M. Krishnappan No. 20 VIII West Cross St.,ShenoyNagerWest Chenai-30 vs The State Of Tamil Nandu

E.Padmanabhan, J.—In this batch of writ petitions the petitioners have prayed for the issue of writ of declaration or any other appropriate

writ or direction to declare Section 4(1-A)(a) read with Schedule 3 Part-I of the Tamil Nadu Motor Vehicles Taxation Act, 1974 as amended, as

unconstitutional, violative of Article 14of the Constitution of India and inconsistent with Scheme of Sec. 3 and 4 (1-A)(b) of the Tamil Nadu Motor

Vehicles Taxation Act in so far as it imposes a compulsory demand of lifetax with differential tax structure for the petitioner in respect of new

Motor Vehicles to be registered in the State of Tamil Nadu. The relief prayed for in all the writ petitions are identical. In all the Writ Petitions,

common contentions have been raised. Hence, these writ petitions were ordered to be consolidated.

Heard Mr.K.M.Vijayan, Senior Counsel, Mr.M.Krishnappan, Mr.V.A. Sadagopan, Mr. M.Palani, learned counsel appearing for the

respective writ petitioners and Mr.T.R.Rajagopalan, Learned Additional Advocate General assisted by Mr. R Thirugnanasambantham, learned

Addl. Government Pleader for the respondents in all the writ petitions.

The main thrust of contentions in all the writ petitions being that the levy of life tax for the new cars in the State of Tamil Nadu which are to be

registered from the date of commencement of the Amending Act and in so far as it makes it compulsory the payment of life tax for the new cars,

the impugned statutory provisions are illegal, ultra vires, offends Article 14of the Constitution.

I-Petitioner''s Case in W.P.No.11815/98:

It would be sufficient to refer to the facts in one of the writ petitions. The petitioner had purchased a new OPEL ASTRA car and when he

approached the second respondent for registration of the said car, he was informed by the second respondent that pursuant to the amendment to

the Motor Vehicles Taxation Act which came into effect from 26th June 1998, the petitioner has no option, but to pay except the life tax which

works out to Rs.16, 430/-for individuals and Rs.32, 860/- for others in respect of the class of cars coming under Schedule III of the Act. Hence,

the petitioner is challenging the said provision by which life tax is sought to be levied and enforced even before the registration of the Motor

Vehicles, namely new cars are concerned.

According to the petitioner, tax on motor vehicles is levied under Tamil Nadu Motor Vehicles Taxation Act. The Taxation Act falls under Entry

57 list II, Schedule VII of the Constitution. As per the scheme of the Tamil Nadu Motor Vehicles Taxation Act liability to pay tax arises u/s 3,

which is the charging section even when the vehicle is used or kept for use in the State of Tamil Nadu at the rates specified for such vehicles in the

first schedule or as the case may be in the second schedule. The impugned. Act amending Sec.3amends the last line of Section 3(1) as follows: -

In the First Schedule, or in the Second Schedule, or in the Third Schedule as the case may be

However, in contrast to charging section 4 relating to payment of tax particularly Section 4(1-A) (a) of the Act provides as follows:

(1-A) Notwithstanding anything contained in sub-section

(a) in respect of Motor Vehicles in item (A) of the Second Schedule and in Part-I of the Third Schedule at the time of its registration, a life time tax

shall be paid at the rates specified in item (A) of the Second Schedule or in Part-I of the Third Schedule as the case may be.

6, According to the petitioner, if a motor vehicle is not purchased as a new vehicle and which is sought to be registered for the 2nd time in the state

of Tamil Nadu, the option to pay the tax either annually or on the prorata life tax is still available. According to the petitioner the State Legislature

had committed a grave blunder in amending Section 4(1-A)(a) of the Tamil Nadu Motor Vehicles Taxation Act by compelling the registered

owners of motor vehicles to pay life tax without any option in respect of the individual vehicles. The petitioner challenges the impugned levy as

inconsistent with the scheme of levy of tax u/s 3 of the Act which provides the payment of tax either annually, or life tax and prorata life tax as per

first, second and third Schedule of the Act.

It is also contended that the impugned amendment u/s 4(1-A)(a) is also inconsistent with Section 4(1-A)(b) of the Act which provides for

payment of tax either annually under first schedule or prorata life tax under third schedule in respect of old cars. The impugned provisions are to

that extent discriminatory and violative of Article 14of the Constitution.

It is also pointed out by the petitioner that there is inconsistency between the classification of motor vehicles made under Entry 7 of Schedule 1

of the Act and third schedule of the Act wherein under the earlier schedule the classification is only on the basis of laden weight of the vehicle

instead of the value of the Vehicle on the contrary third schedule, classifies the vehicles for the purpose of taxation on the basis of the value of the

vehicle. There is no nexus for levy of motor vehicle tax on the basis of value of the vehicles as against the laden weight. The impugned provision

violates Art.14of the Constitution and is inconsistent with the scheme of the Act.

According to the petitioner he should be given an option to pay motor vehicles tax annually and life time tax is a compulsory exaction of money

for the simple reason that he purchases a new car. The tax law cannot penalise the purchaser of a new car by levying life tax on compulsion.

Hence, the present writ petition.

II- Petitioner''s Case in W.P.No: 15139/99.

In W.P.No.15139 of 1998, the writ petitioner who is a Member of the Bar has challenged the very same provision levying life time tax for

motor vehicles to be registered on or after 1.7.1998. In respect of vehicles registered prior to 1.7.1998, option has been given either to pay one

time tax or annual tax, but in the case of new vehicles, it is compulsory to pay one time tax with effect from 1.7.1998, The petitioner had purchased

a Passenger car TATA SUMO on payment of Rs.5,25,451 on 23.9.1998. The unladen weight of the vehicle is 1,700 Kg. The one time tax in

respect of this vehicle comes to Rs.20,540/-.

It is contended that the levy of motor vehicles tax is held to be compensatory in nature for use of the public road. The wear and tear that may

be caused to the road maintained by the 1st respondent would therefore, have relevance to the unladen weight of the vehicle. Therefore, it is

submitted that the amending Act imposing one time without reference to the unladen weight is unconstitutional and arbitrary.

12 The value of the vehicle has no relevance or any basis for fixing the life time tax and it is totally arbitrary and unreasonable. The present tax is

Rs.1000/-per year and on that basis, if the life tax is calculated, it would be collecting 20 years and 6 months tax in advance when the certificate of

registration would be valid only for 15 years under the provisions of the Motor Vehicles Act. Hence, the levy of tax is totally unjustifiable and it has

no nexus. The petitioner contends that option should have been given to the owners of the vehicles either for opting to one time tax or annual tax as

was given in respect of the existing vehicles. The refusal to provide the option would result in deprivation of the sum of money to the petitioner

arbitrarily without any rhyme or reason. Merely because more expenditure is incurred for collection of tax, it will not constitute a valid ground to

compel the owners of the vehicles to pay tax for the life time.

III-Petitioner''s case in W.P.No: 5970/99:

In W.P.No.5970 of 1999, the petitioner N.Niranjan challenges the validity of the same provision. But he had raised few other grounds as well.

According to the petitioner therein apart from inconsistency between the classification of motor vehicles made under Entry 7 of the Act, the

classification should be only on the basis of laden weight of the vehicle instead of the value of the vehicle. On the contrary third Schedule,

according to the petitioner classifies the vehicles for the purpose of the taxation on the basis of the value of the vehicle. There is no nexus for levy of

Motor Vehicles tax on the basis of value, as against the laden weight. Hence it is contended that the impugned provision violates Article 14of the

Constitution besides being inconsistent with the scheme of the Act.

The petitioner further contends that the classification of motor vehicles for the purpose of tax on the basis of the individuals and others has no

nexus to the scheme of the Motor Vehicles Taxation Act which is levied for the use, wear and tear of the roads proportionate to the unladen

weight of the motor vehicles. It is immaterial as well as unworkable to classify the use of the Motor Vehicle as individuals and others for the

purpose of Motor Vehicles Taxation Act.

The petitioner also adds that his option to pay motor vehicles tax annually will impose a liability not more than Rs.1000/- per annum as against

which he is compelled to pay Rs.16, 430/- towards life tax for the simple reason he purchases a new car. The tax law cannot penalise the

purchaser of a new car by levying life tax by compulsion.

IV- Petitioner''s Case in W.P.No: 7073/99:

In W.P.7073 of 1999 while praying for identical relief, the petitioner contends that the State Legislature had committed a grave blunder in

amending the Sec.4 (1A)(a) by compelling the registered owners of new motor vehicles to pay life time tax without any option. The impugned

provision is inconsistent with the scheme of levy of tax u/s 3 of the Act which provides for the payment of tax either annually or life-tax prorate as

per First, Second and Third schedule in respect of old cars. The impugned provision in so far as it provides for different prorate life tax under the

schedules in respect of old cars is discriminatory and violative of Article 14.,

Further, there is inconsistency between the classification of motor vehicles made under Entry 7 First Schedule of the Act and Third Schedule of

the Act, wherein under the earlier schedule, the classification is only on the basis of laden weight of the vehicle instead of the value of the vehicles.

On the contrary, the Third schedule classifies the vehicles for the purpose of taxations on the basis of the value of the vehicles. Hence, there is no

nexus for levy of motor vehicles tax on the basis of their value as against laden weight. Hence, the impugned provision violates Article 14of the

Constitution.

The levy of the tax and the classification of motor vehicles for the purpose of the Act on the basis of individuals and others has no nexus to the

scheme of the motor vehicles taxation Act which is always levied for the use, wear and tear of the road proportionate to the unladen weight of the

motor vehicles. It is immaterial as well as unworkable to classify the use of the motor vehicles as individuals and others for the purpose of the

Motor Vehicles Taxation Act.-

According to the petitioner, his option to pay tax annually will impose a liability not more than Rs.1600/- per annum as against which he is

compelled to pay Rs.32, 600/- towards life time tax for the simple reason he purchases a new car. By tax law, the purchaser cannot be penalised

for the purchase of a new car by levying life time tax on compulsion.

