MAHARAJA TOURIST SERVICE ETC. ETC.versusSTATE OF GUJARAT

A             MAHARAJA TOURIST SERVICE ETC. ETC.
                                        v.
                            STATE OF GUJARAT

                                APRIL 26, 1991

B        [RANGANATH MISRA, CJ AND KULDIP SINGH, J.)

          Constitution of India, 1950: Articles 19(1) (g), 301-Levy of
    additional tax under Motor Vehicle Tax Acts of different States-
    Validity of

       Motor Vehicles Act, 1939/1988/Motor Vehicle Tax Acts-Section
c 63(7)/88(9)-Motor  Vehicle Tax Acts, Punjab, Gujarat, Rajasthan and
    Madhya Pradesh-Additional Tax-Constitutional validity of

         Punjab Motor Vehicles Taxation Rules 1925 Rule 8(v )- _
    Exemption to vehicles registered outside the State and kept in the State
D   upto 30 days-Expression 'kept for use'-Scope of-Kept for more
    than 30 days for regular use-Not by way of transit-Exigibility of
    tax-To be determined in individual cases as and when raised.

          Words and phrases: 'kept for use'-Meaning of.

E         Under the trucing power contained in the several Motor Vehicles
    Tax Acts in vogue in the Respondent-States, provision bas been made
    for taxation as also for levy of additional true. The petitioners who hold
    All India Tourist Permits challenged the constitutional validity of the
    additional tax, on the ground that it was neither compensatory nor
    regulatory, and therefore was violative of Articles 19(1)(g) and 301 of
F   the Constitution. In respect of the States of Punjab and Haryana which
    have a common Act, an additional contention. was raised to the effect
    that Rule 8(v) of the Punjab Motor V•hicles Taxation Rules 1925,
    provides total exemption from liability of tax if the vehicle was brought
    into the State and kept for use within the State for a period not exceed-
    ing 30 days in a year, and since the vehicles registered outside Punjab
G   and Haryana States are not kept within the State for more than 30 days
    in a year, the demand of tax in the face of Rule S(v) is contrary to law.    }--~


          Disposing of the Writ Petitions, this Court,

          HELD: 1. Law is settled that to uphold levy of tax as in the present
H   case, what is necessary is existence of a nexus between the subject and

                                       524
                            M.T.S. v. STATE OF GUJARAT                        525

       the object of the levy and it is not necessary to show that the whole or a    A
       substantial part of the tax collected is utilised. Hence the demand of tax
       is not open to challenge and the plea raised against the levy, whether of
"c>-   tax or additional tax, in not justified. Under the taxing provision a
       statutory outer limit has been provided and the actual amount is left to
       be determined by the State Government by notification. Obviously,
       discretion is left with the State Government to' demand at a rate which       B
       in a given situation would be justified. Once it is held that the tax is
       either compensatory or regulatory that forms the guideline for the State
        Government to keep in view to determine the rate at which within the
       upper limit fixed by law the demand has to be made. [525E-H]

            Automobile Transport (Rajasthan) Ltd. v, The State of Rajasthan
       and Ors., [1963] I SCR 491; Mis. International Tourist Corporation
                                                                                     c
       and Ors. v. Staie of Haryana and Ors., [1981] 2 SCC 318 and B.A.
       Jayaram and Ors. v. Union of India and Ors., [1984] 1 SCC 168, relied
       on.

             2. The word 'kept' has not been defmed in the Punjab Motor              D
       Vehicles Taxation Act, 1924. It must, therefore, be interpreted in its
       ordinary popular sense consistent with the context. The ordinary dictio·
       nary meaning of the word 'keep' is 'to retain', 'to maintain' or 'cause to
       stay or remain in a place' or 'to detain' or 'to stay or continue in a
       specified condition, position etc.'. It is something different from a mere
       state of transit or a course of journey through the State. It is something    E
       more than a mere stoppage or halt for rest, food or refreshment, etc. io
       the course of transit through the territory of the State. That being the
       postition, rule 8(v) which uses the term 'kept for use' may not cover a
       case of bare transit and in terms of the rule exemption is available for
       vehicles kept upto 30 days in a year. In that view of the matter tourist
       vehicles registered outside the State of Punjab and Haryana when              F
       brought into these two States for regular use and not by way of transit
       and when used for more t'ian 30 days in a rear would attract taxability;
       otherwise the exemption provision in rule 8(v) would be available. [530C·F]



