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Freedom of Trade—State carriages—Tax on Vehicles-—State law imposing tax on vehicles used in public place or kept for use-—Constitutional validity—Rajasthan Motor Vehicles Taxation Act, 1951 (Rajasthan 11 of 1951), ss. 4,11, Schedules— Constitution of India, Arts. 19, 245, 301, 304 Seventh Sch. List I, entry 42, List 11, entry 57.Sub-section (1) of s. 4 of the Rajasthan Motor Vehicles Taxation Act, 1951, provided: “...... No motor vehicle shall be used in any public place or kept for use in Rajasthan unless the owner thereof has paid in respect of it, a tax at the appropriate rate specified in the schedules to this Act within the time allowed...... ” The appellants were carrying on the business of plying stage carriages in the State of Ajmer. They held permits and plied their buses on diverse routes. There was one route which lay mainly in Ajmer State but it crossed narrow strips of the territory of the State of Rajasthan. Another route, Ajmer to Kishangarh, was substantially in the Ajmer State, but a third of it was in Rajasthan. Formerly, there was an agreement between the Ajmer State and the former State of Kishangarh, by which neither State charged any tax or fees on vehicles registered in Ajmer or Kishangarh. Later, Kishangarh became a part of Rajasthan. On the passing of the Rajasthan Motor Vehicles Taxation Act, 1951, and the promulgation of the rules made thereunder, the Motor Vehicles Taxation Officer, Jaipur, demanded of the appellants payment of the tax due on their motor Vehicles for the period April 1, 1951, to March 31,1954. By virtue of the provisions of s. 4 of the Act read with the Schedules no one could use or keep a motor-vehicle in Rajasthan without paying the appropriate tax for it and if he did so he was made liable to the penalties imposed under s. 11 of the Act. The appellants challenged the legality of the demand on the grounds that s, 4 of the Act read with the Schedules constituted a direct and immediate restriction on the movement of trade and commerce with and within Rajasthan inasmuch as motor vehicles which carried passengers and goods within or through Rajasthan had to pay the tax which imposed a pecuniary burden on a commercial activity and was, therefore, hit by Art. 301 of the Constitution of India and was not saved by Art. 304(b) inasmuch as the proviso to Art. 304(b) was not complied with, nor was the Act assented to by the President within the meaning of Art. 255 of the Constitution. The respondents claimed that taxation for the purpose of raising revenue or for the maintenance of roads etc., was not hit by Art. 301 and that the Act did not constitute an immediate or direct impediment to the movement of trade and commerce inasmuch as the tax imposed was a consolidate tax on the vehicle itself though the quantum of the tax was fixed in some instances with reference to the seating capacity or loading capacity etc. Held (per S. K. Das, Kapur, Sarkar and Subba Rao, JJ-), that the Rajasthan Motor Vehicles Taxation Act 1951, did not violate the provisions of Art. 301 of the Constitution of India and that the taxes imposed under the Act were compensatory or regulatory taxes which did not hinder the freedom of trade, commerce and intercourse assured by that Article. Such taxes, therefore, were legal. Per S. K. Das, Kapur and Sarkar, JJ.—(1) The concept of freedom of trade, commerce and intercourse postulated by Art. 301 must be understood in the context of an ordinary society and as part of a Constitution which envisaged a distribution of powers between the States and the Union, and if so understood, the concept must recognised the need and legitimacy of some degree of regulatory control, whether by the Union or the States. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities did not hamper trade, commerce and intercourse but rather facilitated them and, therefore, were not hit by the freedom declared by Art. 301 ; such measures need out comply with the requirements of the provisions of Art. 304(b) of the Constitution. (2) In view of the provisions of Art. 245, the restrictions in Part XIII of the Constitution applied to taxation laws ; and such laws were not confined only to legislation with respect to entries relating to trade and commerce in any of the lists in the Seventh Schedule. (3) On a proper construction of the Act and the Schedules, the taxes imposed were really taxes for the use of the roads in Rajasthan. In basing the taxes on passenger capacity or loading capacity, the ‘legislature had merely evolved a method and measure of compensation demanded by the State, but the taxes were © still compensation and charge for regulation.Per Subba Rao, J.—(1) The freedom declared under Art. 301 of the Constitution of India referred to the right of free movement of trade without any obstructions by way of barriers, inter-State or intra-State, or other impediments operating as such barriers; and the said freedom was not impeded, but on the other hand, promoted, by regulations creating conditions for the free movement of trade, such as, police regulations, provisions for services, maintenance of roads, provision for aerodromes, wharfs etc., with or without compensation. (2) Parliament may by law impose restrict- ions on such freedom in the public interest, and the States also, in exercise of its legislative power, may impose similar restrictions, subject to the proviso mentioned therein, (3) Laws of taxation were not outside the freedom enshrined either in Art. 19 or Art. 301. . . Per Hidayatullah, Rajagopala Ayyangar and Mudholkar JJ.—(!) Section 4(1) of the Rajasthan Motor Vehicles Taxation Act, 1951, as read with Schs. II, III and Part I of Sch, IV, offended Art. 301 of the Constitution, and as resort to the procedure prescribed by Art 304(b) was not taken it was ultra vires the Constitution. (2) The pith and substance of the Act was the levy of tax on motor vehicles in Rajasthan or their use in that State irrespective of where the vehicles came from and not: legislation in respect of inter- State trade or commerce. The Act was within entry 57 of the List of the Seventh Schedule and not under entry 42 of Union List. (3),A tax which -is made the condition precedent of the right to enter upon and carry on business is a restriction on the right to carry on trade and: commerce within Art. 301. In’ the present case, the. trade, which consisted in making use of motor vehicles for carriage of passengers and goods, could be-carried on only if the tax was paid, and, therefore, the taxes’ imposed by-Schs. IJ, III and IV(I) operated on trade and commerce directly. (4) The tax levied under the Act was not, truly a fair recompense for wear and tear of roads, but a restriction, which Art, 301 forbade. (5) The Act was not, in its true character, regulatory because there was no provision therein, which could be regarded as regulatory of motor vehicles. The Act plainly levied a tax upon possession or us¢ of motor vehicles.American and Australian decisions with regard to the Commerce Clause or the American Constitution and s. 92 of the Australian Constitution, considered. |
