Holding

The tax on designated omnibuses, including the advance‑tax and refund scheme, is intra‑vires; the amendment is valid and the High Court’s striking‑down is set aside.

Summary

The State of Gujarat amended the Bombay Motor Vehicles Tax Act, 1958 (via Gujarat Act No.9 of 2002) to impose a higher tax on "designated omnibuses" (contract carriages) and to require advance payment with a refund mechanism for non‑use. Bus operators challenged the amendment, alleging violation of Articles 14, 19(1)(g), 21 and 300A and contending that the tax was discriminatory, beyond the State's legislative competence under Entries 56 and 57 of List II, and that advance tax on vehicles not actually used was invalid. The Gujarat High Court struck down the provisions. The Supreme Court examined the nature of the levy, the meaning of "used or kept for use" in the statute, and the scope of Entries 56 and 57, holding that the tax is a compensatory tax within the State’s power, that the classification of contract carriages is reasonable, and that advance tax and refund provisions do not render the enactment unconstitutional. Consequently, the amendment was upheld and the High Court’s judgment set aside.

Issues considered

The validity of Section 3A(1) and (2) of the Bombay Motor Vehicles Tax Act, 1958 and Rule 5 of the Bombay Motor Vehicles Tax Rules, 1959, as amended by Gujarat Act No.9 of 2002, under Entries 56 and 57 of List II of the Seventh Schedule.
Whether the tax on designated omnibuses violates Article 14 (and Articles 19(1)(g), 21, 300A) by being discriminatory.
Whether the levy of advance tax on vehicles that are not actually used, and the associated refund provisions, exceed constitutional authority.
Whether the classification of contract carriages for a higher tax rate is a reasonable classification.
Whether the motive of augmenting State finances affects the constitutional validity of the tax.

Legislation cited

Constitution of Indias. Article 14, s. Article 19(1)(g), s. Article 21, s. Article 300A, s. Seventh Schedule, List II, Entry 56, s. Seventh Schedule, List II, Entry 57

Subjects

Vehicle taxLegislative competenceDiscriminationAdvance taxRefund mechanismEntries 56 and 57Constitutional lawPith and substanceClassification of vehiclesMotor vehicles

Judgment

A STATE OF GUJARAT AND ORS.
v.
AKHIL GUJARAT PRAVASI V.S. MAHAMANDAL AND ORS.

APRIL 8, 2004

B [S. RAJENDRA BABU AND G.P. MATHUR, JJ.)

Bombay Motor Vehicles Tax Act, 1958-Section 3A(J) and (2):

Gujarat Act No.9 of 2002:
c
Bombay Motor Vehicles Tax Rules, 1959-Rule 5:

Constitution ofIndia, I950--Articles 14, 19(/)(g), 21, 300A and Seventh
Schedule list II, Entries 56 and 57:

D Levy of advance tax-On Designated omnibuses used or kept for use in
the State-Provision for refund of the tax if the vehicle not used or kept for
use for a continuous period of not less than one month-Provisions ofAct and
Rules challenged-Struck down by High Court being discriminatory and being
beyond legislative competence as Entries 56 and 57 do not authorize levy of
E advance tax-On appeal, held: The tax imposed is not discriminatory-If the
vehicle is "used" or is "kept for use" in the State, it becomes liable for
payment of tax and the actual use and quantum of use is immaterial-The
legislature had legislative competence to enact the provision as the language
used in the Section is in conformity with Entry 57.

p Interpretation of the Constitution:

Interpretation of Entries of Schedule VII-Criteria for-Held: Entries
should be given a broad and comprehensive interpretation-Jn order to
ascertain legislative competence, Court must consider what constitutes in pith
and substance the true subject matter of the legislation and whether the subject
G matter is covered by the topics enumerated in the Legislative list-Doctrine
of Pith and Substance.

Words and Phrases:

"'Tax "-Meaning of
H 956
STATE 1·. AKHILGUJARATPRAVASI VS. MAHAMANDAL 957
Respondents-Bus operators filed Writ Petition in High Court A
challenging Section 3A (1) and (2) of Bombay Motor Vehicles Tax Act,
1958 and Rule 5 of Bombay Motor Vehicles Tax Rules, 1959, on the ground
that the same were violative of Articles 14, 19(l)(g), 21 and 300A of the
Constitution of India because the contract carriages which are designated
as omnibuses and luxury or tourists designated omnibuses had been B
subjected to heavy tax while all other vehicles were taxed under Section
3 of the Act whereunder the quantum of tax was much lower. Thus the
tax imposed upon them was without any reasonable classification and
hence the provision was arbitrary and discriminatory; that if the vehicle
is "not used" or "kept for use" or "passengers are not carried to the full
capacity" no tax could be levied; that Section 3A had been enacted without C
any legislative competence as the Act had been made with reference to
Entries 56 and 57 of List II of VII Schedule of the Constitution; that
provision was bad in as much as the amount of annual rate of tax was
fixed and not as per the capacity of the vehicle or the distance actually
covered or number of days of actual use; that the provision for depositing
tax in advance and thereafter claiming refund was wholly illusory and in D
fact the authorities had not made any such refund despite the application
in that regard being made.

High Court allowed the petitions striking down Section 3A (1) and
(2) and Rule 5 holding that the tax was a composite tax and not on E
passengers alone; that demand of advance tax on passengers for one month
was beyond the legislative competence as Entries 56 and 57 of List II of
VII Schedule of the Constitution do not authorize levy of advance tax;
that demand of advance tax on vehicles which were not put on road or
which were kept away from use was also beyond the legislative competence
and the provision for payment of advance tax and Rule 5 were without F
any authority of law; that mere fact that there was a provision for refund
of the advance tax paid, could not save the enactment as the levy of
advance tax itself was without any authority of law. The Court issued
Writ of Mandamus to the State Authority not to recover any tax from
the vehicles of the respondents and further directed the State to grant G
refund of the tax already recovered from the respondents. Hence the
present appeal. After decision of the High Court the Act was amended
by Gujarat Act No.9 of 2002 in order to validate the imposition and
collection of tax on designated omnibuses. Writ petition was filed in this
Court challenging the amendments.
H
958 SUPREME COURT REPORTS [2004] 3 S.C.R.

A Respondents-operators of the vehicles contended that the tax was
essentially a tax on passengers since rate of tax was fixed having regard
to the number of passengers permitted to be carried and ttfat the
enactment had been made with reference to Entry 56 List II of VII
Schedule of the Constitution. Since under this Entry no tax can be levied
B unless a passenger actually travels in the vehicle and since the tax is levied
on the basis of sitting capacity, it is beyond the competence of the State
Legislature; that if the tax was a composite tax, the requirement of both
the Entries 56 and 57 have to be satisfied, but the impugned tax does not
satisfy the requirement of Entry 57 as even if vehicle is intended to be '
used or kept for use the entire tax has to be paid; that the provision for
C refund of the tax is illusory as the refund is allowed only if the vehicle is
not used for the entire period of one month and the use of the vehicle even
for a single day creates a liability for payment of the tax for the whole
month; and that the Act is not compensatory enactment which might have
been passed for collecting revenue for the purpose of maintenance of roads
as the purpose for which the Act is enacted was to augment the financial
D resources of the State to meet the huge expenditure on account of natural
calamities etc.