,            Mis. International Tourist Corporation and Ors. v. State of
       Haryana and Ors., [1981] 2 SCC 318 and State of Mysore and Ors. v. G
       Mis T. V. Sundaram Iyengar & Sons (P) Ltd., [1980] 1 SCC 66, refer-
       red to.

             3. The question of exigibility of tax in the States of Punjab and
       Haryana with reference to rule 8(v) of the Punjab Motor Vehicles Taxa-
       tion Rules, 1925 is left to be determined in individual cases as and when     H
       raised. [530G I
    526                   SUPREME COURT REPORTS             [199l] 2 S.C.R.

           ORIGINAL JURISDICTION: Writ Petition No. 505 of 1990
A
    etc. etc.

          (Under Article 32 of the Constitution of India)

         R.N. Sachtey, S.K. Bhattacharya, S.C. Patel, Anip Sachthey,
B   Mahabir Singh, R.K. Agnihotri, R.K. Kapur, Ms. Anil Katyar, N.D.
    Garg, C.M. Nayar (NP), H.S. Munjral, V.B. Joshi, V.K. Verma, S.K.
    Agnihotri, Sakesh Kumar, N. Ganapathy, M. Veerappa, Mrs. Rani
    Chhabra, M.N. Shroff, Indra Makwana, Sushil Kumar Jain, S.N.
    Aggarwal, Ms. Vijay Lakshmi Menon, C.V.S. Rao, Aruneshwar
    Gupta and Sushi! Kumar for the appearing parties.
c         The Judgment of the Court was delivered by

        RANGANATH MISRA, CJ. These are applications under Arti-
  cle 32 of the Constitution on behalf of petitioners who hold All India
  Tourist Permits granted under section 63(7) of the Motor Vehicles
D Act, 1939 corresponding to section 88(9) of the Motor Vehicles Act,
  1988. The respondent·States in these writ petitions are Haryana,
  Punjab, Gujarat, Rajasthan and Madhya Pradesh. There iS a common
  Act--the Punjab Motor Vehicles Taxation Act, 1924-which is applic-
  able to the States Punjab and Haryana. In each of the other States.
  there is a similar separate legislation. Under the taxing power in the
E several Acts provision has been made for taxation as also for levy of
  additional tax. It is the contention of the petitioners that the demand
  of additional tax is neither compensatory nor regulatory and, there-
  fore, the levy is violative of Article IO(l)(g) read with Article 301 of
  the Constitution. In regard to the States of Punjab' and Haryana a
  special contention has been raised to the effect that rule 8(v) of the
F Punjab Motor Vehicles Taxation Rules. 1925 provide total exemption
  from liability of tax if the vehicle is brought into Punjab and kept for
  use within the State for a period not exceeding 30 days in a year and it
  is the contention of the petitioners that since the vehicle~ registered
  outside the States of Punjab and Haryana are not kept witi!in the State
  for more than 30 days a year, the demand of tax in the face of rule 8(v)
G is contrary to law.

          In the State of Gujarat, the Bombay Motor Vehicl~s Tax Act,
    1958 has been amended, Section 3A of the Amending Act provides
    that:
                                                                i
H               "3A(l) On and from the first day of April 1982 there shall
              M.T.S. v. STATE OF GUJARAT[RANGANATH MISRA, CJ.)                527

                   be levied and collected, on all omnibuses which are exclu-
                                                                                    A
                   sively used or kept for use in the State as contract carriages
                   (hereinafter in this section referred to as the omnibus) a tax
                   (hereinafter referred to as "the additional tax") in addition
                   to the tax levied under section 3, at the rates fixed by the
                   State Government by notification in the official Gazette
                   but not exceeding the. maximum rates specified in the            B
                   table below:

                  Descriptions of           Maximum rate of
                 ·an omnibus                additional tax.