V-Petitioner''s Case in W.P.No: 14176/98:

W.P.No: 14176 of 1998 the petitioner while pointing out the inconsistency in the statutory provision with respect to the classification of motor

vehicles made under Entry 7 of Third schedule of the Act, it was hitherto based on laden weight instead of value of the vehicle, contended that

presently Third schedule classifies the vehicles for the purpose of taxation on the basis of value of the vehicle and there is no nexus for such levy on

the basis of value of the vehicle as against the laden weight. Hence, the impugned Amendment Act is violative of Article 14of the Constitution. By

compelling the petitioner to pay life tax, the petitioner is made to face further financial hardship and loss.

With respect to these writ petitions, no separate counter affidavit has been filed. But common arguments were advanced by the counsel for

either side. Apart from the various contentions raised in the above writ petitions, the counsel for the petitioners were also permitted to raise

contentions at the hearing and the learned Additional Advocate General also made his submissions to meet those contentions.

VI - Respondents Case:

In the counter affidavit filed on behalf of the respondents, it has been stated that at the time when the Tamil Nadu Motor Vehicles Taxation

Act, 1974 was enacted, the mode of payment of Motor Vehicles Tax in respect of non-transport vehicles four-wheelers, was either quarterly or

half yearly or annually as seen from Section 4(1) of the said Act, at the rates specified under class 7 of the taxation schedule. The said mode of

payment of tax was modified as payment of annual tax by virtue of Tamil Nadu Act, 25/89 with effect from 1.4.1989. For two wheelers/non-

transport vehicles the mode of payment of tax was made as annual payment by the said Tamil Nadu Act 25/89. By the said amendment Act in

respect of two wheelers non-transport vehicles were made to pay Motor Vehicles Tax, at the time of its registration as a new vehicle as ''Life Time

Tax'' by inserting an amendment to Section 4 of the Act, as Section 4(1)(A) of the said Act;

By the said amendment, life time tax was made compulsory in respect of two wheelers. Subsequently, it was thought fit to bring four wheelers-

non-transport vehicles also under the purview of payment of life time tax at the time of its new registration, since the system of life time tax for two

wheelers has been working well. After studying for nearly 10 years, the Government decided to introduce life time tax compulsory for four

wheeler-non-transport vehicles like cars and jeeps also. The Bill was introduced for this purpose. The Statement of Objects and Reasons of the

said Bill states as follows:

The system of life time tax for two wheelers introduced to avoid the hassel faced while paying annual tax for motor vehicles has been working well.

On the same lines, it has been decided to introduce the Life time Tax system in respect of four wheeler motor vehicles (Light Motor Vehicles).

New Vehicles will be compulsorily subjected to ""life time tax"". The persons already running such vehicles will have the option of paying life time tax

in lieu of annual tax.

To achieve the above object, the Government have amended the relevant provision of the said Taxation Act and published the same as Tamil

Nadu Act 27 of 1998. Challenging the same, the present writ petitions have been filed. According to the respondent, the Tamil Nadu Act 27 of

1998 which came into effect from 1.7.1998 provides for compulsory life time tax for four wheelers at the time of registration so as to facilitate the

taxpayers to pay the tax once in life of the vehicle to avoid frequent payments made hitherto. The levy of life time tax would also reduce the burden

of clerical work in Transport Department resulting in efficient service to the public. This measure would also avoid the vehicles'' owners to pay any

additional tax either by way of increase or otherwise as specified u/s 4(4) of the Tamil Nadu Motor Vehicles Taxation Act, 1974.

The levy is not violating any Article of Constitution of India and the requirement of Entry 57 List II of the Article is satisfied and is within the

competence of State Legislature. The vehicles once registered are categorised as old vehicles for which option was given to the vehicle owner

either to pay annual tax or life tax as specified under Part II of the Third Schedule of the Act 27 of 1998 and if a vehicle is brought from other

States for assignment of new Registration Mark u/s 47 of the Motor Vehicles Act, 1988, it cannot be treated as a second time Registration of old

vehicles for which option is not available as claimed by the petitioners.

The various contentions raised by the petitioners are devoid of merits. The levy of motor vehicles tax is based on various factors such as

dispensing with cumbersome methods, revenue to the Government and also to get rid of the difficulties in paying the tax by the vehicle owners.

Section 4 of the Act empowers the Government to decide what mode of payment of tax is feasible to the vehicle owners. The State Legislatures

have been empowered to levy different methods to levy Motor Vehicles tax. The once registered vehicles are the old vehicles which are using

public road before the enactment of the amended Act. Hence, the retrospective effect of compulsory life time tax payment cannot be held as

discriminatory.

Tamil Nadu Act 27/98 is not with the intention of penalising the purchase of a new car, but with an aim of making the payment of tax easy and

also considering the fact of affordability of the vehicle owner. The rate of tax has been worked out very carefully so that it does not throw any

additional burden. Besides, several individuals have welcomed this step. This step further helps to check evasion of tax.

Identical counter affidavits have been filed in other Writ Petitions also.

VII - Statutory Provisions:

Before proceeding to take up the contentions, it is but essential to set out the statutory provisions which are being challenged in this batch of

writ petitions.

Section 2 of the Act is the Definition section wherein the expression ""laden weight"", ""life time tax"", ""public road"" besides other expressions have

been defined. Section 3 of the Act provides that subject to the provisions of Sub Section (2), tax shall be levied on every motor vehicle used or

kept for use in the State of Tamil Nadu at the rates specified for such vehicle in the first schedule or in the second schedule or in the third schedule

as the case may be (As amended by Act. 27/98).

Subsection (2) of the Section 3also enables the Government by a Notification to increase the rate of tax specified in schedules from time to

time provided such increase shall not in the aggregate exceed 50% of the rate specified in the first schedule as the case may be in the second

schedule on the date of commencement of the Amending Act, 1989.

Section 4(1) provides that tax levied under the Act subject to provisions of Subsection (1 A) be paid in the manner prescribed by the

registered owner or by any other person having possession or control of the motor vehicle at his choice either quarterly, half yearly or annually on a

licence to be taken up by him for that quarter, half year or year, as the case may be.

Section 11provides for payment of additional tax. Section 13provides for refund of tax. Section 15provides for imposition of penalty for failure

to pay tax. Section 15(3) provides for recovery of escaped tax. Section 17provides for utilisation of the proceeds of the tax. Section 19provides

for the offences by the companies. Section 20provides for exemptions. Section 20Aprovides for remissions. Section 20Bprovides for an appeal.

Section 24confers power on the State Government to make rules.

Second Schedule relates to motor cycles of various CCs. Fourth Schedule relates to Motor Cars.

By Section 3of the Amending Act 27/98, Section 4of the Principal Act has been amended. The amendment which is being challenged reads

thus:

In section 4of the Principal Act, --

(1) in sub-section (1-A), for clauses (a) and (b), the following clauses shall be substituted, namely: --

(a) in respect of the motor vehicles specified in item (A) of the Second Schedule and in Part-I of the Third Schedule, at the time of its registration,

a life time tax shall be paid at the rates specified in item (A) of the Second Schedule or in Part-I of the Third schedule, as the case may be, on a

licence to be taken out for the life time of such vehicles;

(b) in respect of motor vehicles specified in item (B) of the Second Schedule and in Part II of the third schedule, the tax shall be paid either

annually at the rates specified in the First Schedule or for the life time of such vehicles at the rates specified in item (B) of the Second Schedule or

in Part-II of the Third Schedule, as the case may be, on a licence to be taken out for such vehicles for that year or for the life time, as the case may

be: and.....

(2) in Sub-section (4), after the expression ""Second Schedule"", the expression ""or in the Third Schedule"" shall be inserted.

By Section 5of the Amending Act a second schedule as part - I. The schedule new schedule has been added after the read thus:

THIRD SCHEDULE

(See Section 4(1-A)

PART-I

At the time of registration of new Motor vehicles

If the value of the vehicle is not more than If the value of the vehicle is more than If the value of the vehicle is

Rs.5lakhs. Rs.5lakhs but more than Rs. more than Rs. 10lakhs.

10lakhs

Individual (2)Others (3) Individual (4)Others (5) Individual (6)Others (7)

Rs Rs. Rs. Rs. Rs. Rs.

(a) Weighing not more than 700Kgs.8,210 16,420 12, 320 24,640 16,420 32, 840

unladen

(b) Weighing more than 700kgs. but 10,950 21,900 16,430 32, 860 21,900 43,800

not more than 1500kgsunladen

(c) Weighing more than 1500kgs but13,690 27, 380 20,540 41,080 27,380 54, 760

not more than 3000kgsunladen

d) Weighing more than 17,110 34,220 25,670 51,300 34,220 68,440

3000kgsunladen in respect of which

private transport vehicles permit is

not required under Motor Vehicles

Act.

PART -II

OLD VEHICLES

If the vehicle is already registered and If the vehicle is already registered and

its age from the month of registration isits age from the month of Registration

not more than 5 years. is more than 5 years

Individual Others Individual (3) Rs Others (4) Rs.

(1) Rs. (2) Rs.

(a) Weighing not more than 700kgs. 6, 160 12,320 4,110 8,220

unladen

(b) Weighing more than 700kgs but not 8,210 16,420 5,480 10,960

more than 1500kgs. unladen

(c) Weighing more than 1500kgs but not 10,270 20, 540 6,850 13,700

more than 2000kgsunladen

(d) Weighing more than 2000kgs but not 11,300 22,600 7,350 15,060

more than 3000kgsunladen

(e) Weighing more than 3000kgsunladen in12,830 25,600 8,560 17, 120

respect of which private transport vehicles

permit is not required under Motor

Vehicles Act

Different rates have been specified for four wheelers non-transport vehicles depending upon the unladen weight under Act 27 of 1998 with

effect from 1.7.1998. The levy is also based upon the value of the vehicle ranging not more than 5 lakhs, ranging more then 5 lakhs and ranging 10

lakhs and above.

The vehicles have also been categorised on the basis of the holder of the vehicle; such as individual or partnership or companies and different

fates of tax have been prescribed for the same kind of vehicle if it is owned by an individual vis-a-vis Company. So also different rates have been

prescribed for imported vehicles and Indian vehicles, and depending on price ranges as well. So also with respect to the ownership. The details of

which will be referred at the appropriate time.