Appellant-State contended that taxable events occur when the
vehicles in question were ready for use and the liability to pay tax
E immediately arises when the vehicle becomes usable. Once the certificate
of registration is given and the taxable event occurs, it is open to levy
advance tax irrespective of the fact whether the tax is levied under Entries
56 and 57; that contract carriages are a class by themselves and a higher
tax on such category ofvehicles has been specifically held to be permissible.

F Allowing the appeal and dismissing the writ petitions, the Court
.
HELD: 1. In interpreting the scope of various entries in the
legislative lists in Seventh Schedule, widest possible amplitude must be
given to the words used and each general word must be held to extend to
ancillary or subsidiary matters which can fairly be said to be
G comprehended in it. (970-D]

2.1. The tax imposed upon the designated omnibuses is not
discriminatory. It cannot be said that contract carriages which are
designated as omnibuses and luxury or tourist designated omnibuses have
been subjected to a very heavy tax under Section 3A of the Act, whilst all
H other vehicles are taxed under Section 3 of the Act and whereunder the
STA TE v, AKHIL GUJARAT PRA VASI V.S MAHAMANDAL 959

" quantum of tax is much lower and as such they have been discriminated A
against in the matter of taxation and there is lawful justification for
meeting out such differential treatment to them. 1980-F; 979-G-H; 980-Al
G.K. Krishnan v. State of Tamil Nadu, AIR (1975) SC 583 and Malwa
Bus Service v. State of Punjab, AIR (I 983) SC 634, relied on.
B
2.2. The enactment under question is a taxing statute. A tax is a
compulsory exaction of money by public authority for public purposes
enforceable by law and ·is not payment "for services rendered". This
definition brings out the essential characteristics of a tax as distinguished
from other forms of imposition which, in a general sense, are included
within it. The essence of taxation is compulsion that is to say, it is imposed C
under statutory power without the tax-payers' consent and the payment
is enforced by law. The second characteristic of tax is that it is an
imposition made for public purpose without reference to any special
benefit to be conferred on the payer of the tax. This is expressed by saying
that the levy of tax is for the purpose of general revenue, which when D
collected forms part of the public revenues of the State. As the object of
1
a tax is not to confer any special benefit upon any partic ular individual
there is no element of 'quid pro quo' between the tax payer and the public
authority. Another feature of taxation is that as it is a part of the common
burden, the quantum of imposition upon the tax-payer depends generally
upon his capacity to pay. 1970-F-H; 971-A-B) E
Commissioner, Hindu Religious Endowments, Madras v. Shri Laxmindra
Thirtha Swamiar of Shri Shirur Mutt, AIR (1954) SC 284, followed.

2.3. A fee is generally defined to be a charge for a special service
rendered to individuals by some Governmental Agency. But the F
traditional view that there must be actual quid pro quo has undergone a
sea change with the passage of time. Co relationship between the levy and
the services rendered/expected is one of general character and not of
mathematical exactitude. All that is necessary is that there should be a
"reasonable relationship" between the levy of the fee and the services
rendered. It is increasingly realized that the element of quid pro quo in G
the strict sense is not a sine qua non for a fee. 1971-B-CI

Sreenivas General Traders v. State of A.P., AIR (1983) SC 1246;
Municipal Corporation a/Delhi v. Moh. Yasin, AIR (1983) SC 617 and B.S.E.
Brokers' Forum v. Securities and Exchange Board of India, [2001 j 3 SCC H
960 SUPREME COURT REPORTS [2004) 3 S.C.R.

A 482, relied on.

2.4. Entry 56 authorises a tax, the incidence of which is on goods
and passengers carried by road or on inland waterways. Even though
the amount of the tax may be measured by the fares or by the distance
travelled, the Entry does not specify who should be the assessee and,
B therefore, it is open to enact a law to recover the tax from the owners or
operators of the vehicles. The tax imposed under this Entry is of
regulatory and compensatory character. The tax under Entry 57 is
leviable by the State legislature on all vehicles "suitable for use on roads"
which are kept in the State. The tax is compensatory in nature and,
C therefore, must have some nexus with the vehicles using the public roads
of the State. The words "suitable for use" signify the kind of vehicles
meaning thereby that the vehicles should be such type which are normally
capable of running on the road. The entry does not indicate in any manner
that tax would be leviable only for the period when the vehicle is actually
using the road and not otherwise and, therefore, it has no corelation with
D the actual period of use. It being a tax and not a fee (as understood in
the conservative sense) the actual use of the public roads of the State
cannot be insisted upon for incurring the liability. (971-E-H; 972-AJ

2.5. The language used in Section 3A-'all omnibuses which are used
or kept for use in the State exclusively as contract carriages' - is in
E conformity with Entry 57 of List II. If a vehicle is "used" or is "kept for
use" in the State, it becomes liable for payment of tax and the actual use
or quantum of use is not material. The fact that the statute provides for
refund of the tax, if the authority is satisfied that the vehicle has not been
used, does not mean that the legislature can only make a provision for
F levy of tax which is limited for the period of actual use or that no tax can
be levied during the period the vehicle is not put to use in the State. The
provision for the refund has been made only for the advantage of the
operator so that he may be relieved of the burden of tax when he is not
getting any income from the vehicle on account of its non-use but it has
no relevance to the competence or authority of the State to enact a law
G providing for imposition of a tax on vehicles which are used or arc kept
for use in the State. (977-E-Hl

Travancore Tea Co. v. State of Kera/a, AIR (1980) SC 1547; State of
Karnataka v. K. Gopa/akrishna Shenoy, AIR (1987) SC 1911; Chief General
H Manager, Jagannath Area v. State of Orissa, (1996( 10 SCC 676; State of
STATE,, AKHIL GUJARATPRAVASI VS. MAHAMANDAL 961

Kera/av. Arvind Ramakant Modawdakar, 1199917 SCC 400 and Mahakoshaf A
Tourist v. State of MP., 120011 7 SCC 245, relied on.

Boiani Ores ltd. v. State of Orissa, AIR (I 975) SC I 7; Mysore v.
Szmdaram Motors Pvt. ltd., AIR (1980) SC 148 and Gujarat v. Kaushikbhai
K. Patel, AIR (2000) SC 2 I 75, distinguished.
B
2.6. It cannot be said that the Act is not a compensatory enactment
which may have been passed for collecting revenue for the purpose of
maintenance of roads and consequently the same is invalid because the
purpose for which the Act was enacted was to augment the financial
resources of the State to meet the huge expenditure on account of natural C
calamities etc. as has been mentioned in the Statement of Objects and
Reasons. If the State Legislature was competent to pass the Act, the
question of motive with which the tax was imposed is immaterial and there
can be no plea of a colourable exercise of power to tax if the Government
had the power to impose the tax. It was further held that if the
Government had an authority to impose 11 tax, the fact that it gave a wrong D
reason for exercising the power would not derogate from the validity of
the tax. [979-D-Fl

G.K. Krishnan v. State of Tamil Nadu, AIR (1975) SC 583, relied on.

3. Since the view taken by the High Court is not correct and Section E
3A and Rule 5 of the Rules, as incorporated vide notification dated
6.2.2001 are intra vires and are perfectly valid, the challenge made to
Gujarat Act No. 9 of 2002 has no substance and must fail. (980-H; 981-AI
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6462-6464
of 2001. F
From the Judgment and Order dated 17.8.2001 of the Gujarat High
Court in S.C.A. Nos. 1288, 1421 and 3137 of 2001.

