Case ID: 1204

Judgment:
82 of 1959. Petition under article 32 of the Constitution of India for enforcement of Fundamental Rights. 519 section K. Kapur	 Jai Gopal Chagnani	 K. K. Jain and B. P. Maheshwari	 for the petitioners. C. K. Daphtary	 Solicitor General of India	 G. C. Kasliwal	 Advocate General	 Rajasthan and D. Gupta	 ' for the respondent. March 22. The Judgment of the Court was delivered by HIDAYATULLAH	 J. This is a petition under article 32 of the Constitution. 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. 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: "156. Taxes on goods and passengers carried by road or on inland waterways. " The Act received the assent of the President on April 27	 19.59	 and was published in the Rajasthan Gazette on April 30	 1959. The same day	 the Rules framed in exercise of the powers conferred by section 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. Before we deal with the case further	 it is convenient to see how the Act is constructed and what the 520 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. Section 3 is the charging section	 and section 4 deals with the method of collection of the tax. Since these sections are the main subject of attack	 we quote them in full: "3. Levy of tax. (1) There ' shall be levied	 charged and paid to the State Government	 a tax on all fares and freights in respect of all passengers carried and goods transported by motor vehicles 'at such rate not exceeding one eighth of the value of the fare or freight	 in the case of cemented	 tarred	 asphalted	 metalled	 gravel and kankar roads and not exceeding one twelfth of such value in other cases	 as may be notified by the State Government from time to time subject to a minimum of one naya paisa in any one case	 the amount of tax being calculated to the nearest nays paisa. Explanation. When passengers are carried and goods are transported by a motor vehicle	 and no fare or freight has been charged	 the tax shall be levied and paid as if such passengers were carried or goods transported at the normal rate prevalent on the route. (2) Where any fare or freight charged is a lump sum paid by a person on account of a season ticket or as subscription or contribution for any privilege	 right or facility which is combined. with the right of such person being carried or his goods transported by a motor vehicle without any further payment or at a reduced charge	 the tax shall be levied on the amount of such lump sum or on such amount as appears to the prescribed authority to be fair and 521 equitable having regard to the fare or freight fixed by a competent authority under the Motor Vehicles Act	 1939(Central Act 4 of 1939). (3) Where passengers are carried or goods transported by a motor vehicle from any place outside the State to any place within the State	 or from any place within the State to any place outside the State	 the tax shall be payable in respect of the distance covered within the State at the rate laid down in sub section (1) and shall be calculated on such amount as distance covered in the State bears to the total distance of the journey: Provided that where passengers are carried or goods transported by a motor vehicle from any place within the State to any other place within the State through the intervening territory of another State	 the tax shall be levied on the full amount of the fare or freight payable for the entire journey and the owner shall issue a single ticket or receipt	 as the case may be	 accordingly. (4) Method of collection of tax. The tax shall be collected by the owner of the motor vehicle and paid to the State Government in the prescribed manner: Provided that in case of public carriers the State Government may accept a lump sum in lieu of the tax chargeable on freight in the manner prescribed: Provided further that in case of contract carriages the State Government may accept a lump sum in lieu of the tax chargeable on fare in the manner prescribed. " Section 5 lays down the method of levy	 and enjoins the issuance of a ticket showing the tax paid of a receipt showing the freight charged and the tax paid. It includes a proviso that in the case of passengers the tax becomes chargeable only on entry in the State	 if the journey began outside the State. Section 6 requires the owner to keep accounts and to submit periodic returns and provides for levy of penal ties in case of failure	 which penalties are laid down in section 8. Section 7 deals with the appointment of taxing authorities	 and a. 12 gives the power of entry the 522 officers into vehicles	 garages	 and offices for inspection and checking. Section 10 enjoins upon the owners the duty of furnishing tables of fares and freights	 time tables		 etc. Section 9 enables the State Government to grant to any person or class of persons	. exemption from all or any of the provisions of the Act. The Rules prescribe those matters which are required under the Act to be prescribed by the Rules. It is not necessary to refer to them beyond Rules 8 and 8 A	 which have been challenged. Rule 8(i) prescribes the method of payment of tax by means of stamps to be affixed to the tickets	 and the second proviso is to the following effect: "Provided further that the tax payable under the Act on fare by the owner of a motor cycle	 rickshaw or a motor cab shall be paid to the State Government in lump sum	 of which the amount shall be fixed by the State Government from time to time by	 Notification in this behalf." Rule 8(ii) then provides: "The owner of a public carrier shall pay to the State Government a lump sum in lieu of the tax 	chargeable under the Act on freight and the amount of such lump sum shall be fixed by the State Government from time to time by Notification in this behalf. " Rule 8 A	 in so far as material to this case	 reads: "Provisions for payment of lump sum in lieu of tax on fare or freight.