IX-Points:

The points that arise for consideration 1 could be formulated as under:

(i) Whether the provisions impugned are unconstitutional, ultra vires of the State Legislature and offend Art.14and Art.19 (1) (g) of the

Constitution?

(ii) Whether the levy is compensatory? I What would be the effect of levy if it ceases to be compensatory or regulatory in nature?

(iii) Whether the levy falls under Entry 57, List-II of Schedule-VII of The Constitution?

(iv) To what relief, if any?

The above points could be considered together and it is not necessary to consider each one of them separately.

X-Nature of Levy of Motor Vehicles Taxi

Before taking up the challenge to provisions of the Motor Vehicles Taxation Act, it is essential to ascertain the nature of levy of tax under the

Tamil Nadu Motor Vehicles Taxation Act. It is admitted by either side that the tax has been levied by the State Legislature under Entry 57 List II

Schedule VII of the State List. The entry reads thus: ""Tax on vehicles whether mechanically propelled or not suitable for use on roads including

tram motors subject to provision of Entry 35 of List III.

The power of State Legislature to levy tax on vehicle whether mechanically propelled or not under Entry 57 of List II Schedule VII being

subject to Entry 35 of List III. The tax under the present Entry 57 is leviable by the State Legislature on all vehicles suitable for use on roads which

are kept in the State.

In Bolani Ores Ltd., it has been held by the Apex Court that the Bihar Taxation Act is a regulatory measure imposing compensatory taxes for

the purpose of raising revenue to meet the expenditure for making roads, maintaining them and for facilitating movement and regulation of traffic. It

has been held that the Taxation Act is a regulatory measure and it has been further emphasised that the power of Taxation under the Act cannot

exceed the compensatory nature which must have some nexus with the vehicle using the road, namely public roads. In Bolani Ores v. State of

Orissa Jaganmohan Reddy, J., speaking for the Bench held thus: -

In so far as the Act is concerned, having regard to the fact that the dumpers and rockers are motor vehicles which are not taken out of that

category, as was the case before the amendment they have to be registered after the amendment and can only be driven by persons holding a valid

licence. The tractor though it may be a motor vehicle within the definition of that term is neither a goods vehicle nor a vehicle which carries

passengers nor is it being driven in a place to which public have a right access. As it does not perform any of the aforesaid functions or uses it is

not a vehicle which has to be registered nor has it to be driven only by a person who holds a licence. 29....In ascertaining the intention of the

Legislature in adopting the method of merely referring to the definition of ''motor vehicle'' under the Act for the purpose of the Taxation Act, we

have to keep in mind its purpose and intendment as also that of the Motor Vehicles Act. We have already stated what these purposes are and

having regard to them the registration of a motor vehicle does not automatically make it liable for taxation under the Taxation Act. The Taxation

Act is a regulatory measure imposing compensatory taxes for the purpose of raising revenue to meet the expenditure for making roads, maintaining

them and for facilitating the movement and regulation of traffic. The validity of the taxing power under Entry 57, List II of the Seventh Schedule rad

with Art.301of the Constitution depends upon the regulatory and compensatory nature of the taxes. 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. The

regulations under the Motor Vehicles Act for registration and prohibition of certain categories of vehicles being driven by persons who have no

driving licence, even though those vehicles are not plying on the roads, are designed to ensure the safety of passengers and goods etc, etc., and for

that purpose, it is enacted to keep control and check on the vehicles. Legislative power under Entry 35 of List III (Concurrent List) does not bar

such a provision. But Entry 57 of List II is subject to the limitations referred to above namely, 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 the Act, they cannot be taxed.""....

in G.K. Krishnan and Others Vs. State of Tamil Nadu and Others, the imposition of enhanced levy on contract carriages by a Government

Order was challenged by contract carriage operators. The Apex Court while considering the nature of levy as being compensatory, held thus:

Strictly speaking, a compensatory tax is based on the nature and the extent of the use made of the roads, as, for example, a mileage or ton-

mileage charge or the like, and if the proceeds are devoted to the repair, unkeep, maintenance and depreciation of relevant roads and the

collection of the extraction involves no substantial interference with the movement. The expression ""reasonable compensation"" is convenient but

vague. The standard of reasonableness can only be in the severity with which it bears on traffic and such evidence of extravagance in its assessment

as come from general considerations. What is essential for the purpose of securing freedom of movement by road is that no pecuniary burden

should be placed upon it which goes beyond a proper recompense to the state for the actual use made of the physical facilities provided in the

shape of a road. The difficulties are very great in defining this conception. But the conception appears to be based on a real distinction between

remuneration for the provision of a specific physical service of which particular use is made and a burden placed upon transportation in aid of the

general expenditure of the state. It is clear that the motor vehicles require, for their safe, efficient and economical use, roads of considerable width,

hardness and durability; the maintenance of such roads will cost the government money. But, because the users of vehicles generally, and of public

motor vehicles in particular, stand in a special and direct relation to such roads, and may be said to derive a special and direct benefit from them, it

seems not unreasonable that they should be called upon to make a special contribution to their maintenance over and above their general

contribution as taxpayers of the State. If however, a charge is imposed, not for the purpose of obtaining a proper contribution to the maintenance

and upkeep of the road, but for the purpose of adversely affecting trade or commerce, then it would be a restriction on the freedom of trade,

commerce or intercourse, see Freightlines and Construction Holding Ltd., v. State of New South Wales, (1968) AC 625.

In the said decision, it has been also held by the Apex Court that the levy of enhanced tax on contract carriages was not hit by Art. 14of the

Constitution and the Apex Court applied the rule of presumption while testing the reasonableness having regard to the fact that it was based on

local conditions by which the Government was fully cognizant besides holding that the differentiation of a reasonable relation to the purpose of the

Act.

In State of Karnataka and Others Vs. D.P. Sharma and Others, , the decision in G.K. Krishnan and Others Vs. State of Tamil Nadu and

Others, was followed and the Apex Court held that the classification of stage carriages on the one hand and contract carriages on the other, for the

purpose of a higher levy of vehicle tax on contract carriages. On the basis of their having greater facilities for running more miles, charging more

rates and causing greater wear and tear to the roads, than the stage carriages is reasonable having regard to the purpose and object of the Act.

The Apex Court reiterated that the nature of levy on motor vehicles is in the nature of compensatory tax and the object being to tax on motor

vehicles suitable for use on roads kept in the State. It has been further held that the tax is of compensatory character, as the basis of the tax is

cither the weight of the vehicle or its seating capacity and, in some cases, the mileage travelled. The Apex Court held thus:

This Court has held in The Automobile Transport (Rajasthan) Ltd. Vs. The State of Rajasthan and Others, that imposition of a tax by a law passed

by the State which is regulatory or compensatory in character would not infringe the freedom of trade, commerce and intercourse, even if the

previous sanction of the President has not been obtained for the bill proposing to impose the tax. This court has explained in its judgment in G.K.

Krishnan and Others Vs. State of Tamil Nadu and Others, ) the nature of a compensatory tax. We do not think it necessary to repeat here what

was said in that judgment. Suffice it for the purpose of this case to say that the object of that is to tax all motor vehicles suitable for use on roads

kept in the State, and that the tax is of a compensatory character, as the basis of the tax is either the weight of the vehicle or its seating capacity

and, in some cases, the mileage travelled. Therefore, in deciding the question whether a higher rate of tax on contract carriage is discriminatory, it is

necessary to see whether the classification made between stage carriages on the one hand and contract carriages on the other is reasonable, having

regard to the object and purpose of the Act.

What is compensatory has already been considered by the Apex Court in G.K.Krishnan v. State of Tamil Nadu which has already been

extracted supra. The Apex Court also indicated in G.K.Krishnan v. State of Tamil Nadu that if a charge is imposed not for the purpose of

obtaining proper contribution to the maintenance and upkeep of the road, but for the purpose of adversely affecting the trade or commerce, then it

would be in restriction of the trade, commerce or intercourse.

In G.K.Krishnan v. State of Tamil Nadu, cited supra, Mathew, J., speaking for the Branch held thus:-

It has been said that the amount of the charges and the method of collection are primarily for determination by the State itself, although they

must be reasonable and fixed according to some uniform, fair and practical standard. If the tax is attacked on the ground that it is excessive, the

burden of proof is upon the one attacking its validity. Although any method of taxation which has a direct bearing upon or connection with the use

of the highways is apparently valid, a tax which has no such apparent bearing and is not shown to be compensatory, but is rather a tax on the

privilege of engaging in trade or commerce, is beyond the power of the State. Nor is it necessary that there should be separate fund or express

allocation of money for the maintenance of roads to prove the compensatory purpose when such purpose is proved by alternative evidence.

While considering the challenge of levy of higher tax on the contract carriages and the plea of discrimination in the classification on the basis of

the capacity of the contract carriages, the Apex Court held thus:-

It cannot be said that a classification made on the basis of the capacity of the contract carriages to run more miles is unreasonable because

those carriages will be using the road more than the stage carriages which have got a time schedule, specified routes and minimum and maximum

number of trips. A person who challenges a classification as unreasonable has the burden of proving it. There is always a presumption that a

classification is valid, especially in a taxing statute. The ancient proposition that a person who challenges the reasonableness of a classification, and

therefore, the constitutionality, of the law making the classification has to prove it by relevant materials, has been reiterated by this Court recently.

See The Amalgamated Tea Estates Co. Ltd. Vs. The State of Kerala, and Murthy Match Works and Others Vs. The Asstt. Collector of Central

Excise, and Another, In the context of commercial regulation, Article 14is offended only if the classification rests on grounds wholly irrelevant to

the achievement of the objective and this lenient standard is further weighted in the State''s favour by the fact that a statutory discrimination will not

be set aside if a set of facts may reasonably be conceived by the Court to justify it. See McGowan v. Mary Land (1961) US 420 at pp. 425-426.

The levy is compensatory and any levy which has no such apparent hearing and is not shown to be compensatory cannot be sustained. The

above are the tests which are to be followed while considering the validity of the Amending Act imposing life tax on new four wheelers and

imposing different rates of tax depending upon the ownership of the vehicles as well as depending upon the make of the vehicle or whether it is an

imported vehicle or locally made vehicle.