                   A.   ordinary            (i) Monthly rate of Rs.240 per
                        Omnibuses               passenger permitted to be           c
                                                carried.
                                            (ii) Weekly rate of Rs. 80 per
                                                 passenger permitted to be
                                                carried.
                                                                                    D
..,.                                        (iii) Daily rate of Rs.16 per
                                                  passenger permitted to be
                                                  carried.
                   B.   Luxury or tourist (i) Monthly rate of Rs.360 per
                        omnibuses             passenger permitted to be
                                              carried.                              .E

                                            (ii) Weekly rate of Rs.120 per
                                                 passenger permitted to be
                                                 carried.
                                            (iii) Daily rate of Rs.24 pe~
                                                  passenger permitted to be         F
                                                  carried ....... "

               The validity of levy of this type came up for consideration before
         this Court in the case of the Automobile Transport (Rajasthan) Ltd. v.
         The State of Rajasthan and Ors., [1963) I S.C.R. 491. Four learned
       . Judges who constituted the majority held that the provisions of G
         Rajasthan Motor Vehicles Taxation Act, 1951 did not violate the pro-
         visions of Article 301 of the Constitution and the taxes imposed under
         the Act were compensatory or regulatory in nature which did not
         hinder the freedom of trade, commerce and intercourse assured by
         that Article, At page 586 of the Report the following test was H
         indicated:
    528                   SUPREME COURT REPORTS             [ 1991] 2 S.C.R.

               "It seems to us that a working test for deciding whether a
A
               tax is compensatory or not is to inquire whether the trades
               people are having the use of certain facilities for the better
               conduct of their business and paying not patently much
               more than what is required for providing the facilities. It
               would be impossible to judge the compensatory nature of a
B              tax by a meticulous test, and in the nature of things that
               cannot be done.

          The same question came up for consideration before a Two-
    J udge Bench in M/s. International Tourist Corporation and Ors. v.
    State of Haryana and Ors., [1981] 2 SCC 318. This Court followed the
    decision referred to above of the larger group and observed:
c
               "There cannot be the slightest doubt that the State of
               Haryana incurs considerable expenditure for the main-
               tenance of roads and providing facilities for the transport of
               goods and passengers within the State of Haryana. The
D              maintenance of highways other than the National High-
               ways is exclusively the responsibility of the State Govern-
               ment. While the maintenance of National Highways is the
               responsibility of the Union Government, under section 5 of
               the National Highways Act, that very provision empowers
               the Central Government to direct that any function in rela-
E              tion to the development and maintenance of a National
               Highway shall also be exercisable by the concerned State
               Government. Section 6 further empowers the Central
               Government to give directions to the State Government as
               to the carrying out of the provisions of the Act and section
               8 authorises the Central Government to enter into an
F              agreement with the State Government in relation to the
               development and maintenance of the whole or part of a
               National Highway situated within the State including a pro-
               vision for the sharing of expenditure. Therefore, the State
               Government is not altogether devoid of responsibility in
               the matter of development and maintenance of a National
G              Highway, though the primary responsibility is that of the
               Union Government. It is under a statutory obligation to
               obey the directions given by the Central Government with
               respect to the development and maintenance of National
               Highways and may enter into an agreement to share the
               expenditure. That part of the Highway which is within a
H              municipal area is excluded from the definition of a National
       M.T.S. v. STATE OF GUJARAT [RANGANATII MISRA, CT.]             529

            Highway and therefore, the responsibility for the develop-        A
            ment and maintenance of that part of the Highway is cer-
            tainly on the State Government and the Municipal Com-
            mittee concerned. Since the development and maintenance
            of that part of the Highway which is within a municipal area
            is equally important for the smooth flow of passengers and
            goods along the National Highway it has to be said that in        B
            developing and maintaining the Highway which is within a
            municipal area, the State Government is surely facilitating
            the flow of passengers and goods along the National High-
            way. Apart from this, other facilities provided by the State
            Government along all Highways including National Higff.
            ways, such as lighting, traffic control, amenities for passen-
            gers, halting places for buses and trucks are available for
                                                                              c
            use by everyone including those travelling along the
            National Highways. It cannot, therefore, be said that the
            State Government confers no benefits and renders. no
            service in connection with traffic moving along National
            Highways and is, therefore, not entitled to levy a com-           D
            pensatory and regulatory tax on passengers and goods car-
            ried on National Highways. We are satisfied that there is
            sufficient nexus between the tax and passengers and goods
            carried on National Highways to justify the imposition."