K.N. Raval, Solicitor General, L.N. Rao, Additional Solicitor General,
Ms. Hemantika Wahi, Ms. Archna Palkar and Malvik Nanavati for the G
Appellants/Petitioners.

Vinod Bobde, Prashant Desai, Mahesh Agrawal, Rishi Agrawal, E.C.
Agrawala, R.R Dave, Manu Krishnan for the Respondent in Appeal and
Petitioner in W.P. No. 249/2002 and W.P. No. 252/2002.
H
962 SUPREME COURT REPORTS [2004] 3 S.C.R. •
A The Judgment of the Court was delivered by

G.P. MATHUR, J. l. Civil Appeal Nos.6462-6464 of2001 have been
preferred by State of Gujarat against the judgment and order dated 17.8.2001
of a Division Bench of the High Court, whereby Section 3A (I) and (2) of
Bombay Motor Vehicles Tax Act, 1958 and also Rule 5 of Bombay Motor
B Vehicles Tax Rules, 1959 made vide notification dated 6.2.2001 were struck
down and a writ of mandamus was issued to the State authorities not to
recover any tax in pursuance thereto from the vehicles of the respondents
herein (writ petitioners in the High Court) which were kept but were not
being used. A further direction was issued to the respondent State to grant
C refund of the tax already recovered from the respondents within three months
from the date of receipt of copy of the judgment after examining their case
regarding non-use of the vehicles. After the decision of the High Court, the
Bombay Motor Vehicles Tax Act was amended by Gujarat Act No. 9 of2002
in order to validate the imposition and collection of tax on designated
omnibuses, which was published in the Gazette on 31.3.2002. Writ Petition
· D Nos.249 and 252 of 2002 have been filed in this Court challenging the
amendments made by the aforesaid amending Act.

2. It will be convenient to reproduce relevant provisions of the statute
which was subject matter of challenge before the Gujarat High Court. The
Bombay Motor Vehicles Tax Act, 1958 (hereinafter referred to as "the Act")
E was made applicable to the State of Gujarat by the Gujarat Adoption of Laws
(State and Concurrent Subjects) Order, 1960. The Act was amended several
times and lastly on 6.2.200 I by Gujarat Act No.2 of 200 I. Section 2 of this
Act gives the definitions and Sub-section (I) defines "certificate of taxation"
and it means a certificate, issued under Section 5, indicating therein the rate
p at which the tax is leviable, and the periods for which the tax has been paid,
Sub-section (5) defines "registered owner" and it means the person in whose
name a motor vehicle is registered under the Motor Vehicles Act, 1939 (or,
as the case may be, the Motor Vehicles Act, 1988) and Sub-section (7)
defines "Taxation Authority" or "Authority" and it means such officer or
authority as the State Government may by notification in the Official Gazette,
G appoint to be the Taxation Authority for the whole State or for any area or
areas for the purposes of the Act, and the State Government may appoint
more than one officer or authority as Taxation Authority for the whole State
or for any area. The controversy here relates to Sections 3 and 3A of the Act
and the relevant part thereof are being reproduced below :
H
STATE v. AKHIL GUJARAT PRA VASI V.S. MAHAMANDAL IG.P.MA THUR, J.] 963

Section 3 (I) Subject to the other provisions of this Act, on and from A
the Ist day of April, J958, there shall be levied and collected on all
motor vehicles used or kept for use in the State, a tax at the rates
fixed by the State Government, by notification in the Office Gazette,
[but not exceeding the maximum rates specified in the [First, Second,
Third, Fourth, Fifth, Sixth and Seventh Schedules] :
B
Provided ............... [Omitted as not relevant]

Provided further .................. [Omitted as not reievant]

(2) Except, during any period for which the Taxati0n Authority has,
in the prescribed manner, certified that a motor vehicle was not used C
or kept for use in the State, the registered owner, or any person
having possession or control, of a motor vehicle of which the certificate
of registration is current, shall, for the purposes of this Act, be deemed
to use or keep such vehicle for use in the State.

(3) No tax shall be leviable under sub-section (I) on motor vehicles D
on which tax is leviable under sub-section (I) of section 3A.

Section 3A. (1) ·On and from the 1st day of April, 1991, there shall
be levied and collected on all omnibuses which are used or kept for
use in the State exclusively as contract carriages (hereinafter in this
section and sub-section (I A) of Section 4 referred to as "the designated E
omnibuses") a tax at the rates specified in the table below :-

TABLE

Description of Designated omnibuses Annual rate of tax
F
I. (a) Ordinary designated omnibuses (Rs.2,700) per passenger permitted
permitted to be carried not more to be carried.
than twenty passengers.
(b) Ordinary designated omnibuses (Rs.4,050) per passenger permitted
permitted to be carried more to be carried. G
than twenty passengers.
2. (a) Luxury or tourist designated (Rs.4,050) per passenger permitted
omnibuses permitted to be to be carried.
carried not more than twenty
passengers.
H
964 SUPREME COURT REPORTS (2004] 3 S.C.R.

A (b) Luxury or tourist designated (Rs.6,000) per passenger permitted
omnibuses permitted to be to be carried.
carried more than twenty
passengers.

Provided that in the case of the designated omnibuses used solely
B for the purpose of transporting students of educational institutions in
the State in connection with any of the activities of such educational
institutions a tax shall be levied and collected under sub-section (I)
of section 3, and not under this sub-section.

(2) (a) The tax leviable under sub-section (I) shall be paid in advance
C by every registered owner or any person having possession or control
of the designated omnibuses either annually at the annual rate specified
in the Table appearing in sub-section (I) or in monthly instalments
of one-twelfth of the annual rate.

(b) The annual payment of tax or the payment of monthly instalment
D of tax shall be made within such period and in such manner as may
be prescribed.

(3) .. [Omitted as not relevant]

(4) .. [Omitted as not relevant]
E (5) (a) Where the registered owner or any person having possession
or control of a designated omnibus who has paid tax under this section
proves to the satisfaction of the Taxation Authority that the designated
omnibus in respect of which the tax has been paid has not been used
or kept for use for a continuous period of not less than one month,
F he shall be entitled to the refund of an amount equal to one-twelfth
of the annual rate of tax paid in respect of such omnibus for each
complete month of the period for which the tax has been paid so
however that, except as otherwise provided in clause (b) the total
amount of a refund in a year shall not exceed
G (i) six hundred seventyfive rupees per passenger permitted to be
carried, in the case of an ordinary designated omnibus permitted
to be carried not more than twenty passengers.
(ii) one thousand twelve rupees per passenger permitted to be carried,
in the case of an ordinary designated omnibus permitted to be
H carried more than twenty passengers.
7
I

STATE r. AKHIL GUJARAT PRA VASI VS. MAHAMANDAL [G. P MA THUR, J.] 965
. .., (iii) one thousand one hundred twenty-five rupees per passenger A
pennitted to be carried, in the case of a luxury or tourist designated
on:mibus permitted to be carried not more than twenty passengers.

(iv) one thousand five hundred rupees per passenger pennitted to be
carried, in the case of a luxury or tourist designated omnibus
pennitted to be carried more than twenty passengers. B
Provided that for the purpose of detennining the amount of refund
under this clause, only such of the period ir• which a designated
omnibus has not been used or kept for use shall be taken into account
as comprises of complete months.