Mr. M. Palani, learned counsel for the petitioner as well as Mr.M.Krishnappan, learned counsel for the petitioner in this respect advanced

various contentions, while Mr.K.M.Vijayan, learned senior counsel has confined his arguments to his only contention that ""life tax"" should be

optional and it should not be compulsory. Mr.K.M.Vijayan learned senior counsel challenged the levy as discriminatory or arbitrary or it is

unconstitutional in respect of levy on the basis of status of the owner or holder of the vehicle or the nature of vehicle namely whether Indian made

or foreign made or on the basis of price of the vehicle concerned.,

the learned Additional Advocate General Mr.T.R.Rajagopalan while pointing out that substantial number of new motor vehicle owners have

applied for payment of life tax even at the time of registration and only a fraction of the new owners have come before this court has sought to

justify the levy by, heavily relying on statistics of vehicles. The learned Additional Advocate General also referred to the decision of the Bombay

High Court as well as Kerala High Court in support of his contention that identical levy of life tax on two wheelers as well as four wheelers have

been upheld and therefore there are no merits in this batch of writ petitions.

It is true that as pointed out by the learned Additional Advocate General, the Apex Court in State of Maharashtra and others v, Madhukar

Balkrishna Badiya reported in AIR 1988 SC 2062 upheld the levy of one time tax on motorcycles and tricycles, as it is regulatory, compensatory

and not discriminatory. Their Lordships also held that the amended Act is not violative of Article 14of the Constitution, besides holding that

company owned vehicles are taxed at three times the rate payable by individuals, does not make the legislation violative of Art.14. While upholding

the imposition of life time tax on two wheelers and three wheelers, the Apex Court held thus: -

The Act, as at present, is not violative of Art.14of the Constitution. The fact that company-owned vehicles are taxed at three times the rate

payable by individuals, does not make the legislation violative of Art.14. Historically, the company-owned vehicles have always been taxed at a

rate higher than the individually-owned vehicles. As appears from the records produced, the motor cycles and tricycles constituting 56 to 58 per

cent of all types of vehicle contribute only 6.4 per cent of the total revenue earned through the tax imposed by the Act. It is well settled that the

Legislature has the power to distribute tax burden in a flexible manner and the court would not interfere with the same. This principle has been

reiterated in G.K.Krishnan v. State of Tamil Nadu (AIR 1975 SC 583) ''supra) where this Court observed that in the context of commercial

regulation, Art.14is offended only if the classification rests on grounds wholly irrelevant to the achievement of the objective and this lenient standard

is further weighed in the State''s favour by the fact that a statutory discrimination will not be set aside if a state of acts may reasonably be conceived

by the court to justify it. Tax laws have to respond closely to local needs and Court''s familiarity with these needs likely to be limited. Therefore, the

court must be aware of its own remoteness and lack of familiarity with the local problems. Classification is dependent upon peculiar needs and

specific difficulties of the community. The needs and the difficulties of a community are constituted out of facts and information beyond the easy ken

of the Court.

Having regard to these factors and having regard to the principles applicable to taxation laws, we are of the opinion that the Maharashtra Act

as amended from time to time and mentioned herein before, does not suffer from any vice of being not regulatory or compensatory taxation nor

from the vice of being violative of Art.14of the Constitution.

According to the learned Additional Advocate General, various contentions raised by the counsel for petitioners have already been repelled by

their Lordships of the Apex Court in State of Maharashtra and others v. Madhukar Balkrishna Badiya, cited supra and do not merit consideration.

The learned Additional Advocate General also referred to the decision of the Division Bench judgment of the Kerala High Court

O.P.No.24221 of 1998 etc., batch wherein AR.Lakshmanan, J., speaking for the Division Bench upheld the validity of imposition of life tax on

motorcycles, three wheelers as well as motor cars which was introduced by Kerala Finance Act, 1998. The Division Bench of the Kerala High

Court had, in turn, followed the decision of the Apex Court in State of Maharastra v. Madhukar Balkrishna Badiya (AIR 1988 SC 2062) and an

earlier decision of the Division Bench of Kerala High Court reported in 1993 (1) KLT 303.

In 1993 (1) KIT 303 (Venkata Rao v. State of Kerala), a Division Bench of the Kerala High Court had occasion to consider the validity of

provision requiring the vehicle owners to pay tax in advance other than two wheelers and three wheelers and the advance collection of motor

vehicle tax is levied for a period of five years in respect of certain vehicles only for a period of two years in respect of another type of vehicles.

Even that was also, at the choice of the tax prayer to pay the tax for longer periods. The matter was argued by the party-in-person contending that

the levy of tax for five years/two years in advance as invalid. While following the decision of the Apex Court reported in State of Maharashtra and

Others Vs. Madhukar Balkrishna Badiya and Others, the Division Bench of the Kerala High Court upheld the statutory provision imposing levy for

five years and it was of the view that the amount involved being small, the Division Bench upheld the validity. In that context, the Division Bench

held thus:-

5."" The party-in-person raised a contention before us that the tax is unreasonable inasmuch as it imposes a burden on the taxpayer presently for

paying tax for 5 years/two years in advance. In our view, when the collection of tax even for 15 years in advance has been upheld by the Supreme

Court in the above said decision, the collection of tax in advance for five years in respect of certain vehicles and for two years in respect of certain

other vehicles cannot be said to be unreasonable. Even otherwise, having regard to the amount involved, we do not consider it in any manner

unreasonable, particularly having regard to the fact that once the advance tax is paid, the tax payer''s burden for the future is, to that extent,

reduced. So far as the State is concerned, the State is saving by way of administrative expenses involved in the collection of tax periodically.

Further, the collection of tax in advance in lump sum would enable the State to expend a larger amount in respect of immediate schemes where a

large amount of capital outlay is involved, such schemes being for the benefit of the road users. We, therefore, hold that the levy of tax cannot be

said to be unreasonable.

A point has been raised under Art.19(1)(d) of the Constitution of India that the levy of tax amounts to unreasonable restriction on the citizens.

We do not think that there is any substance in this contention. The State is entitled to levy tax, and the levy of tax or its advance collection does not

amount to unreasonable restriction

With respect to the learned Judges of the Division Bench, we are not persuaded to accept and follow the same here as there are material

differences, not only with respect to the nature of levy, but also in respect of number of years of levy.

It is pointed out by Mr.M.Palani, as well as by Mr.M.Krishnappan, the learned counsel for the writ petitioners that in Kerala State no

distinction has been made with respect to motor cars or motorcycles either as owned by individual or a Company or as imported or Indian made

or on the basis of price or money value of the vehicle. But they have levied the tax based upon unladen weight of the vehicles and therefore the said

decision of the Kerala Division Bench in no way decides the point or contention that has to be decided in this batch of writ petitions. The learned

counsel for the petitioners were aware of the decision of the Apex Court based upon the ownership of the vehicles, namely Company-owned or

individual owned vehicles which levy has already been upheld in respect of motor cycles as well as tricycles by the Apex Court in State of

Maharashtra and Others Vs. Madhukar Balkrishna Badiya and Others,

In the light of the later two pronouncements referred to, the further contentions put forward in this batch of writ petitions have to be examined.

It is true that in the earlier case, levy of life tax on two wheelers and three wheelers has been upheld by the Supreme Court and ""following the same

the Kerala High Court has also upheld the levy of life tax on four wheelers as well, namely motor cars. The legal contentions which are sought to

be advanced in the present writ petitions are totally different and distinct from what was canvassed before the Division Bench of the Kerala High

Court.

In G.K.Krishnan v. State of Tamil Nadu reported in AIR-1975 SC 583 as well as State of Karnataka v. D.P.Sharma 1975 SC 594, it has

been held that the levy in question is compensatory in nature. It is not like any other tax, so to say, the consistent view of the Apex Court being the

levy of motor vehicles tax is compensatory in nature. Therefore, being compensatory in nature though need not necessarily be 100% justification,

there shall not be arbitrariness. The levy of motor Vehicles tax under the Tamil Nadu Motor Vehicles Taxation Act is not merely levy like any other

tax, where the Legislature could provide for different rates of tax for different type of vehicles as it is not a levy of tax simpliciter like Entertainment

Tax, Wealth-tax, income tax or any other tax. The levy of motor Vehicles tax being compensatory in nature, has been laid down by Mathew, J.,

speaking for the larger Bench in G.K. Krishnan and Others Vs. State of Tamil Nadu and Others, and in State of Karnataka and Others Vs. D.P.

Sharma and Others, that the tax is of compensatory character as the basis of the tax is either the weight of the vehicle or its seating capacity and in

some cases, the mileage travelled.

As per the pronouncement of the Apex Court, the levy is a compensatory tax, which is based on the nature and the extent of use made of the

roads, as, for example, mileage or ton-mileage charge, or the like, and if the proceeds are devoted to the repair, upkeep, maintenance and

depreciation of relevant roads and the collection or exaction involves no substantial interference with the movement, the standard of reasonableness

can only be in the severity with which it bears on traffic and such evidence of extravagance in its assessment has come from general considerations.

The Apex Court in G.K.Krishnan v. Stale of Tamil Nadu also laid down that the amount of charges and the method of collection must be

reasonable and fixed according to some uniform, fair and practical standard. It has been further emphasised that although any method of taxation

which has a direct bearing upon or connection with the use of the highways is apparently valid, a tax which has no such apparent bearing and is not

shown to be compensatory, but is rather a tax on the privilege of engaging in trade or commerce, is beyond the power of the State. The practical

administrative difficulties in imposing a tax at a rate per mile though had to be reckoned, it is always difficult to evolve a formula which will in all

cases ensure exact compensation for the use of the road by vehicles having regard to their type, weight and mileage.

In the words of the Apex Court, rough approximation, rather than mathematical accuracy, is all that is required. The Apex Court also relied

upon the decision of the Supreme Court of U.S.A reported in Aero Mayflower Transit Co. v. Board of R.R.Commrs., (1947) 332 US 497

wherein it has been held by the U.S. Supreme Court that the purpose of the tax imposed by the State on motor vehicles using its roads is to obtain

from them a fair contributive share of the cost of constructing and maintaining the public highways and facilities furnished and to defray the expense

of administering the policy regulations enacted for the purpose of ensuring the public safety.

