exemption altogether, even in the case of honest operators. That is a matter for the Legislature and its delegate to decide but not for the court. If the situation had become so malignant that drastic action was called for, it is not for the court to substitute its judgment to say that the object could perhaps be well achieved by adopting a less drasticwas submitted that all-India tourist vehicles do not use the roads of the State as much as the contract carriages operating in the State and therefore, the State was wrong in treating them alike. It was said that treatment of unequals as equals had resulted in an infringement of Art. 14 of the Constitution. It was also submitted that vehicles holding inter-State permits under inter-state agreements were still exempt from tax and this was also a violation of Art. 14 of the Constitution. Another contention raised was that there was some sort of promissory estoppel which prevented the State Government from withdrawing the exemption. Yet another argument was that the withdrawal of the exemption was arbitrary and therefore, judicial review was necessary. These and other like submissions which were made to us in our opinion, fall in the category of arguments which. we mentioned earlier, have only to be stated to be rejected. The answers are self-evident., The submissions are totally without merit and we see no justification for increasing the length of our judgment by further futile discussion.