(b) Where a registered owner or a person having possession or control
c
of a designated omnibus, who has paid tax under this section proves
to the satisfaction of the State Government or such officer not below
the rank of the Director of Transport, Gujarat State, as may, by
notification in the Official Gazette, be authorised in this behalf by the
State Government that the designated omnibus in respect of which D
tax has been paid, has not been used or kept for use for a continuous
period of not less than one month but exceeding three months in a
year, he shall be entitled to the refund of an amount equal to one-
.twelfth of the annual rate of the tax paid in respect of such omnibus
for each complete month of the period of which the tax has been E
paid:

Provided that for the purpose of detennining the amount of refund
under this clause only such of the period in which a designated
omnibus has not been used or kept for use shall be taken into account
as comprises of complete mgnths.
F
(6) .............. [Omitted as not relevant]

Section 4( 1) provides that the tax leviable under Section 3 in respect of
a motor vehicle specified in the First Schedule shall be paid in advance by
every registered owner, or any person having possession or control, of such
motor vehicles to which sub-section (IAA) does not apply. G
3. The Bombay Motor Vehicle Rules, 1959 (hereinafter referred to as
'the Rules') were amended by Bombay Motor Vehicles Tax (Gujarat
Amendment) Rules, 2001 vide notification dated 6.2.2001 and after amendment
Rule 5 reads as under :
H
966 SUPREME COURT REPORTS [2004] 3 S.C.R.

A "(!) A registered owner or any person who has possession or
control of a motor vehicle in respect of which tax is paid in advance,
not intending to use or keep for use such vehicle in the State and
desiring to c1aim refund of tax on that account shall before the
commencement of the period for which the refund of tax is to be
claimed, make a declaration in form NT for any specified period not
B exceeding beyond the period for which the tax is paid in advance to
the Taxation Authority in whose jurisdiction such vehicle is to be
kept under non-use along with the certificate of taxation as well as
certificate of fitness in case of transport vehicles and a fee of rupees
,.
ten.
c Provided that where a vehicle is rendered incapable of being used
or kept for use on account of an accident, mechanical defect or any
other sufficient cause, which make it impossible to give an advance
declaration as aforesaid then such declaration shall be given within a
period of seven days from the date of occurrence of such accident,
D mechanical defect or such other cause, either in person or by registered
post acknowledgement due;

(2) If the Taxation Authority is satisfied that the motor vehicle,
in respect of which a declaration in Form "NT' has been made, has
not been used, or kept for use for the whole or part of the period
E mentioned in the declaration and it shall certify that the motor vehicle
has not been used or kept for use for the whole or part of such period
as the case may be by making an endorsement in the certificate of
taxation to that effect.

Provided that nothing contained in this sub-rule shall effect the
F right of the Taxation Authority to recover the tax and penalty due for
the period of non-use so certified if, at any time, it is found that the
vehicle was actually used or kept for use in the State during such
period.

(3) The declaration in Form 'NT' given under the proviso to sub-
G rule (I) shall be accompanied by the certificate of Taxation and
documentary evidence if any, or any other proof evidencing such
non-use of the vehicle and the period thereof. Where the appropriate
Taxation Authority, on considering the evidence adduced, if any, and
on making such inquiries as it deems fit, refuses to admit the
declaration of non-use or to certify the period of non-use, it shall
H
STATE 1·. AKHIL GUJi\Ri\ T PRAVASI VS. MA Hi\ MAN DAL [G.P.MATHUR, J.] 967
record in writing its reasons therefor and communicate to the A
applicant."
,
4. A perusal of the Act would show that Section 3 is the general charging
Section which provides for levy of tax on all motor vehicles used or kept for
use in the State and the rate of tax for different categories of vehicles is given
in the schedule appended to the Act However, Section 3A is a special provision B
with regard to the "designated omnibuses" and prescribes the annual rate of
tax for ordinary, luxury or tourist designated omnibuses having regard to
'"'\,
their passenger carrying capacity which are used or kept for use in the State.
The challenge here is to Section 3A and, therefore, we will confine to the
said provision. Sub-section (2)(a) of Section 3A enjoins that the tax shall be C
paid in advance by every registered owner or any person having possession
or control of the designated omnibuses either annually or in monthly
instalments. Sub-section (5)(a) of Section 3A provides for refund of the tax
already paid in advance where the registered owner or any person having
possession or control of a designated omnibus satisfies the Taxation Authority
that the vehicle had not been used or kept for use for a continuous period of D
not less than one month. Sub-section (5)(b) contains a similar provision of
refund where the vehicle has not been used or kept for use for continuous
period of not less than one month but exceeding three months in a year. But
here the power of refund has been conferred upon the State Government or
such officer not below the rank of the Director of Transport, as may, by E
notification in the official gazette, be authorised in this behalf by the State
Government. Rule 5 shows that for claiming refund of the advance tax already
paid a declaration in Form NT has to be made to the Taxation Authority
before the commencement of the period for which the refund of tax is to be
claimed in case it is intended not to use or keep any such vehicle in the State.
However, where the vehicle becomes incapable of being used or kept for use F
on account of any accident, mechanical defect or any other sufficient cause,
which makes it impossible to give advance declaration, then such declaration
has to be given within a period of seven days from the date of occurrence of
such accident or mechanical defect or other cause.

5. The writ petitions were filed in the High Court on the ground, inter G
alia, that Section 3A of the Act is violative of Articles 14, 19(l)(g), 21 and
300 A of the Constitution as designated omnibuses which are in fact contract
carriages are discriminated against from other vehicles like stage carriages,
ordinary vehicles and goods vehicles and a very high rate of tax was imposed
upon them without there being any reasonable classification and thus the H
968 SUPREME COURT REPORTS [2004] 3 S.C.R.

A impugned provision was wholly arbitrary and discriminatory. It was submitted ' "
that if the vehicle is "not used" or "kept for use" or "passengers are not
carried to the full capacity" no tax could be levied and consequently the
provisions of Section 3A had been enacted without any legislative competence
having regard to the fact that the Act had been made with reference to Entry
B 56 and 57 of List II of Seventh Schedule of the Constitution. In this connection
it was also submitted that the provision was bad inasmuch as the amount of
annual rate of tax was fixed not as per the capacity of the vehicle or the
distance actually covered or number of days of actual use but on a fixed rate
basis. Whether the vehicle covered only one kilometer or thousand kilometers,
r
the same amount of tax had to be paid. Another submission made was that
C tax had to be paid for the whole month even though the actual use of the
vehicle may have been for a much shorter period. Lastly, it was submitted
that the provision for depositing tax in advance and thereafter claiming a
refund was wholly illusory and in fact the authorities had not made any such
refund even though applications in that regard were pending for a long period.
The High Court has held that the impugned tax was a composite tax and not
D on passengers alone; the demand of advance tax on passengers for one month
was beyond the legislative competence as Entries 56 and 57 of List II of
Seventh Sched1ile of the Constitution do not authorise levy of advance tax;
similarly the demand of advance tax on vehicles which are not put on road
or which are kept away from use was also beyond the legislative competence
E and the provision for payment of advance tax and Rule 5 were without any
authority of law. The High Court further held that the mere fact that there
was a provision for refund of the advance tax paid, could not save the
enactment as the levy of advance tax itself was without any authority of law.
On these findings, the writ petitions were allowed and Section 3A (I) and (2)
of the Act and Rule 5 of the Rules as inserted vide notification dated 6.2.2001
F and also a subsequent circular dated 8.2.200 I were struck down.