It is true that in G.K.Krishnan v. State of Tamil Nadu, the Apex Court upheld the validity of levy of higher rate of tax on contract carriages on

the view that there is a valid classification made on the ""basis of the capacity of the contract carriages which run more mileages, is reasonable

because those carriages will be using the road more than the stage earnings which have got a time schedule, specified routes and minimum and

maximum number of trips.

Article 14is offended only if the classification based on grounds is wholly irrelevant to the achievement of the objects, and in other words, the

classification between the stage carriages, on the one hand, and on the other the contract carriages, has been upheld on the presumption that the

contract carriages run more mileage while the stage carriage covers only a limited mileage.

While considering the nature of levy of motor vehicles tax the emphasis being the extent of the use made of the roads such as mileage or ton-

mileage because the users of vehicles generally and of public motor vehicles in a particular stand in a special and direct relation to such roads, and

may be said to derive a special and direct benefit from them, it seems, in the words of the Apex Court, ""not unreasonable that they should be

called upon to make a special contribution to their maintenance over and above their general contribution as tax payers of the State"". In the same

breath, the Apex Courts further held that if a charge is imposed not for the purpose of obtaining a proper contribution to the maintenance and

upkeep of the road for the purpose of adversely affecting trade or commerce, then it would be a restriction on the freedom of trade, commerce or

intercourse

At the risk of repetition, it has to be pointed out a tax which has no such apparent bearing and not being compensatory, but it is rather a tax on

the privilege of engaging in a trade or commerce for extraction of more revenue either based on the capacity of the owner of the vehicle or the

status of the owner or sophisticated nature of the vehicle or by categorising the vehicles as Indian made or imported vehicles, in our considered

view will not fall under the Legislative entry. To this extent, the contentions of Mr.M. Palani, Mr.M.Krishnappan, learned counsel for the

petitioners deserve to be considered further.

Our attention has been drawn to the recent decision of the Apex Court in State of Maharashtra v. Madhukar Balkrishna Badiva, cited supra

wherein classification of the vehicle as company owned or owned by individual and higher rate of tax on company owned vehicles had been upheld

by the Apex Court. We are bound by this decision and ratio being classification of owners of vehicle.

In Malwa Bus Service (Private) Limited and Others Vs. State of Punjab and Others, the Apex Court once again had occasion to consider the

levy of tax on stage carriages and public carriers and held that levy of different rate of tax on stage carriages and public carriers does not suffer

from the vice of hostile discrimination and such stage carriages belong to a class distinct and separate from public carriers which carry goods on

undefined routes. While reiterating that the nature of levy of motor vehicles tax as compensatory, the Apex Court held thus:-

A law of taxation cannot be termed as being discriminatory because different 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. As observed by this Court in Khandige Sham Bhat and Others Vs. The Agricultural Income Tax Officer, in respect

of taxation laws, the power of legislature to classify goods, things or persons are necessarily wide and flexible so as to enable it to adjust its system

of taxation in all proper and reasonable ways. The Courts lean more readily in favour of upholding the constitutionality of a taxing law in view of the

complexities involved in the social and economic life of the community. It is one of the duties of a modern legislature to utilise the measures of

taxation introduced by it for the purpose of achieving maximum social goods and one has to trust the wisdom of the legislature in this regard.

Unless the fiscal law in question is manifestly discriminatory the Court should refrain from striking it down on the ground of discrimination. These

are some of the broad principles laid down by this Court in several of its decisions and it is unnecessary to burden this judgment with citations.

In the same Malwa Bus Service (Pvt) Ltd., v. State of Punjab, the Apex Court also reiterated that there cannot be much difference between the

fee collected and the compensatory character of the motor vehicles tax. In that context, it has been held thus:-

In Kewal Krishan Puri and Others Vs. State of Punjab and Another, where the question of a fee was involved, this Court said that if at least a

good and substantial portion of amount collected on account of fees, (may be in the neighbourhood of two-thirds or three-fourths) was shown with

reasonable certainty to have been spent for rendering services to those from whom the fees were collected, the levy of fees could be upheld. In

law, there cannot be much difference between the above principle applicable to fees and the principle that ought to, govern the levy of motor

vehicles tax which is claimed to be of a compensatory character. We are satisfied that the State Government has substantiated its case that the

impugned tax is truly compensatory in nature.

In State of Karnataka Vs. K. Gopalakrishna Shenoy and Another, the Apex Court held that the payment of tax on every registered motor

vehicles is compulsory and that 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. In the said case, the payment of tax in advance for

the quarter or half year or a year was the subject matter of consideration and the statutory provision of the Karnataka High Court provided as it

for obligatory to pay tax in advance for the motor vehicles as long as the certificate of registration is current, irrespective of the condition of the

vehicles for use on roads and irrespective of whether the vehicle had a certificate of fitness with current validity or not. In that context, the Supreme

Court held thus:-

The scheme of the Taxation Act is such that the tax due on a motor vehicle has got to be paid in terms of Section 3at the prescribed rate and in

advance and the liability to pay tax continues as long as the Certificate of Registration is current but if it so happens that in spite of the Certificate of

being current, the vehicle had not actually been put to use for the whole of the period or a continuous part thereof, not being less than one calendar

month, the person paying the tax should apply to the Prescribed Authority and obtain a refund of the tax for the appropriate period after satisfying

the Authorities about the truth and genuineness of his claim. Sections 3and 4are absolute in their term and the liability to pay the tax in advance is

not dependant upon the vehicle being covered by Certificate of Fitness or not. Even if the vehicle was not in a road worthy condition and could not

be put to use on the roads without the necessary repairs being carried out, the owner or person having possession or control of a vehicle is

enjoined to pay the tax on the vehicle and then seek a refund.

In the said case, the validity of levy for the current year in question was upheld and payment of tax in advance for the quarter or half year or a

financial year had been upheld. Incidentally, it is relevant to refer to the decision of the Apex Court. In Bolani Ores Ltd., the Apex Court had

occasion to consider the levy of motor vehicles tax on dumpers and rockers that are registrable under the Motor Vehicles Act are not taxable

under the Bihar State Taxation Act as long as they are working solely within the premises of the respective owners. In other words, the Apex

Court enunciated the principle that there may be different kind of vehicles that they are registrable under the Motor Vehicles Act, they are not liable

to be levied with tax under the Motor Vehicles Act and it was emphasised that the taxing statute is a regulatory or compensatory statute and the

Apex Court held that so long as the vehicles are not using the public roads though the vehicle has been registered under the Motor Vehicles Act,

they are not liable to be taxed.

The instrument of taxation is not merely a means to earn more revenue and in India, it ought to be meant to reduce inequalities, and hence the

Parliament is allowed with more freedom of choice in the matter of taxation vis-a-vis other laws. In Sri Srinivasa Theatre and Others Vs.

Government of Tamil Nadu and Others, Jeevan Reddy, J., speaking for the Bench held thus:-

The instrument of taxation is not merely a means to raise revenue in India; it is, and ought to be, a means to reduce inequalities. You don''t tax a

poor man. You tax the rich and the richer one gets, proportionately greater burden he has to bear. In deed, a few years ago, the Income Tax Act

taxed 94p out of every rupee earned by an individual over and above Rupees one Lakh. The Estate Duty Act, no doubt since repealed, Wealth

Tax Act and Gift Tax Act are all measures in the same direction. It is for this reason that while applying the doctrine of classification developed

mainly with reference to an under the concept of ""equal protection of laws"" - Parliament is allowed more freedom of choice in the matter of

taxation vis-a-vis other laws. If this be the situation in the case of direct taxes, it should be more so in the case of indirect taxes, since in the case of

such taxes the real incidence is upon some other than upon the person who actually makes it over to the State though, it is true, he cannot avoid the

liability on the ground that he has not passed it on. In the matter of taxation it is, thus, not a question of power but one of constraints of policy - the

interests of economy, of trade, profession and industry, the justness of the burden, its ''acceptability'' and other similar considerations. We do not

mean to say that taxation laws are immune from attack based upon Article 14. It is only that Parliament and legislature are accorded a greater

freedom and latitude in choosing the persons upon whom and the situations and stages at which it can levy tax. We are not unaware that this

greater latitude has been recognised in USA and UK even without resorting to the concepts of ''equality before law'' or the equal protection of

laws'' - as something that it inherent in the very power of taxation and it has been accepted in this country as well. (See in this connection, the

decision of Subba Rao C.J (as he then was) in Gorantia Butchayya Chowdary v. State of A.P. where the several US and English decisions have

been carefully analysed and explained). In the context of our Constitution, however, there is an added obligation upon the State to employ the

power of taxation --nay all its powers to achieve the goal adumbrated in Article 38.

This enunciation of law will normally apply at all ordinary levies of taxes and not to the levy of motor vehicles tax which is compensatory in nature.

In Regional Transport Officer Cum Taxing Authority, Rouekela and others v. Steel Authority of India Ltd., (Su1995 ppl. IV. SCC 165) the

Apex Court had occasion to consider the challenge to the levy of tax on the vehicles used by Steel Authority of India to transport its employees. In

that context, the Apex Court held that the State cannot be permitted to act arbitrarily in choosing item of taxation and leave it to the subject to

disprove liability. It is the State which was to examine the facts and then apply the charging item on the plain language of the provision obviating any

unjust imposition. Till such stage is arrived at, there is no occasion for the State to demand tax over and above which in any event is due to it under

item-6. In that context it has been held thus:-

The appellant, on the other hand, has demonstrably not been able to justify before us how straight away that jump in the rate could be without the

necessary fact establishment. So we go through a limited area of consensus to say that till reliefs (if due) can successfully be sought by the Steel

Authority of India Ltd. under Sections 10and/or 15of the Act, it is eligible to tax and the corrective measure presently can be for changing the rates

of tax under Item 3 to Item 6, reserving the right to the appellant-State to come to a different conclusion after a fact-finding inquiry, in which of

course, the respondent would be associated. The State cannot be permitted to act arbitrarily in choosing the tern of taxation and leave it to the

subject to disprove liability. It is the State which has to examine the facts and then apply the charging Item on the plain language of the provision

obviating any unjust imposition. Till such stage is arrived at, there is no occasion for the appellant-State to demand tax over and above which in any

event is due to it under Item 6. Nonetheless, we make it clear, that this opinion of ours is only embedded in that area of consensus and shall not be

taken to be a pronouncement on the applicability of Item 6, in the facts and circumstances of the case.

