Case: M/s. Sainik Motors, Jodhpur &amp; Others Vs. State of Rajasthan

The petitioners, who are seven in number, challenge as unconstitutional and ultra vires certain provisions of the Rajasthan Passengers and Goods Taxation Act, 1959, the Rajasthan Passengers and Goods Taxation Rules, 1959, and a notification issued under R. 8. For brevity, we will refer to them in this judgment, as the Act, the Rules and the notification respectively. The first petitioner is a registered firm, petitioners Nos. 2 to 6 are the partners of that firm, and petitioner No. 7 is the General Manager of the firm. Petitioner No. 7 holds a public carrier permit for the whole of Rajasthan in his individual name. The petitioners also hold 59 stage carriage permits from the Regional Transport Authority, Jodhpur, for diverse routes over roads which have different kinds of surfaces, some being sandy or katcha and others, metalled, tarred, etc.2. The Act was passed in 1959 for levying a tax on passengers and goods carried by road in motor vehicles. The power to enact the Act purports to be derived from Entry No. 56 of the State List in Sch. VII to the Constitution, which reads :"56. Taxes on goods and passengers carried by road or on inland waterways." The Act received the assent of the President on April 27, 1959, and was published in the Rajasthan Gazette on April 30, 1959. The same day, the Rules framed in exercise of the powers conferred by S. 21 of the Act were also published, and the notification was also issued. The Rules were subsequently amended, and we are concerned with the Rules, as amended.3. Before we deal with the case further, it is convenient to see how the Act is constructed and what the Rules and the notification provide. The Act, which consists of 21 sections, came into force in the whole of the State of Rajasthan on May 1,1959. The Act contains the usual provisions to be found in all taxing statutes about appeals, revision, offences and penalties, power to compound offences, recovery of tax as arrears of land revenue, bar of proceedings, exclusion of the jurisdiction of Civil Courts, refunds and power to make rules, to which detailed reference need not be made. We are only concerned with the imposition of the tax and the mode of its recovery, and will refer to those provisions which are relevant.6. The notification which was issued under R. 8 prescribing lump sum rates, is as follows :"Jaipur, April 30, 1959.No. F. 15(5) E and T/59. III. - In pursuance of rule 8 of the Rajasthan Passengers and Goods Taxation Rules, 1959, the Government of Rajasthan hereby direct that the tax chargeable on fare or freight in respect of the following class of Motor Vehicles, shall be paid in lump sum of which the amount is mentioned opposite each such classPublic carriers (Goods Vehicles)Holding a general permit under the Motor Vehicles Act, 1939, to use all roads in RajasthanLoad carrying capacity below 5 Tons ...... Rs. 420/- per annum.(ii Load carrying capacity 5 Tons and above ..... Rs. 540/- per annum.(b) Having a permit under the Motor Vehicles Act, 1939 for playing within the limits of any region or on fixed routes in any one regionLoad carrying capacity below 5 Tons ..... Rs. 360/- per annum.(ii) Load carrying capacity 5 Tons and above .... Rs. 480/- per annum."4. ......Public Carriers (Goods Vehicles) plying on hire on temporary permits under the Motor Vehicles Ac, 1939Public Carriers (Goods Vehicles)Load carrying capacity below 5 Tons ......... Rs. 2/- for each calendar day ... ....(ii) Load carrying capacity 5 Tons and above .... Rs. 4/- for each calendar day ...This shall have effect on and from the 1st May, 1959."