6. Learned counsel for the writ petitioners (here as well as before the•
High Court-operators of vehicles) have submitted that the tax is essentially
a tax on passengers since rate of tax is fixed having regard to the number of
G passengers permitted to be carried and on a plain reading of the Statute it is
clear that the enactment has been made with reference to Entry 56 List II of
Seventh Schedule of the Constitution whereunder tax can be levied on
passengers actually carried. But under this Entry, no tax can be levied unless
a passenger actually travels in the vehicle and since the tax is levied on the
basis of seating capacity, it is beyond the legislative competence of the State
H legislature. It is submitted that the plea of the State before the High Court
1 STATEv. AKHILGUJARAT PRAVASI V.S. MAHAMANDAL [G.P MATHUR, .I] 969

was that it is a composite tax i.e. a tax on passengers and a tax on motor A
vehicles which is also evident from the speech given by the Hon'ble Minister
in the legislature and also from the counter affidavit filed before the High
Court. Therefore, in such a case, the requirement of both the Entries 56 and
57 have to be satisfied. The impugned tax does not satisfy the requirements
of Entry 57 because even if the vehicle is not intended to be used or kept for B
use, the entire tax has to be paid. Learned counsel has further submitted that
the provision for refund of the tax is wholly illusory as the refund is allowed
only if the vehicle is not used for the entire period of one month and the use
of the vehicle even for a single day creates a liability for payment of tax for
the whole month. Learned counsel has also assailed the provision of Rule 5
which lays down the criteria for determining as to whether a vehicle has not C
been used or has not been kept for use.

7. Countering the submission made by learned counsel for the writ
petitioners, Shri Kirit N. Raval, learned Solicitor General appearing for the
State of Gujarat, has submitted that the owner of designated omnibus has to
first apply for a certificate of registration under the provisions of Motor D
Vehicles Act and such a certificate gives rise to a presumption that the vehicle
in question is meant for use on roads in the State. The taxable event occurs
when the vehicle in question is ready for use and the liability to pay tax
immediately arises when the vehicle becomes usable. Once the certificate of
registration has been given and the taxable event occurs, it is perfectly open E
to levy advance tax on motor vehicles and the High Court was in error in
holding that advance tax cannot be levied. This is irrespective of the fact
whether the tax in question is levied under Entry 56 or 57. Learned counsel
has further submitted that if income tax can be levied on income and there
are provisions in the Income Tax Act for levy of advance tax even when the
•• income in question has not been earned, with a machinery for refund, there F
is no reason why even under Entry 56 or 57, the tax cannot be levied when
the presumption of the vehicle being made for use of passengers arises and
taxable event has taken place. Learned Solicitor General has also submitted
that the contention that the contract carriages have been levied a higher tax
ignores the accepted position that contract carriages are a class by themselves . G
and a higher tax on such category of vehicles has been specifically held to
be permissible. The mere fact that the tax falls heavily on one category is
wholly irrelevant and the possibility of better classification for imposition of
tax in question is no ground for striking down the levy.

8. The relevant entries with reference to which the impugned enactment H
970 SUPREME COURT REPORTS [2004] 3 S.C.R.

A has been made are Entries 56 and 57 of List II of Seventh Schedule of the
Constitution which read as under :

Entry 56 - Taxes on goods and passengers carried by road or on inland
water ways.

B Entry 57 - 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.
r
Entry 35 of List Ill - Mechanically propelled vehicles including the principles
on which taxes on such vehicles are to be levied.
c
9. Before examining the contentions raised at the Bar it is necessary to
bear in mind certain fundamental principles which are too well settled. The
necessity for the same arises on account of the fact that they have been lost
sight of in the contentions raised on behalf of the operators of designated
D omnibuses both here and also in the High Court.

I0. In interpreting the scope of various entries in the legislative lists in
Seventh Schedule, widest possible amplitude must be given to the words
used and each general word must be held to extend to ancillary or subsidiary
matters which can fairly be said to be comprehended in it. The entries should,
E thus be given a broad and comprehensive interpretation. In order to see
whether a particular legislative provision falls within the jurisdiction of the
legislature which has passed it, the Court must consider what constitutes in
pith and substance the true subject matter of the legislation and whether such
subject matter is covered by the topics enumerated in the legislative list
pertaining to that legislature.
F
11. The enactment under question is a taxing statute. The indicia of tax
was explained by a bench of seven judges in Commissioner-Hindu Religious
Endowments, Madras v. Shri Laxmindra Thirtha Swamiar of Shri Shirur
Mutt, AIR (1954) SC 284 which has since been consistently followed and it
is as under. A tax is a compulsory exaction of money by public authority for
G public purposes enforceable by law and is not payment "for services rendered".
This definition brings out the essential characteristics of a tax as distinguished
~·
from other forms of imposition which, in a general sense, are included within
it. The essence of taxation is compulsion that is to say, it is imposed under
statutory power without the tax-payers consent and the payment is enforced
H by law. The second characteristic of tax is that it is an imposition made for
~
STATE 1·. AKHIL GUJARAT PRA VASI V.S. MAHAMANDAL [G.P.MA THUR, J.] 971

.;
L public purpose without reference to any special benefit to be conferred on the A
payer of the tax. This is expressed by saying that the levy of tax is for the
purposes of general revenue, which when collected forms part of the public
revenues of the State. As the object of a tax is not to confer any special
benefit upon any particular individual there is no element of 'quid pro quo'
between the tax payer and the public authority. Another feature of taxation
is that as it is a part of the common burden, the quantum of imposition upon
B
the tax-payer depends generally upon his capacity to pay.

\
12. A fee is generally defined to be a charge for a special service
'
rendered to individuals by some governmental agency. But the traditional
view that there must be actual quid pro quo has undergone a sea change with
the passage of time. Corelationship between the levy and the services rendered/
c
expected is one of general character and not of mathematical exactitude. All
that is necessary is that there should be a "reasonable relationship" between
the levy of the fee and the services rendered. It is increasingly realized that
the element of quid pro quo in the strict sense is not a sine qua non for a fee.
(See Sreenivas General Traders v. State of A.P., AIR (1983) SC 1246, D
Municipal Corporation of Delhi v. Moh. Yasin, AIR (1983) SC 617 and
\
B.S.E. Brokers' Forum v. Securities and Exchange Board of India, (2001] 3
..,, sec 482).
13. Entry 56 authorises a tax, the incidence of which is on goods and
passengers carried by road or on inland waterways. Even though the amount E
of the tax may be measured by the fares or by the distance travelled, the
Entry does not specify who shou Id be the assessee and, therefore, it is open
to enact a law to recover the tax from the owners or operators of the vehicles.
The tax imposed under this Entry is of regulatory and compensatory character.
The tax under Entry 57 is leviable by the State legislature on all vehicles F
'.:..,
"suitable for use on roads" which are kept in the State. The tax is compensatory
'
in nature and, therefore, must have some nexus with the vehicles using the
public roads of the State. The words "suitable for use" signify the kind of
vehicles meaning thereby that the vehicles should be such type which are
normally capable of running on the road. The entry does not indicate in any
manner that tax would be leviable only for the period when the vehicle is G
actually using the road and not otherwise and, therefore, it has no correlation
..... with the actual period of use. Naturally the State has to maintain the roads
and to keep them in proper condition for all those who own vehicles suitable
for use on roads. This is irrespective of the fact whether they use it or not
or use it occasionally or for short duration only. It being a tax and not a fee H
972 SUPREME COURT REPORTS [2004] 3 S.C.R.