As already pointed out, the levy of tax in advance and collection of motor vehicle tax in advance either for the quarter or for the half year or for

the whole year had already been upheld by the Apex Court. The levy of life tax in respect of two wheelers and three wheelers had been upheld by

the Apex Court. In the view of their Lordships of the Apex Court collection of tax on motor cycles and tricycles contribute only 56 to 58 per cent

of all types of vehicles and the substantial increase cannot be said to be not a regulatory or a compensatory measure. While finding that the new

system of levy of tax for the life time of motor cycle and tricycle gives relief to the two wheeler owners as they need not frequent themselves to the

RTO offices for annual payment, the Apex Court held that such levy of life time tax on two wheelers does not suffer from any vice of being not

regulatory or compensatory taxation, nor from the vice of being violative of Art.14of the Constitution.

The Supreme Court also reiterated that company owned vehicles travel more mileage and using roads more often and added that it cannot be

said that there was differentiation without any basis and as such there was discrimination. With due respect to their Lordships of the Supreme

Court, we are of the considered view that the same scale cannot be extended in respect of four wheelers non-transport light motor vehicles where

life tax is sought to be levied and enforced as a matter of compulsion by the impugned amendment. The tax that has been levied on the two

wheelers is far less and far minimum and when compared to the expenditure undertaken by the individual who pays tax and the authority who

collects the tax, the Apex Court held that such a levy is valid and it does not cease to be a regulatory one nor it ceases to be compensatory in

nature. This is not the case in the present case.

The charging section provides that tax shall be levied on every motor vehicle used or kept for use in the State at the rates specified for such

vehicle as prescribed in the first schedule or second schedule or in the third schedule as the case may be. Sub section 1-A of Section 3provides

that in respect of motor vehicles specified in item (A) of the second schedule and in Part-I of the Third Schedule, as the case may be, at the time of

its first registration, a life time tax shall be paid at the rates specified therein on a licence to be taken for the life time tax of such vehicle.

In respect of motor vehicles specified in item (B) of the second schedule, and in Part II of the Third Schedule, the tax shall be paid either

annually at the rates specified in the first schedule or for life time of such vehicle at the rates specified in Item (B) of the second schedule or in Part-

II of the Third Schedule as the case may be, on a licence to be taken for such vehicle for the year or for the life time as the case may be.

In other words, in respect of old light motor vehicles for which a provision has been made for levy of tax, the option has been given to the

owner of the vehicle to pay annual tax or the life tax as the case may be at the discretion of the owner. But in respect of new vehicles in terms of

the impugned amendment the owner has to pay life tax which is a compulsory levy. The emphasis being that it is not made optional, but compulsory

exaction of tax.

It may be that a provision which enables the owner to pay tax either for quarter; or half year or annually or for life of the vehicle and it is an

enabling provision which a owner may invoke, avoid going to the RTO''s Office and save expenditure if so opted. But at the same time, any

exaction of tax for the life time of the vehicle compulsorily, ceases to be regulatory and it also ceases to be compensatory in nature and a person

who purchases a new vehicle in this State has no option to pay the tax for the vehicle either quarterly, half yearly or annually. It is true that a

provision has been made for refund. But such refund has to be claimed and it will be sanctioned if the claimant substantiates his claim.

When a new vehicle registered in this State and the owner being compelled to pay the life time tax for the vehicle leaves for the other State, the

contingencies arise are different; It is not as if the tax is uniform in all States nor there is any Central enactment in this respect. A owner of the

vehicle who migrates from this State to any other State has to re-register his vehicle and the consequence being the liability to pay tax in the other

State as well and in case of migration to State of Tamil Nadu a different treatment follows.

As already pointed out, the collection of tax for the quarter or half year or annually had been upheld as still it continues to be compensatory in

nature as it is obvious at least before the end of the year, the tax so collected is spent or being utilised for the maintaining of roads and making

provision for the improvement of the traffic and such other regulatory measures. Per contra, the levy of life time tax and the question as to what is

the life time of the vehicle is still a larger issue and various provisions of the Motor Vehicles Taxation Act as well as Motor Vehicles Rules provide

equally different meaning and Taxation Act does not define what is ""life time"" for a light motor vehicle. This results in undefiniteness and leads to

ambiguity. Therefore, this Court is of the considered view that the levy of substantial amount of tax which is nearly 20 times more than the annual

tax in respect of new four wheelers and more so when it is made-compulsory, ceases to be regulatory and ceases to be compensatory and

therefore it falls outside the legislative competency of the State Legislature. The emphasis being the levy of life tax takes the levy from being

compensatory or regulatory and it turns out to be a levy on ownership of motor vehicle.

The legislative competency of the State Legislature enables the State Legislature to levy motor vehicles tax which is compensatory in nature. If

the tax ceases to be compensatory in nature or a regulatory measure as already pointed out by the Supreme Court, the levy will be beyond the

scope of the State Legislature.

The question that an option could be granted to the owner of the vehicles to opt either for annual payment or life time payment, it will be an

enabling provision and it is for each one of the owners of the vehicles to plan his future utilisation of the vehicle, such a life time levy of the tax not

only ceases to be not compensatory in nature, but also a tax on holding of the vehicles and not for the user which is indefinite after a particular

period. It cannot be assumed that for the entire life, the vehicle will be used in this State, nor there is any provision which prohibits the transfer of

the vehicles from this State to another State or migration of the owner of the vehicle from this State to any other State.

The levy rate prescribed and quantum of levy of motor vehicles tax for life of new vehicles and the quantum of tax payable thereon ranges from

10 to 30 per cent of the value of the new vehicles, which amounts to levy on the value of the vehicles and it ceases to be compensatory in nature,

nor it retains the character of regulatory in measure as has been held by the Apex Court in G.K.Krishnan v. State of Tamil Nadu and in State of

Maharashtra v. Madhular Balkrishna Badiya. The levy by State legislature falls under Entry 57 List II Schedule VI and entry under which the tax

has been levied will be valid so long as the levy is compensatory in nature and it does not ceases to be regulatory in nature. But the moment it

ceases to be compensatory in nature and it is not a regulatory measure, the exaction of advance tax for 20 years is a tax levy beyond the scope of

the State Legislature and such a levy is arbitrary and offends Article 14as well as 19(1)(g) of the Constitution.

As already pointed out different rate of levy of motor vehicles tax, though compensatory in nature, had been upheld by the Apex Court in

respect of contract carriages vis-a-vis stage carriages. Where the test applied being the mileage which a contract carriage may undertake in a state

vis-a-vis the restriction of mileage, the stage carriage has to undertake. On that score, it has been held that the differentiation in levy of contract

carriage was held to be not discriminatory.

As already pointed out the tax being compensatory and the tax being collected for the maintenance of roads or regulation of traffic as the case

may be though it may not be mathematical, equivalent to that of quid pro quo Still such a levy is compensatory. The collection of tax 20 times more

than the annual tax as already pointed out above ceases to be compensatory in nature and such a levy of tax for 20 years or 25 years, as the case

may be is not permissible in law. Even assuming that the Legislature has authority to levy tax on the vehicles it cannot be held that the same will fall

under the ""Legislative Entry"" under which the present Amending Act is made..

It is equally true that levy of more tax on vehicles owned by Companies vis-a-vis individual owners had been upheld by the Apex Court. That

is also on the assumption that such company owned vehicles may do more mileage than the vehicles owned by an individual. The Apex Court had

shown some concession to this extent as in those cases the petitioners could not make out a case that cease to be compensatory in nature. But in

the present case the compulsory exaction of tax for the life of the vehicle and a different levy in respect of those vehicles on the basis of ownership

also and without reference to their laden weight, but with reference to the value of the vehicle, either imported or local made definitely takes away

the legislative enactment outside the scope of legislative entry.

As already pointed out in G.K. Krishnan and Others Vs. State of Tamil Nadu and Others, and State of Maharashtra and Others Vs.

Madhukar Balkrishna Badiya and Others, and the later decision in AIR 1987 SC 17 (Bolani Ores v. State of Orissa) as well as State of

Karnataka and Others Vs. D.P. Sharma and Others, , the levy is compensatory in nature and the collection of substantial amount in advance for a

period of 15 years or 25 years as the case may be as life time tax is not regulatory and it ceases to be compensatory as it is an exaction substantial

amount without authority.

It may be that for another 25 years during the life time of the vehicle the present owner, who registers his new vehicle need not frequent the

office of the R.T.O. but he will not retain the benefit or protection, once the vehicle is passed by transfer and also there is no guarantee that the

Legislature will not withdraw the protection of non revision of such tax as there could be no estoppel against the Legislature.

In the present case, the charging section is distinctly different from that of the Bombay Motor Vehicles Act, 1958 as well as that of the Kerala

Motor Vehicles Taxation Act and this makes the difference, apart from the rate of levy at various rates based on value of the car or its make

Vehicles Taxation Act and this makes the difference, apart from the rate of levy at various rates based on value of the car or its make.

As the basis for levy being compensatory, the levy of tax on and from 1974 as amended by Tamil Nadu Act 27 of 1998 a comparison of the

rates would show that they ceased to be compensatory in nature, nor still could retain the character of regulatory in measure. A four wheeler

weighing more than 700 kgs of unladen weight and if the value is not more than 5 lakhs in case of individual, the tax payable is Rs.8210/- for, the

life of the vehicle and in case of other than individuals, the tax payable is 16420/- If the vehicle weighing not more than 700 kgs of unladen weight,

and if the value of the vehicle is more than Rs.5 lakhs but not more than Rs.10 lakhs, in case of individual, the liability to pay tax is Rs.12, 320 and

in case of others, the tax fixed being Rs.24, 640/-. If the value of the same vehicle of 700 kgs of unladen weight exceeds Rs.10 lakhs, in case of

individual, it is Rs. 16420/- and in case of others the tax fixed being Rs.32, 840/-. Thus, the basis of levy charges from laden weight or the wear

and tear on the state road had been charged to value of vehicle its ownership and possession. It ceases to be a compensatory levy, and not

regulatory as well.