((1) In cases covered by the second. proviso to sub rule (1) of rule 8 and by subrule (ii) of that rule the lump sum fixed by the State Government as payable in lieu of the tax on fare or freight	 as the case may be	 shall be deposited in cash into a Government Treasury or a Sub Treasury in equal quarterly instalments payable within 15 days from the 31st day of March	 the 30th day of June	 the 30th day of September and the 31st day of December every year; and in case of such vehicles not registered in Rajasthan to the incharge of the check post or barrier at the time of their entry into the State of Rajasthan or to the officer of the Excise and Taxation Department nearest to the point of 523 entry into the State and having jurisdiction over that area: Provided that Provided that (a) for the quarter ending on the 30th day of June '	 1959	 such payment shall be made for the months of May and June	 1959	 at the rate of 1/12 of the said sum for each month	 (b) where the owner has not plied his vehicle for the entire quarter immediately preceding any of the aforesaid dates a proportionate decrease in the amount due for that quarter may be made	 (c) if the owner ceases to ply his vehicle on a date preceding any of the aforesaid dates	 the proportionate amount for the quarter shall be paid by him immediately upon such cessation	 and (d) where the owner has not plied his vehicle for a continuous period of not less than three months and produces a certificate from the authority competent under the Rajasthan Motor Vehicles Taxation Act	 1951	 or the rules made thereunder to the effect that he has been refunded the tax for that period under section 7 of the said Act	 no amount by way of tax under the Act shall be payable for such period. (2) The owner shall inform the Assessing Authority as soon as his vehicle goes out of use. When the vehicle is again put on the road	 an intimation to that effect shall be sent to the Assessing Authority immediately. " The notification which was issued under R. 8 prescribing lump sum rates	 is as follows: "Jaipur	 April 30	 1959 No. F. 15(5) E & T/59. In pursuance of rule 8 of the Rajasthan Passengers and Goods Taxation Rules	 1959	 the Government of Rajasthan hereby directs that the tax chargeable on fare or freight in respect of the following cl. was of Motor Vehicles	 shall be paid in lump sum of which the amount is mentioned opposite each such class: 3. Public carriers (Goods Vehicles): (a) Holding a general permit under the 	 to use all roads in Rajasthan; 524 (i) Load carrying capacity below 5 Tons Rs. 420 per annum. (ii) Load carrying capacity 5 Tons and above . Rs. 540 per annum. (b) Holding a permit under the 	 for plying within the limits of any region or on fixed routes in any one region: (i)Load 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 . (b) Public Carriers (Goods Vehicles) d(i) 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" The petitioners challenged the Act	 the Rules and the notification from many angles	 in the petition; but at the hearing before us	 the arguments were more restrained. The main objection to the Act is that the tax has not been laid upon "passengers and goods" as authorised by Entry No. 56 but upon "fares and freights"	 which are different entities	 and in support of the contention that there is a difference	 reference is made to Entry No. 89 of the Union List	 where power is conferred to tax "fares and freights". It is submitted that a tax on fares and freights being a different tax	 cannot be levied under the Entry	 and thus	 the tax is without authority of law. The Act and the Rules are further challenged on the grounds that they are repugnant to articles 301 and 304 as being a restriction upon inter State trade	 commerce and intercourse	 to article 19 as involving an unreasonable restriction upon the business of the petitioners	 and also to article 14 as discriminating between this mode of transport and the Railways. The Act is further challenged on the ground that it concedes to the State 525 Government the power to fix the amount of lump sum payment without guidance. The rates and lump sum payment are challenged because they involve discrimination between routes involving roads of different surfaces. Rules 8 and 8 A and the notification are challenged as	 it is submitted	 they go beyond the Act by making the lump sum payment compulsory	 even though under the Act it is optional	 and involve payment of tax even when no passengers or goods are transported. Lastly	 it is said that by making tax payable even though the route between two intra State point passes outside the State	 the Act has an extra territorial operation which is ultra vires the legislature. The first and the 'Main contention is that the Act in the guise of taxing passengers and goods	 taxes really the income of the petitioners	 or	 at any rate	 fares and freights	 and is thus unconstitutional. It is argued that the tax is borne by the operators because of competition with the Railways. That the petitioners are required to bear the tax themselves to stand competition with the Railways is a matter of policy '	 which the petitioners follow and is not something which flows inevitably from the provisions of the Act. 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 section 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 incidence of the tax is upon passengers and goods	 though the amount of the. tax is measured by the fares and freights. A similar argument was not accepted by the Madras High Court in Mathurai vs State of Madras (1)	 and the same view was expressed in Atma Ram Budhia vs State of Bihar (2). In our opinion	 the charging section does (1) I.L.R. (2) (1952) I.L.R 31 Pat 493 (S.B.). 526 not go outside Entry No. 56. The tax is still on passengers and goods	 though what it is to be is deter	mined by the amount of fare or freight. It is clear that if the tax were laid on passengers irrespective of the distance travelled by them	 it would lead to anomalies if the amount charged be the same in every case. This if; 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. 