A (as understood in the conservative sense) the actual use of the public roads
of the State cannot be insisted upon for incurring the liability.

14. The main ground of challenge of the writ petitioners is that Section
3A mandates payment of tax in advance even though the vehicle may not at
all be used. It may be noticed that Section 3A of the Act lays down that there
B shall be levied and collected on all omnibuses which are used or kept for use
in the State exclusively as contract carriages a tax at the rates specified in the
table. The incidence of tax is, therefore, on omnibuses which are "used or
kept for use in the State". A similar controversy was examined in Travancore
Tea Co. v. State of Kera/a, AIR (1980) SC I547. Here the company alleged
C that the vehicles were purchased by it solely and exclusively for use in the
tea estates and intended to be used only for agricultural purposes and were
not used nor kept for use in the State, as contemplated by Section 3 of Kerala
Motor Vehicles Taxation Act. It was further alleged by the company that for
the purpose of plantation it was maintaining the roads, fit for vehicular traffic,
in the eight estates covering a length of 131 miles. Paragraphs 4, 5 and 6 of
D the Reports which are relevant are being reproduced below :

"4. The question that falls for decision is whether on the assumption
that the motor vehicles are used or kept for use within the estate, and
not intended to be used on public roads of the State; the tax is leviable?
In order to appreciate the question raised, it is necessary to refer to
E the relevant entry in the Constitution, the provisions of the .\ct and
the Motor Vehicles Act and the decision relating to the question
rendered by this Court. Entry 57 in List II of the Constitution relates
to 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. This entry enables the State Government to levy a tax
F
on all vehicles whether mechanically propelled or not, suitable for
use on roads. There is no dispute that the vehicles are mechanically
propelled and suitable for use on roads.
5. Section 3 of the impugned Act (Kerala Motor Vehicles Taxation
Act (Act 24 of 1963) provides that a tax "shall be levied on all motor
G
vehicles used or kept for use in the State." The levy is within the
competence of the State legislature as entry 57 in List II authorises
levy on vehicles suitable for use on roads. It has been laid down by
this Court in Boiani Ores ltd v. State of Orissa, [!975] 2 SCR 138
..
at p, 155; AIR (1975) SC 17 that under Entry 57 of List II, the power
H of taxation cannot exceed compensatory nature which must have some
STATE 1·. AKHILGU.IARAT PRAVASI V.S. MAHAMANDAL [G.P.MATHUR, .I] 973

nexus with the vehicles using the roads i.e. public roads. If the vehicles A
do not use the roads, notwithstanding that they are registered under
the Act, they cannot be taxed.

6. If the words 'used or kept for use in the State' are construed as
used or kept for use on the public roads of the State, the Act would
be in conformity with the powers conferred on the State legislature B
under Entry 57 of List II. If the vehicles are suitable for use on public
roads they are liable to be taxed. In order to levy a tax on vehicles
\ used or kept for use on public roads of the State and at the same time
to avoid evasion of tax the legislature has prescribed the
procedure ....... " (emphasis supplied)
c
After laying down the above principle of law the question whether
estate roads are public roads was left for investigation and decision by R.T.O.

15. The validity of payment of advance tax was examined in State of
Karnataka v. K. Gopa!akrishna Shenoy, AIR (1987) SC 191 I, with reference
to Mysore Motor Vehicles Tax Act, Section 3(1) whereof provided for levy D
of tax on all motor vehicles suitable for use on roads, kept in the State of
Mysore. The explanation appended to Sub-section (1) of Section 3 laid down
that a motor vehicle of which certificate of registration is current shall, for
the purpose of the Act, be deemed to be a vehicle suitable for use on roads.
Section 4 provided that the tax under Section 3 shall be paid in advance by E
the registered owner or person having possession or control of the motor
vehicle. Section 7 provided for refund of tax if it was proved to the satisfaction
of the prescribed authority that the vehicle had not been used during the
whole of the period for which tax had been paid or a continuous part thereof
not being less than one calendar month, a refund shall be made of such
portion of the tax and subject to such conditions as may be prescribed. In F
)>.

paras 6 and 7 of the Reports, it was held as under :

"6 ......... On a reading of Sections 3 and 4 it may be seen that they
make the registered owner or person having possession or control of
a motor vehicle kept in the State absolutely liable to pay tax in G
advance at the rates specified in part A of the Schedule thereto for a
quarter, half-year or year at his choice. The Motor Vehicle Taxation
Acts in all the States of the Indian Union follow a uniform pattern.
Enfry 57 of List II of Schedule VII of the Constitution is the Legislative
Entry conferring power on the States to levy the tax. It has been
observed by this Court in Automobile Transport ltd. v. State of H
974 SUPREME COURT REPORTS [2004] 3 S.C.R.

A Rajasthan, (1963] I SCR 491: AIR (1962) SC 1406 that the tax on
motor vehicles is a compensatory tax levied for the use of the roads
and it is not a tax on ownership or possession of motor vehicles. The
object of the Act is achieved by charging to tax all motor vehicles
suitable for use on roads kept in the State, the registered owner or
person having possession or control being held liable to pay the tax
B in advance and then providing for grant of refund for non-user subject
to prescribed conditions.

7. What falls for consideration now is whether the owner or person
having the possession or control of a motor vehicle is not bound to
pay the tax under Section 3( I) of the Act because the vehicle was in
c a state of repair and was not put to use on the road and furthermore
the Certificate of Fitness of the vehicle had not been kept current
even though the Certificate of Registration was kept current. One
factor which has to be borne in mind in interpreting Section 3(1) and
its Explanation is the meaning to be given to the words "suitable for
D use on roads", occurring in them as otherwise a misconception would
arise. These very words occur in Entry 57 in the State List which
reads as under:-

"Taxes on vehicles, whether mechanically propelled or not, suitable
for use on roads, including tram cars, subject to the provisions of
E Entry 35 of List III".

The words "suitable for use on roads" in the said Entry have been
construed by Hidayatullah, .I. as he then was, in Automobile Transport
(AIR 1962 SC 1406) case as under :

F "The words 'suitable for use on roads' describe the kinds of
vehicle and not their condition. They exclude from the Entry, farm
machinery, aeroplanes, railways etc. which though mechanically
propelled are not suitable for use on roads. The inclusion of trams
using tracks which may be on roads or off them, makes the distinction
still more apparent."
G
It, therefore, follows that the same meaning should be given to those
words occurring in Section 3(1) and the Explanation also. The resultant
position that emerges is that Section 3(1) confers a right upon the
State to levy a tax on all motor vehicles which are suitably designed
for use o~ roads at prescribed rates without reference to the road
H worthy condition of the vehicle or otherwise. Section 4 enjoins every
STATE1·. AKHILGU.IARATPRAVASI V.S MAHAMANDAL [G.P.MATlllJR,.J.] 975

registered owner or person having possession or control of the motor A
vehicle to pay the tax in advance. The Explanation to Section 3(1)
contains a deeming provision and its effect is that as long as the
Certificate of Registration of a motor vehicle is current, it must be
deemed to be a vehicle suitable for use on roads. The inevitable
consequence of the Explanation would be that the owner or a person B
having control or possession of a motor vehicle is statutorily obliged
to pay the tax in advance for the motor vehicle as long as the Certificate
of Registration is current irrespective of the condition of the vehicle
\ for use on the roads and irrespective of whether the vehicle had a
Certificate of Fitness with current validity or not. The Act, however,
takes care to see that the owner of a motor vehicle or a person having C
possession or control of it is not penalised by payment of tax in
advance for a vehicle which had not been actually used during the
whole of a period or part of a period for which tax had been paid by
him ........."