So also different rates have been provided for vehicles weighing more than 700 kgs to 1500 Kgs, 1500 kgs to 2000 kgs, 2000 kgs to 3000

kgs and 3000 kgs onwards, different quantum of tax has been levied and if the value of the vehicle is not more than Rs.5 lakhs, in case of other

than individual, the tax payable is double that of the tax payable by an individual and if the value exceeds 5 lakhs but less than Rs.10 lakhs, such

levy in case of vehicles owned by other than individual it is thrice the same unladen weight and if it exceeds Rs.10 lakhs, for the same unladen

weight the tax payable in respect of individual goes by twice the tax and four times for others. The tabular column set out herein would demonstrate

the same:-

As already pointed out, the levy of compensatory tax is on the basis of unladen weight of the vehicle and its capacity to carry, and such

capacity to carry more may result in more thrust on the roads and may result in more damage to the highways. But when the vehicles are of the

same unladen weight, there is no reason at all to discriminate and levy four times merely because the value of the vehicle is more and such a levy

ceases to be compensatory in nature and it is a levy on the ownership. In effect, it is a clear levy on the value of the vehicle and its ownership and it

ceases to be regulatory as well. It is no longer compensatory and it turns out to be a ""tax"" for the support of the Government on property, people

or their activities.

It is true, that with respect to levy of tax viz., Income tax or Wealth-tax, Gift -tax or any other Tax, as held by the Apex Court, there could be

different rate of levy depending upon the capacity to pay as it is the object of the law makers for distribution of wealth. But when the levy of motor

vehicles being of compensatory in nature, there is neither a reason nor any rhyme, nor there could be any classification other than the unladen

weight of the vehicle. The user of the road or the thrust the vehicle may cause or the damage the vehicle may cause has no relevancy or bearing on

the value of the vehicle. The more the vehicle is sophisticated, the less thrust it makes on the road and the control system in the vehicle is more

sophisticated, it cause less damage to the road. This is not disputed.

Further it is true that the Apex Court had held on the facts of the case in State of Maharashtra and Others Vs. Madhukar Balkrishna Badiya

and Others, that there could be higher levy in respect of vehicles owned other than individuals on the presumption that the vehicles owned by

Corporate Sector may do more mileage than the vehicles owned by the individuals. But in the present case as seen from the Tabular Statement, the

levy is made on the basis of unladen weight as well as their ownership, its value either not more than 5 lakhs or 5 to 10 lakhs or above 10 lakhs of

the same unladen weight and the tax levied in a given situation a vehicle of unladen weight of 2000 kgs, if it is owned by an individual it is liable to

pay a life time tax of Rs.13, 690/-, whereas for the same unladen weight if the value of the vehicle is more, it is twice the tax and if the owner of the

vehicle is not an individual, the tax shoots up by 400%.

Merely based on presumption and on assumption, it cannot be held that the vehicles owned other than by individuals do more mileage and_

results in more damage to the roads as if all the four wheelers owned other than by individuals do more mileage. There cannot be any such

universal assumption, especially when the costly and luxurious cars owned by Companies are used sparingly and it is not being used as a run

around or so frequently. The four wheelers in respect of which the tax is levied is light motor vehicles which could carry four passengers in all

including the Driver or at times 1+4=5 including Driver. The vehicles had been categorised on the basis of their laden weight, which weight is

relevant for the purpose of levy as has been held by the Apex Court. Even assuming the vehicles owned other than by individual do more mileage

during the given period, there is no reason or rhyme or basis at all to levy a tax 400 times more even in respect of the same category of vehicle,

merely because the value of the vehicle is more or above a particular level or exceeds a price range.

Once the tax is levied either on the basis of the capacity of the owner of the vehicle to pay, or on the basis of the status namely, individual or

others, it ceases to be compensatory in nature as it is still the law and pronouncement of the Apex Court that the levy of motor vehicles tax is

compensatory and it is not a tax, where the Legislature could levy different rate of tax for different sector or different person of different status or of

different levels, provided if there is a valid classification. It is not here.

In the present case, neither there is a valid classification, nor there is any justification, nor there is any reason to uphold the higher levy or

increase by 400%. There is no restriction that a company owned vehicle will always remain a company owned vehicle. So also the vehicle owned

by an individual always remain with the same individual owner. The vehicles may change from one person to another during its life time who may

either be an individual or corporate or a company or a partnership, as the case may be. There is no restriction either in the provisions of the Motor

Vehicles Taxation Act that a vehicle owned by an individual shall be kept or owned by an individual alone for its life. So also a vehicle which is

owned by a Company or Corporate body shall continue to be owned by such a body alone for its life and it shall not be transferred to an individual

as well.

Further the levy of tax based on the value of the vehicle ranging upto 5 lakhs, upto 10 lakhs and higher than 10 lakhs also takes away the levy

beyond the legislative competency as it is a levy on the ownership of the vehicle and on the price range of the vehicle and it is not a compensatory

levy. The more the value of the vehicle the depreciation is more and the value of the vehicle does not remain to be the same throughout its life.

Further, the levy being compensatory in nature and advance tax either for the quarter or for the half year or for the financial year is permissible,

levy of tax and compulsory exaction of tax for the life time of the vehicle as already pointed out takes away the levy from its being compensatory in

nature as well, as from the legislative competency, but makes it a levy of tax on ownership. It is true that there is a provision for refund of tax. But

such a procedure is circumscribed by various conditions. Merely because there is a provision for refund, it cannot be assumed that the levy is valid

and still retains the character of compensatory in nature or regulatory in measure.

For all the above reasons, in our considered view the levy of life time tax on four wheelers without the owners'' exercising their option, and

without there being a provision for exercising option, cannot be sustained and it is illegal and ultra vires and it offends Art. 14as well as 19(1)(g) of

the Constitution, besides there being no rational nexus, and it is an unjust enrichment at the cost of the public. The levy also treats equals as

unequals.

Challenge to the levy as violative of Art.14and 19(1)(g) of The Constitution has also been made by Mr.M.Palani, learned counsel for the writ

petitioner by relying upon the pronouncement of the Apex Court in AIR 1962 SC 1563 (Jagannath Baksh Singh v. State of U.P.), where the

Supreme Court held thus:-

A taxing statute can be held to contravene Article 14if it purports to impose on the same class of property similarly situated an incidence of

taxation which leads to obvious inequality. There is ho doubt that it is for the Legislature to decide on what objects to levy what rate of tax and it is

not for the courts to consider whether some other objects should have been taxed or whether a different rate should have been prescribed for the

tax. It is also true that the Legislature is competent to classify persons or properties into different categories and tax them differently, and if the

classification thus made is rational, the taxing statute cannot be challenged merely because different rates of taxation are prescribed for different

categories of persons or objects. But, if in its operation any taxing statute is found to contravene Art. 14, it would be open to Courts to strike it

down as denying to the citizens the equality before the law guaranteed by Art.14.

Therefore, whenever the validity of a taxing statute is challenged on the ground that it contravenes, Art.14or Art. 19, the challenge cannot be

thrown out on the preliminary ground that a tax law is beyond such challenge, but its merits must be carefully examined.

Mr.M.Palani, learned counsel for one of the writ petitioners also pointed out that levy on passenger vehicles as well as levy on goods carriers

was on the basis of unladen weight and levy on the passenger seating capacity, levy on the contract carriage is on the laden weight, while the

charging Section 3provides for revision on the basis of user, but levy on two-wheelers is measured by Cubic Capacity of the Engine. As already

pointed out, in AIR 1975, SC 583 (G.K.K.risknan v. State of Tamil Nadu) it has been repeatedly held to be compensatory nature and it should

be based upon the laden weight and it shall not be based upon the value of the vehicle or unladen weight. The value of the vehicle is not consistent

and it may vary from time to time, also varies depending upon the additional attachments or luxury attachments, but they have no relevancy or

bearing with respect to the wear and tear or user on the road.

According to Mr. M. Palani, learned counsel, there is no reason or rhyme to tax the vehicles on the basis of its purchase value or the value as

fixed by them in respect of such category of vehicle. In other words equals are treated as unequals. Such a treatment is held to be discriminatory in

AIR 1970 ""S.C.1133 (Twyford Tea Co. Ltd.,

Kerala State), wherein the Apex Court held thus: -

What is meant by the power to classify without unreasonably discriminating between persons similarly situated, has Seen stated in several other

cases c this Court. The same applies when the legislature reasonably applies a uniform rate after equalising matters between diversely situated

persons. Simply stated the law is this: Differences in treatment must be capable of being reasonably explained in the light of the object for which the

particular legislation is undertaken. This must be based on some reasonable distinction between the cases differentially treated. When differential

treatment is not reasonably explained and justified, the treatment is discriminatory. If different subjects are equally treated, there must be some

basis on which the differences have been equalised otherwise discrimination will be found. To be able to succeed in the charge of discrimination, a

person must establish conclusively that persons equally circumstanced have been treated unequally and vice versa. However, in Khandige Sham

Bhat and Others Vs. The Agricultural Income Tax Officer, it was observed:

If there is equality and uniformity within each group, the law will not be condemned as dicriminative, though due to some fortuitous circumstances

arising out of a peculiar situation some included in a class get an advantage over others, so long as they are not singled out for special treatment.

Taxation law is not an exception to this doctrine: Vide Kunnathat Thathunni Moopil Nair Vs. The State of Kerala and Another, But in the

application or me principles, the courts, in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the

legislature in the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature

to classify is of ""wide range and flexibility"" so that it can adjust its system of taxation in all proper and reasonable ways.