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 from 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 a. (3) of section 3 and to which reference will be made separately. In our opinion	 the levy of tax cannot be said to offend articles 301 and 304 of the Constitution. The next contention is that the Act allows an option to pay a lump sum in lieu of the tax	 but Rules 8 and 8 A and the notification make the payment of the lump sum compulsory. There is no doubt that ex facie the two provisos to a. 4 employ language which is permissive	 while the two Rules and the notification employ language which is imperative. The two provisos to a. 4 are enabling	 and thereby authorise the State Government to accept a lump sum payment in lieu of the tax actually chargeable. The 527 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. It is	 however	 contended that though the section creates an option	 the Rules and the notification make the payment compulsory	 and attention is drawn to the word "shall" used both in Rules 8 and 8 A and the notification	 whereas the words in the two provisos to section 4 are "may accept". The word "shall" is ordinarily mandatory	 but it is sometimes not so interpreted if the context or the intention otherwise demands. In re Lord Thurlow Ex Parte Official Receiver (1)	 Lord Esher	 M. R.	 observed at p. 729 that "the word 'shall ' is not always obligatory. It may be directory"	 and Lopes L. J.	 at p. 731 added: "It is clear that the word 'shall ' is not always used in a mandatory sense. There is abundance of authority to the contrary in cases where it has been held to be directory only". It was thus that the word 'shall ' was held to be directory only	 in that case	 by Coutts Trotter	 C. J.	 in Manikkam Pattar vs Nanchappa Chettiar (2)	 by Russel	 J.	 in In re Rustom (3)	 by Venkatasubba Rao	 J.	 (1) (1895) 1 Q.B 724 (2) (3) Bom. 396; 528 in Jethaji Peraji Firm vs Krishnayya (1) and by the Judicial Committee in Burjore and Bhavani Pershad V. Mussumat Bhagana (2). 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 the Act. It is contended that the power to fix lump sums in lieu of tax has been conferred upon Government without guidance	 and is	 therefore	 unconstitutional. It is also urged that the levy of a lump sum leads to the result that even if passengers or goods are not transported	 the tax is still payable. These arguments	 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. (1) (1929) I.L.R 	 656. (2) (1883) L.R. 11 I. A. 7. 529 The fares and freights are fixed by competent authority under the 	 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 figure is based on averages	 and cannot be impeached by reference to a possibility that on some days no business might be done. 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 roads has been pointed out	 and all operators are equally affected by the	 Act. Some manner of support for the argument was sought from section 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 or charities. It is next urged that the imposition of a higher rate of tax for cemented	 tarred	 asphalted	 metalled	 gravel and kankar roads than that for other roads discriminates between operator	 This argument 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 67 530 indispensable to any good government	 and the imposition of the tax is justified on the assumption of a 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 made out. The last contention is that the proviso to sub section (3) of section 3 is extra territorial in nature	 because it makes the tax payable on fares and freights attributable to the territory of another State when the route passes through such territory	 even though the journey starts and ends in Rajasthan. We were 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. In the result	 the petition fails	 and is dismissed with costs. Petition dismissed.

Summary:
The petitioners who were partners of a registered firm hold ing public carrier and stage carriage permits challenged the constutionality of certain provisions of the Rajasthan Passengers and Goods Taxation Act	 1959	 the Rajasthan Passengers and Goods Taxation Rules	 959	 and a notification issued under r. 8. The Act was passed for levying a tax on passengers and goods 518 carried by road in motor vehicles the power to enact being derived from Entry 56 of the State List in Sch. VII of the Constitution. Section 3(4) of the Act prescribed the method of collection of the tax and provided that the State Government may accept a lump sum in lieu of the tax chargeable". Rule 8(i) prescribed the method of payment and provided that the tax "shall be paid in lump sum" and the notification in question prescribed the rates of the tax. Held	 that the incidence of the tax was upon "passengers and goods" and not upon income of the petitioners though the amount of the tax was measured by the fares and freights. The charging section	 namely	 section 3 did not go outside Entry 56. Mathurai vs State of Madras	 I.L.R. 	 Alma Ram Budhia vs State of Bihar	 Pat. 493	 referred to. The tax did not offend articles 301 and 304 of the Constitution and no inter State trade	 commerce or intercourse was affected by it. Although the tax fell upon passengers and goods proceeding to or from an extra State point	 it was limited only to the fare and freight proportionate to the route within the State. The word "shall" is ordinarily mandatory but it is sometimes interpreted as directory	 and in the present case the word "shall" used in rr. 8 and 8A and the notification should be interpreted as directory as section 4 of the Act from which the Rules and the notification derive their authority	 creates an option by using the words "may accept". The Act	 the Rules and the notification must be read harmoniously. The mandatory language was used to fix peremptorily the amount of the lump sum if paid in lieu of the tax. In Re Lord Thurlow Ex Parte Official Receiver	 (1895) 1 Q.B. 724	 Mannikam Patter vs Nanchappa Chettiar	 (1928) M.W.N. 441	 In re Rustom	 369	 jethaji Peraji Firm v: Krishnayya	 Mad. 648 and Burjore and Bhavant Pershad vs Mussumat Bhagana	 (1883) L.R. II I.A. 7	 followed. The lump sum figure was based on averages and could not be impeached by reference to a possibility that on some days no business might be done. Comparison with Railways which is a union subject was not admissible. There was no discrimination between operators of public motor vehicles using roads all of whom were affected by the Act	 There could be no comparison between persons using better kind of roads and those using roads which were not so good. All operators using better kind of roads had to pay heavier tax	 and there was no discrimination between them as a class.