After considering the provision for refund of the tax as contained in D
Section 7 of the Act, it was held as under in para 8 of the Report :
\
"8 .........The principle underlying the Taxation Act is that every motor
vehicle issued Certificate of Registration is to be deemed a potential
user of the roads all through the time the Certificate of Registration
is current and therefore liable to pay tax under Section 3(1) read with E
Section 4. If, however, the vehicle had not made use of the roads
because it could not be put on the roads due to repairs, even though
the Certificate of Registration was current, the owner or oerson
concerned has to seek for and obtain refund of the tax paid in advance
after satisfying the Authorities about the truth of his claim. It is not F
for the Transport Authorities to justify the demand for tax by proving
that the vehicle is in a fit condition and can be put to use on the roads
or that it had plied on the roads without payme~t of tax. It would be
absolutely impossible for the State to keep monitoring all the vehicles
and prove that each and every registered vehicle is in a fit condition
and would be making use of the roads and is therefore liable to pay G
the tax. For that reason, the State has made the payment of tax
compulsory on every registered vehicle and thai too in advance and
has at the same time provided for the grant of refund of tax whenever
the person paying the tax has not made use of the roads by plying the
vehicle and substantiates his claim by proper proof. Any view to the H
(
976 SUPREME COURT REPORTS [2004) 3 S. C.R.

A contrary would defeat the purpose and intent of the Taxation Act and
would also afford scope and opportunity for some of the persons
liable to pay the tax to ply the vehicle unlawfully without payment
of tax and later on justify their non-payment by setting up a plea that
the vehicle was in repair for a continuous period of over a month or
the whole of a quarter, half-year or year as they choose to claim."
B
16. In Chief General Manager, Jagannath Area v. State of Orissa,
[ 1996] I0 SCC 676, the question for consideration was whether the dumpers
belonging to the appellant which were being used within the mining areas
were taxable under Orissa Motor Vehicles Taxation Act, Section 3 whereof
C laid down that a tax shall be levied on every motor vehicle used or kept for
use within the State at the rates specified in the Schedule. Two contentions
were raised before th is Court and the second contention was that the tax on
vehicles being compensatory in nature, levy of such tax can be sustained only
on the ground that the vehicles used the roads for which the tax is levied and
if the vehicle in question did not use the roads and yet tax is levied on the
D same, the said levy is liable to be struck down. Repelling the argument that
in absence of actual use of the road, the tax would not be leviable, this Court
held as under in para 11 of the Reports :

"11. The tax imposed on the motor vehicles is basically a tax for the
use of the roads within the State. It is no doubt a compensatory tax
E which facilitates trade, commerce and intercourse within the State by
providing roads and maintaining roads in a good state of repairs. As
has been held by this Court in Automobile Transport ltd. v. State of
Rajasthdn and Ors., [1963] I SCR 491, it would not be right to say
that the tax is not compensatory because the precise or specific amount
F collected is not actually used in providing any facilities. If a statute
fixes a charge for a convenience or service provided by the State or
an agency of the State, and imposes it upon those who choose to avail
themselves of the service or convenience, or who can use the services
provided for, the imposition assumes the character of remuneration
or consideration charged in respect of an advantage sought or received
G or advantage which can be received. The mere fact that any particular
individual though can take advantage of the convenience of the services
provided by the State but for some reason or the other chooses not
to enjoy the services provided cannot escape the taxing liability on
that score nor can the provision imposing the tax become invalid on
that score ... "
H
STATE 1·. AKHIL GUJARAT PRA VASI V.S MAHAMANOAL [G.P.MATHUR, .I] 977
h 17. This view has been reiterated in several decisions of this Court. In A
State of Kera/a v. Arvind Ramakant Modairdakar, [ 1999] 7 SCC 400, the
Court ruled that it is a settled po;ition in law that the actual user of the road
by the vehicles which are covered by the requisite permits is not always a
relevant factor since the taxable event under Section 3(1) of Kera la Motor
Vehicles Taxation Act occurs when the vehicle is used or is kept for use in
the State and once the vehicle becomes liable for payment of tax, the extent B
and quantity of use by the vehicle is not a decisive factor for the purpose of
levy of tax. In Mahakoshal Tourist v. State of MP., [2002] 7 SCC 245 the
challenge made with regard to the absence of a machinery for assessment of
tax for the vehicles plying in the State of Madhya Pradesh on the basis of All
India Tourist permit and denying them refund of tax for the period they were c
not used or kept for use in the said State was considered. In view of the
language used in Section 3 of the relevant Act which provided for levy of tax
on every motor vehicle "used or kept for use in the State" at the rate specified
in the schedule, it was held that the expression "used" or "kept for use"
means, either the actual use of the vehicle on the roads of the State of
Madhya Pradesh or keeping the vehicle (which is in condition and capable D
\ of being used) available for use in the State, if so desired. It was further held
that while plying outside the State in connection with the contract, a vehicle
y
will, nonetheless be within the import of "kept for use in the State" and it is
immaterial for the purpose of Section 3 whether a vehicle is actually being
used or is kept for use in the State. E
18. The language used in Section 3A - all omnibuses which are used
or kept for use in the State exclusively as contract carriages - is in conformity
with Entry 57 of List II. The consistent view taken by this Court is that if a
vehicle is "used" or is "kept for use" in the State, it becomes liable for
payment of tax and the actual use or quantum of use is not material. The fact F
\ that the statute provides for refund of the tax, if the authority is satisfied that
the vehicle has not been used, does not mean that the legislature can only
make a provision for levy of tax which is limited for the period of actual use
or that no tax can be levied during the period the vehicle is not put to use
in the State. The provision for the refund has been made only for the advantage
of the operator so that he may be relieved of the burden of tax when he is
G
not getting any income from the vehicle on account of its non-use but it has
....- no relevance to the competence or authority of the State to enact a law
providing for imposition of a tax on vehicles which are used or are kept for
use in the State.
H

'I'
978 SUPREME COURT REPORTS [2004] 3 S.C.R.