In Venkateshwara Theatre v. State of Andhra Pradesh and others 1993-3 SCC 677, the Supreme Court held thus:

Article 14enjoins the State not to deny to any person equality before the law or the equal protection of the laws. The phrase ""equality before the

law"" contains the declaration of equality of the civil rights of all persons within the territories of India. It is a basic principle of republicanism. The

phrase ""equal protection of laws"" is adopted from the Fourteenth Amendment to the U.S. Constitution. The right conferred by Article 14postulates

that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed. Since the State, in exercise of its

governmental power, has, of necessity, to make laws operating differently on different groups of persons within its territory to attain particular ends

in giving effect to its policies, it is recognised that the State must possess the power of distinguishing and classifying persons or things to be

subjected to such laws. It is, however, required that the classification must satisfy two conditions, namely, (i) it is founded on an intelligible

differentia which distinguishes those that are grouped together from others; and (ii) the differentia must have a rational relation to the object sought

to be achieved by the Act. It is not the requirement that the classification should be scientifically perfect or logically complete. Classification would

be justified if it is not palpably arbitrary. (See: Re, Special Courts Bill, 1978). If there is equality and uniformity within each group, the law will not

be condemned as discriminative, though due to some fortuitous circumstance arising out of a peculiar situation some included in a class get an

advantage over others,. so long as they are not singled out for special treatment. (See: Khandige Sham Bhat v. Agricultural I.T.O.)

As rightly pointed out by Mr.M. Palani, learned counsel, it is nothing but hostile discrimination and there is no rational for the levy as the levy

under the Act could be only compensatory in nature and it is not a tax. In this respect, the learned counsel rightly relied upon the decision of the

Apex Court in Gujarat Ambuja Cement Ltd. and Another Vs. Union of India and Others, wherein the Apex Court held thus:-

Learned Senior Counsel, Shri Venugopal and other learned advocates who raised similar contentions in the companion appeals, submitted that

even though, prima facie fixation may be taken as a legislative function, it is now well settled by a catena of decision of this Court that when price

fixation is challenged as arbitrary and unreasonable the court has ample jurisdiction to go into this question and examine the impugned price policy

on the touchstone of Article 14of the Constitution of India. In this connection, Shri Venugopal, learned senior counsel invited our attention to the

observations of the High Court in para 13 of the judgment wherein it was held that ""price fixation is neither the function nor forte of the court. It is

neither concerned with the policy nor with the rate, it is left to the discretion of the executive"", he submitted that the aforesaid statement of law

culled our from the decisions of this Court, is a partial enunciation of the legal principle. It was submitted that despite the fact that this pricing policy

was in the realm of legislative exercise if the policy is shown to be violative of Article 14of the Constitution of India as unreasonable, arbitrary of

involving non application of mind to relevant considerations or based on irrelevant considerations, it could be challenged in Court. To that extent,

learned Senior Counsel, Shri Venugopal, is right. In fact, in fairness to learned Senior Counsel for the respondents, it must be stated that he did not

challenge the locus standi of the writ petitioners to mount such a challenge under Article 226of the Constitution of India. But his submission was

that even during the relevant time, it was open to the writ petitioners to purchase coal from any colliery of their choice which was a non premium

colliery. The said stand taken in the counter before the High Court and which was reiterated by the learned Senior Counsel for the respondents

before the High Court was also reiterated before us. It was also contended that there was nothing illegal or unreasonable in charging 10% more for

A, B, C & D Grades of coal by the premium collieries, as according to the learned Senior Counsel for the respondents, relevant considerations

were kept in view by pricing authorities in coming to the aforesaid conclusion about charging 10% more. Shri Venugopal challenged the said stand

of learned counsel for the respondents by submitting that because of the Linkage Committee''s restrictions, the writ petitioners had no choice but to

lift coal from Respondent 4-Colliery located in Madhya Pradesh, otherwise their manufacturing activities would have come to a grinding halt and,

therefore, it was a misnomer to say that it was open to the writ petitioners to purchase coal from non-premium collieries as they liked. He further

contended that for the purpose of utilisation of coal as essential raw material in their plaint, different grades of coal are required. Classification of

coal by grade is made according to the standard specified by the Indian Standard Specification depending upon the inherent ingredient contents of

coal. Before such gradation is determined in respect of any particular type of coal, there is always a testing process. Through such testing process,

the gradation of coal is fixed and once such a gradation is fixed, there is no, nor can there be any, question of further testing or re-fixing the

classification already made. Learned Senior Counsel for the respondents on the other hand pointed out that even on merits it could not the 10%

hike in price for different grades of coal supplied by Respondents 4-Colliery viz., the premium colliery was in any way irrational as the coal

supplied by the said colliery as compared to non premium collieries was of a better quality, as it had greater lasting, fuel-heat value and

consequently the said 10% premium charged by the premium colliery could not be said to be violative of the guarantee of Article 14of the

Constitution of India. It was submitted that the writ petitioners themselves paid this 10% extra charge on the coal lifted by them during the period

from 1.1.1989 till 1991 when they filed the writ petitions in the High Court. It is also submitted that from 1.4.1996, coal has not remained a

controlled commodity and it is easily available as raw material in the open market and consequently, the grievance made by the writ petitioners has

become more or less academic and is confined only to the aforesaid limited period from 1.1.1989 to 31.3.1996 or up to 31.8.1996, as submitted

by the learned Senior Counsel, Shri Venugopal for the appellant-writ petitioners.

Very many authorities have been cited by Mr.M.Palani, learned counsel in support of his arguments contending that levy is arbitrary, and the

levy of life time is violative of Art. 14and ceases to be compensatory in nature. This contention deserves to be countenanced.

Per contra, Mr.T.R.Rajagopalan, learned Additional Advocate General, appearing for the respondents sought to sustain the levy on the

ground that during the life time of such vehicles there is no increase in rate of tax beside there is a provision for refund of tax and that penalty

provision will not apply to vehicles for which life time tax has been paid. The learned Additional Advocate General sought to sustain the levy of life

time tax for the four wheelers mainly on the ground that the collection cost of tax is increasing day by day and the work of the department as well

as the enforcing authority also become too cumbersome. Be that so, there is no reason at all to discriminate the vehicles owned by individuals vis-

a-vis others. So also there is no reason at all to levy different rate of tax in respect of the vehicles whose value ranges from 5 lakhs to 10 lakhs or

10 lakhs and above though user of the same road is the basis and criteria for the levy.

Though the learned Additional Advocate General contended that the levy is not discriminatory, the value alone is different and therefore it is a

reasonable classification, which the Legislature is competent to make, such a contention is not acceptable as it is not tax, but it is a compensatory

levy. So long as the levy falls under the category of compensatory levy, the Legislature cannot pick and choose or adopt a different scale or levy

differently by categorising the subjects or objects.

The contention advanced by Mr.T.R.Rajagopalan, learned Additional Advocate General on the competency of the Legislature as well as its

power to provide differently or levy differently is relevant for the purpose of levy of a tax and the authorities relied upon by him only relate to tax

simpliciter, namely goods, land or other taxes. But it will have no application to compensatory levy as in the present case.

According to the learned Additional Advocate General the impugned levy is not unreasonable and therefore no interference is called for. The

learned Additional Advocate General relied upon the pronouncement of the Apex Court reported in Kerala Hotel and Restaurant Association and

others Vs. State of Kerala and others, and also contended that different rates of tax could be levied by relying upon the decision of the Supreme

Court in Gauri Shanker and others Vs. Union of India and others,

As already pointed out, we are unable to appreciate the said contention advanced by Mr.T.R.Rajagopalan, learned Additional Advocate

General as the present levy is not a tax simpliciter, but it is a compensatory levy which has to be substantiated at least to a larger extent and it

cannot be for a life time exaction based upon compulsion. It may be a levy in respect of two wheelers. Such a levy on two wheelers has been

enforced and no one had challenged. But on that score the imposition of levy on four wheelers cannot be accepted. The levy in respect of two

wheelers was mainly on the power of the engine namely Cubic Capacity and not with reference to the market value of the vehicle or other

conditions as the four wheelers are sought to be taxed.

In reply, Mr.K.M.Vijayan, learned senior counsel appearing for some of the writ petitioners referred to the decision of the Apex Court in

State of Maharashtra v.

State of Maharashtra and Others Vs. Madhukar Balkrishna Badiya and Others, and also contended that there cannot be a valid levy as in the

present case. The Supreme Court held thus:-

In our opinion the fact that the Act, as at present, does not provide for refund in the 14th and 15th years, does not make the law outside the

competence of the State Legislature. The concept ""regulatory and compensatory"" tax does not imply mathematical precision of quid pro quo. This

aspect was emphasised in International Tourist Corporation and Others Vs. State of Haryana and Others, as noted before.

In the foregoing circumstances, we also hasten to add that had an option been given to the owners of the vehicles and such a levy is referable

to the unladen weight of the vehicles, being compensatory nature of tax, we would have no occasion to interfere with the impugned provision. We

also find the same arguments will apply in respect of old vehicles where a different rate of tax is also sought to be levied for different kind of

vehicles for the same reasonings even though we need not strike down the statutory provision with respect to the old vehicles where an option has

been given to the individual owner of the vehicle to pay either annual tax or life time tax for the balance of period.

In the circumstances, we hold that Section 3of the Tamil Nadu Motor Vehicles Taxation Act, 1974 introducing Section 4 (1-A) (a) read with

schedule III Part-I as unconstitutional, violative of Article 14of the Constitution and inconsistent with the scheme of Section 3as well as Section 4of

the Act. After the commencing of the Amendment Act, substantial number of writ petitions have been filed and the petitioners in the respective writ

petitions have been permitted to register their vehicles on payment of annual tax. As such no direction is required to be issued for the refund of tax

to the owners of the new vehicles who have filed this batch of writ petitions. We have also, considered the aspect of reading down the provision to

make it valid. But such a course is not possible on the very provisions.

XI - CONCLUSION

In the circumstances Section 4(1-A) (a)and the III Schedule are declared as unconstitutional, violative of Art. 14& 19(1)(g) of the

Constitution and they are beyond the legislative competency of the State Legislature, besides they cease to be a compensatory levy. The points

framed for consideration are answered against the State and the writ petitions are allowed to the extent indicated above. The parties shall bear their

respective costs. Consequently, all the connected W.M.Ps are closed.