Court's reasoning:
We do not agree that the Act, in its pith and substance, lays the tax upon income and not upon passengers and goods. Section 3, in terms, speaks of the charge of the tax "in respect of all passengers carried and goods transported by motor vehicles", and though the measure of the tax is furnished by the amount of fare and freight charged, it does not cease to be a tax on passengers and goods. The Explanation to S. 3(1) lays down that even if passengers are carried or goods transported without the charge of fare or freight, the tax has to be paid as if fare or freight has been charged. This clearly shows that the incident of the tax is upon passengers and goods, though the amount of the tax is measured by the fares orour opinion, the charging section does not go outside Entry No. 56.The tax is still on passengers and goods, though what it is to be is determined by the amount of fare and freight. It is clear that if the tax were laid on passengers irrespective of he distance traveled by them, it would lead to anomalies if the amount charged be the same in every case. This is additionally clear in the case of goods where the weight, bulk or nature of the goods may be different and a scale of payments must inevitably be devised. Though the tax is laid on passengers and goods, the amount varies in the case of passengers according to the distance travelled, and in the case of goods because the freight must necessarily differ on account of weight, bulk and nature of the goods, transported. The tax, however, is still a tax on passengers and goods, and the argument that it is not so, is not sound.10. We are also of opinion that no inter-State trade, commerce or intercourse is affected. The tax is for purposes of State, and falls upon passengers and goods carried by motor vehicles within the State.No doubt, it falls upon passengers and goods proceeding to or form an extra-State point but it is limited only to the fare and freight proportionate to the route within the State. For this purpose, there is an elaborate scheme in R. 8-A to avoid a charge of tax on that portion of the route which lies outside the State. There is thus no tax on fares and freights attributable to routes outside the State except in one instance which is contemplated by the proviso to sub-s. (3) of S. 3 and to which reference will be made separately. In our opinion the levy of tax cannot be said to offend Arts. 301 and 304 of theis no doubt that ex facie the two provisos to S. 4 employ language which is permissive, while the two Rules and the notification employ language which is imperative. The two provisos to S. 4 are enabling, and thereby authorise the State Government to accept a lump sum payment in lieu of the tax actually chargeable. The word "accept" shows that the election to pay a lump sum is with the taxpayer, who may choose one method of payment or the other. The inclusion of such a provision is designed to promote easy observance of the Act and also its easy enforcement. The charge of tax calculated on fares and freights involves difficulties for the operators who have to keep accounts and also difficulties for the taxing authorities, who have to maintain constant checks and inspections. The lump sum payment is a convenient mode by which an amount is payable per year irrespective of whether the tax would be more or less if calculated on actual fares or freights. The operators pay the lump sum if they so choose, to avoid having to maintain accounts and to file returns, and the Government accepts it to avoid having to inspect accounts and to keep a check. The rates which are prescribed for a lump sum payment per year are for those who wish to avail of them.Now, Rules 8 and 8-A and the notification only lay down what lump sum payment has to be in each case, if a lump sum is being paid. The mandatory language is used to fix peremptorily the amount of the lump sum. Rules 8 and 8-A and the notification cannot be said to overreach the section to which they are subordinate and from which they must take their colour and meaning. If the Act creates an option, it cannot be negatived by the Rules. The Act and the Rules must be read harmoniously, and reading them so, it is plain that the apparent mandatory language of the Rules and the notification still retains the permissive character of the section, but only lays down what the amount of the lump sum must be, if lump sum payment is made in lieu of payment of the tax calculated on actual fares and freights. If the two Rules and the notification are read in this way, the mandatory language is limited to the prescribing of the lump sum rates. In our opinion, the two Rules and the notification are not void and contradictory of theargument, in our opinion, cannot be accepted. The learned Advocate-General pointed out that the lump sum rates work out at a very low figure, the minimum being less than Re. 1/- per day and the maximum. Rs. 1.50 np. per day. The rates are no doubt very reasonable, but this hardly meets the argument of the petitioners. There are, however, good reasons for upholding the fixation of lump sums. The payment of the lump sum is not obligatory, and a person can elect to pay tax calculated on actual fares and freights. The fares and freights are fixed by competent authority under the Motor Vehicles Act, and that takes into account the average earnings, and the lump sum is fixed as an average of what tax would be realised if calculated on actual fares and freights. There is no compulsion for any operator to elect to pay a lump sum if he does not choose to do so. Nor is the argument that there may be vacant periods when no passengers or goods are transported but the tax is payable, is of any force, because there may be days when the business done might result in tax in excess of the lump sum payable. The lump sum figures is based on average, and cannot be impeached by reference to a possibility that on some days no business might be done.15. The next contention that there is discrimination between road transport and rail transport is also without force. The entry in the State List is limited to a tax on passengers and goods transported by road or inland waterways. The comparison with Railways is not admissible, because tax on railway fares and freights is a Union subject, and is not available to the State Legislature. There is thus a clear classification made by the Constitution itself. No discrimination between operators of public motor vehicles using road has been pointed out, and all operators are equally affected by the Act. Some manner of support for the argument was sought from S. 9, where the State Government is empowered to grant exemption from the Act by general or specific order to any person or class of persons. But we were informed that no exemption has been granted except to hospitals orarguments overlooks the very object and purpose of a tax. As is well-known, taxes are burdens or charges imposed by legislative power upon persons or property to raise money for public purposes. The power to tax is thus indispensable to any good government, and the imposition of the tax is justified on the assumption of the return in the shape of conveniences. If this be the true import of a tax, it is but natural that taxes will be graded according as they involve more or less of such conveniences. They will be heavy in case of roads requiring greater expenditure to construct and to maintain, than in case of roads not requiring such expenditure. All operators using the better kind of roads have to pay the heavier tax, and there is no discrimination between them as a class. Discrimination can only be found if it exists between persons who are comparable, and there is no comparison between persons using the better kind of roads and those who use roads which are not so good. It is the cost of construction and maintenance which makes the difference in the tax, and no case of discrimination can be said to be madewere informed that now there are no such routes, but even otherwise, such portions must have been very short and negligible. No affidavit was sworn to show how many such routes were involved and what their extent was, and in view of lack of adequate averments, we must reject the contention.