A 19. Learned counsel for the writ petitioners has laid great emphasis _1

upon Boiani Ores Ltd. v. State of Orissa, AIR ( 1975) SC 17 where having
regard to Bihar and Orissa Motor Vehicles ,Taxation Act an observation was
made that "it is not the purpose of the Taxation Act to levy taxes on vehicles
which do not use the roads or in any way form part of the flow of traffic on
the roads which is required to be regulated". Another observation in the same
B judgment "but Entry 57 of List II is subject to the limitation that the power
of taxation thereunder cannot exceed the compensatory nature which must
have some nexus with the vehicles using the roads, viz. public roads. If the
vehicles do not use the roads, notwithstanding that they are registered under J
the Moto; Vehicles Act, they cannot be taxed" has also been heavily relied
c upon for contending that tax can be levied only for the period when the
vehicle is actually using the road and consequently Section 3A of the Act is
invalid. In fact, the High Court has also taken support from the aforesaid
observation for holding that for the period, the designated omnibuses are not
using the roads and are merely standing, no tax is leviable. It is trite that any
observation made during the course of reasoning in a judgment should not be
D read divorced from the context in which they were used. Boiani Ores Ltd.
had filed a suit seeking a declaration that certain machineries like Shovels, I

Caterpillars, Bulldozers, Rockers, Dumpers and Tractors, etc. which were
used in mining operation in the area leased out to them were not liable for '
registration under Section 22 of the Motor Vehicles Act and cannot be taxed
E under Section 6 of the Bihar Taxation Act. The observation aforesaid was
made in the context of the machinery which was used for mining operation
within the leased area which obviously did not form part of the flow of traffic
on the roads. The Court was not called upon to answer the question posed
here, namely, whether a normal motor vehicle cannot be taxed for the period
during which it is kept for use but is actually not operating. The Court did
F not hold as a proposition of law that for the period a vehicle is not used on ,f
the roads, it cannot be taxed.

20. The principle laid down in State of Mysore v. Sundararn Motors
Pvt. Ltd., AIR (1980) SC 148 reliance on which has been placed by the High
Court has also no application here. Section 3 of Mysore Motor Vehicles
G Taxation Act provided that a tax shall be levied on all motor vehicles suitable
for use on roads, kept in the State of Mysore. Mis Sundaram Motors were
d~alers in motor vehicles which were manufactured in Bombay and some of -~

these vehicles passed through the territory of State of Mysore on way to their
destination in another State (Tamil Nadu) and during the course of the journey,
H the vehicles halted for rest and food, etc. of the drivers. It was held that the
STATE 1• AKI-Ill GUJARAT PRA VASI VS. MAHAMANDAL [G.P.MA THUR, J] 979

)'T short break taken during the course of journey could not fasten liability for A
tax as the words "kept" employed in Section 3 had an altogether different
connotation, which has an element of stationariness_ The principle laid down
in this case can hardly have any application here. Similarly, the writ petitioners
can derive no assistance from State of Gujarat v. Kaushikbhai K_ Patel, AIR
(2000) SC 2175, wherein the words "for reasons beyond the control of such
owner or person" previously occurring in Section 3A(5)(b) were held to be B
beyond the legislative competence of the State. In this case the High Court
had held that once the statute provided for refund of tax on account of non-
use of the vehicle, the legislature could not have imposed a further condition
to the effect "for reasons beyond the control of such owner or person" and
the said expression was held to be beyond the legislative competence. The c
appeal preferred by the State of Gujarat was dismissed by this Court and the
view taken by the High Court was affirmed. We would like to point out that
the judgment does not show that the attention of the Bench was invited to any
of the decisions which we have referred to above, wherein it has been held
that actual user of the road is not material and mere keeping of the vehicle
which is capable of being used is enough to attract liability of tax . D
..
21. Learned counsel for the writ petitioners has submitted that the
purpose for which the Act was enacted was to augment the financial resources
of the State to meet the huge expenditure on account of natural calamities
etc. as has been mentioned in the Statement of Objects and Reasons. Therefore
E
the Act is not a compensatory enactment which may have been passed for
collecting revenue for the purpose of maintenance of roads and consequently
the same is invalid. In our opinion, the contention raised has no substance.
In G.K Krishnan v. State of.Tamil Nadu, AIR (1975) SC 583 this Court has
clearly ruled that if the State Legislature was competent to pass the Act, the
question of motive with which the tax was imposed is immaterial and there F
\ can be no plea of a coiourabie exercise of power to tax if the Government
had the power to impose the tax. It was further held that if the Government
had an authority to impose a tax, the fact that it gave a wrong reason for
exercising the power would not derogate from the validity of the tax.

22. Learned counsel for the writ petitioners has also submitted that only G
contract carriages which are designated as omnibuses and luxury or tourist
y designated omnibuses have been subjected to a very heavy tax under Section
3A of \he Act, whilst all other vehicles are taxed under Section 3 of the Act
and whereunder the quantum of tax is much lower as would be evident from
First to Seventh Schedule of the Act The submission is that these vehicles H
980 SUPREME COURT REPORTS [2004) 3 S.C.R.

A have been discriminated against in the matter of taxation and there is no
lawful justification for meeting out such differential treatment to them. We
are unable to accept the submission made. A similar contention was negatived.
in G.K Krishnan v. State of Tamil Nadu. AIR (1975) SC 583 on the ground
that the classification of vehicles as Stage carriage and contracr.carriage for
B the purpose of imposing a higher tax on the latter is presumed to be reasonable
having regard to the fact that it was based on local conditions of which the
Government was fully cognizant and the differentiation thus made has
reasonable relation to the purpose of the Act. A similar contention made in
Ma/wa Bus Service v. State of Punjab, AIR ( 1983) SC 634 was repelled and 1
it was held as under :
c " ....... There is no dispute that even a fiscal legislation is subject
to Article 14 of the Constitution. But it is well settled that a legislature
in order to tax some need not tax all. It can adopt a reasonable
classification of persons and things in imposing tax liabilities. A law
of taxation cannot be termed as being discriminatory because different
D rates of taxation are prescribed in respect of different items, provided
it is possible to hold that the said items belong to distinct and separate
groups and that there is a reasonable nexus between the classification
and the object to be achieved by the imposition of different rates of
taxation. The mere fact that a tax falls more heavily on certain goods
or persons may not result in its invalidity ........ "
E
It was further held that the Courts lean more readily in favour of
upholding the constitutionality of taxing law in view of the complexities
involved in the social and economic life of the community. Unless the fiscal
law in question is manifestly discriminatory, the Court should refrain from
F striking it down on the ground of discrimination. This being the position of
law, it is not possible to accept the contention of the writ petitioners that the ,j
tax imposed upon the designated omnibuses is discriminatoty.

23. Nothing new has been pointed out to challenge Gujarat Act No.9
of 2002 by which the Bombay Motor Vehicles Taxation Act, as adopted in
G the State of Gujarat with up to date amendments, was further amended after
the decision of the High Court which was rendered on 17th August, 2001. In
fact, the main argument of the learned counsel for the writ petitioners is that
the said amending Act merely rearranged the Sections and suffered from the
same infirmity as the previous Act. Since we are of the opinion that the view
taken by the High Court is not correct and Section 3A and Rule 5 of the
H Rules, as incorporated vide notification dated 6.2.2001 are intra vires and are
)t

STATE >'.AKHILGUJARAT PRAVASI V.S. MAHAMANDAL [GP MATHUR, J] 981

perfectly valid, the challenge made to Gujarat Act No.9 of 2002 has no A
substance and must fail.

24. In the result, Civil Appeal Nos.6462-6464 of 2001 filed by the
State of Gujarat are allowed and the impugned judgment and order dated
17 .8.200 I of the High Court is set aside. Writ Petition Nos.249 and 252 of
2002 filed in this Court are dismissed. No costs. B
K.K.T. Appeals allowec/Pt.titions dismissed.

\