      This view has been approved in B.A. Jayaram and Ors. v. Union           E
of India and Ors., [ 1984] 1 S. C. C. 168. That case also relates to permit
holders under section 63(7) of the Motor Vehicles Act, 1939, and
challenge of the present type was negatived in that case. Law is settled
that to uphold levy of a tax of this type, what is necessary is existence
of a nexus between the subject and the object of the levy and it is not
necessary to show that the whole or a substantial part of the tax col-        F
lected is utilised. We are, therefore, satisfied that the demand of tax is
not open to challenge and the plea raised agai,nst the levy, whether of
tax or additional tax, is not justified. Under the taxing provision a
statutory outer limit has been provided and the actual amount is left to
be determined by the State Government by notification. Obviously,
discretion is left with the State Govemm.ent to demand at a rate which        G
in a given situation would be justified. Once it is held that the tax is
either compensatory or regulatory that forms the guideline for the
State Government to keep in view to determine the rate at which
within the upper limit fixed by law the demand has to be made.

      The second contention which has been raised is applicable to the        H
    530                    SUPREME COURT REPORTS             [ 1991] 2 S.C.R.

A States of Punjab and Haryana and that depends upon the scope of rule
  8(v) of the Punjab Motor Vehicles Taxation Rules, 1925. We note that
  the provision prescribes that a motor vehicle temporarily brought into
  Punjab and kept for use therein for a period not exceeding 30 days is
  entitled to total exemption and that is not in dispute before us. Nor is it
  in dispute that the rule applies to Haryana. The words 'Kept for use'
B
  came up for consideration in the case of International Tourist Corpo-
  ration (supra) where this Court held that once a vehicle is used within
  the State the taxable event occured and it must be taken for use. In
  State of Mysore and Ors. v. M/s. T.V. Sundaram Iyengar & Sons (P)
  Ltd., (1980] 1 S.C.C. 66 the meaning of 'kept' was examined at length
  and this Court held that a vehicle in transit through the State of
c Mysore, or even making a necessary halt for a short interval, during
  transit, cannot be said to be a vehicle 'kept' for use on roads in the
  State of Mysore. The word 'kept' has not been defined in the Act. It
  must, therefore, be interpreted in its ordinary popular sense consistent
  with the context. The ordinary dictionary meaning of the word 'keep' is
D 'to retain', 'to maintain' or 'cause to stay or remain in a place' or 'to
  detain' or 'to stay or continue in a specified condition, position etc.'. It
  is something different from a mere state of transit or a course of
  journey through the State. It is something more than a mere stoppage
  or halt for rest, food or refreshment, etc. in the course of transit
  through the territory of the State. That being the position rule 8(v)
  which uses the term 'kept for use' may not cover a case of bare transit
E and in terms of the rule exemption is available for vehicles kept upto
  30 days in a year. In that view of the matter tourist vehicles registered
  outside the States of Punjab and Haryana when brought into these two
  States for regular use and not by way of transit and when used for more
  than 30 days in a year would attract taxability otherwise the exemption
  provision in rule 8(v) would be available. We have settled the legal
F position and we leave it to the individual taxing authorities as also the
  operators of tourist vehicles to work out their respective rights.

          We would, therefore, like to clarify that the first aspect being a
    challenge against the taxing provision whether by way of tax or addi-
G   tional tax is rejected and the question of exigibility of tax in the States
    of Punjab and Haryana with reference to rule 8(v) of the Punjab
    Motor Vehicles Taxation Rules, 1925 is left to be determined in indi-
    vidual cases as and when raised. There would be no order as to costs.

    G.N.                                                Petitions disposed of.