Suchet Singh vs State of J. and K.

Jaswant Singh, J.—The petitioner who is the president of the Jammu R.S. Pora Bus Union which runs its buses on Jammu-Ranbirshingh

Pura and Jammu Bishnah routes has moved this Court under Article 32(2-A) of the Constitution of India read with Section 103 of the Constitution

of Jammu and Kashmir seeking a writ of certiorari quashing notification No. SRO-42 dated 24-2-1964 exempting persons carried in City Buses

mentioned in the said notification from the operation of the Jammu and Kashmir Passenger Taxation Act of 1463 (Act No. 12 of 1963) (which

hereinafter will be referred to as 'the Act').

The notification has been challenged by the petitioner alleging inter alia that the State of Jammu and Kashmir also maintains and plies City Bus

Services upto Kalu Chak (Ismail Pur), Camp Rehari (Bori) and other places in Jammu and Shalimar. Harwan, Batwara, Soura, Naseem Bagh and

other places in Sri-nagar, that the buses plied by Jammu Ranbirsingh Pura Bus Union also pass through some of the routes mentioned in the

impugned Notification, that the Act authorises the levy of passenger tax on all fares in respect of all passengers carried by Motor Vehicles at rate

not exceeding 30 per cent of the value of the fare as may be notified by the Government from time to time in this behalf subject to a minimum of 2

paise, that Section 10 of the Act authorises the Government to grant exemption to any person or class of persons from the operation of all or any

of the provisions of the Act if in its opinion such exemption would be expedient in public interest, that the Government has in exercise of the

powers conferred on it by the aforesaid section of the Act issued the impugned notification exempting from the operation of the Act persons

carried in the City Buses mentioned in the notification, and that whereas persons travelling by the buses maintained and plied by the Jammu-

Ranbirsingh Pura Bus Union on the routes mentioned in the notification are subject to payment of the tax, the passengers travelling in the City-

Buses mentioned in the impugned notification have not in consequence thereof to pay any such tax.

The grounds on which the petition is based and which have been pressed before me by the petitioner's learned Counsel are:-- that whole of the

Act is ultra vires of the powers of the Legislature inasmuch as the imposition of the tax contemplated by it (i.e., the Act) amounts to a restriction on

trade and commerce of the petitioner and could not have been passed by the State Legislature without fulfilling the requirements of Article 304(b)

of the Constitution: that Section 10 of the Act is invalid as it confers an unfettered and unbridled power on the executive Government to exempt

any person or class of persons from the one-ration of all or any of the provisions of the Act without laying down guiding principles as to what

would be deemed to be 'public interest' within the meaning of the provision: that even assuming that the expression 'public interest' occurring in the

aforesaid section of the Act amounts to laying down the guiding principle, it is vague and susceptible of so many meanings, that the whims and

caprice of the Government is likely to extend the meaning of the expression to an obnoxious limit and this leaves considerable room for arbitrary

exercise of power: that in any case the notification is violative of Article 14 of the Constitution as, persons similarly situated have been treated

differently, that there is no rational basis or intelligent differentia between persons carried by the City buses and those carried by private buses

particularly when the stations like Kalu Chak, Harwan are beyond the Municipal limits of Jammu and Srinagar respectively; that when the State

enters the arena of trade and commerce open to competition by private enterprise it cannot place itself in a better and more advantageous position

than private individual, concerns and competitors, and that In consequence of the exemption granted to the passengers carried in the City Buses

not only has the petitioner's transport business in carrying passengers on the routes specified in the notification been very adversely affected but at

the same time the petitioner as a passenger has been placed in a disadvantageous position as compared to those travelling in City buses covered by

the impugned notification.

The petition has been resisted by the State inter alia on the grounds that the petitioner has no locus standi to file the petition, that the petition is

not maintainable as other efficacious remedies are open to the petitioner, that the buses plying on Ranbirsingh Pura and Bishnah routes use a part of

the route of some of the City bus services in Jammu City, that the buses of the City Bus Service have whole or main part of the routes within the

City limits, only some of them being plied on short distances beyond those limits, that Section 10 of the Act is not ultra vires of the Constitution,

that the words ""public interest or similar word"" do not give any arbitrary power to the State as these words have well settled connotation and have

acquired a meaning which is well understood by all, that the respondent while carrying on any business undertaking is a class by itself and any

discrimination made in its favour is not open to challenge under Article 14 of the Constitution that the respondent does and has means to provide

better amenities of service to the persons carried in by their vehicles of City Bus Service, that Motor Vehicles Transport is lifeline of the State and

the only means for land communication in different parts thereof and also with the rest of India, that nationalization of this Industry is a policy of the

respondent and this is also in the interest of the general public and thus nationalized transport stands on a special footing and needs all

encouragement and concessions, that tourists and pilgrims from all over the world visit Srinagar and Jammu all the year round, that it is these

tourists and pilgrims as also the students that use the city bus service in very large numbers and the exemption granted by means of the impugned

notification being in public interest is valid.

In a supplementary affidavit filed on behalf of the State it is stated as under ""that Jammu and Kashmir Passenger Taxation Act, 1963, is a valid

piece of legislation and is not hit by Article 304 or 19 of the Constitution of India; that the provisions of Article 304 of the Constitution of India do

not apply to this case; that Passenger Tax is levied to raise revenues for financing various activities of the State. In addition to this, the tax is

compensatory and regulatory and not restrictive. In return for it, the State Government builds, improves and maintains roads; provides parking

stands employs personnel for controlling vehicular road traffic and carries on other activities which provide facilities and benefits to citizens

including passengers and motor vehicle owners. The Act is a reasonable restriction within the meaning of Article 19 of the Constitution of India.

The learned Counsel for the parties have advanced able arguments while supporting the contentions raised by their clients.

The first question that falls for determination in this petition is whether the imposition of a tax per se amounts to a restriction as conceived by

Article 301 of the Constitution and if it does not per se amount to such a restriction whether the tax in question amounts to such a restriction, so as

to require compliance with the procedure laid down in Article 304(b) of the Constitution. Articles 301 and 304(b) of the Constitution read:

Subject to the other provisions of this Part, trade, commerce and intercourse throughout the territory of India shall be free.

Notwithstanding anything In Article 301 or Article 303 the Legislature of a State may by law--

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(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public

interest:

Provided that no bill or amendment for the purposes of Clause (b) shall be introduced or moved in the Legislature of a State without the previous

sanction of the President.

It is now well settled that only such restrictions or impediments as directly and immediately impede or hamper the free flow of trade, commerce

and intercourse whether intra-State or inter-State fall within the prohibition imposed by Article 301 and subject to the other provisions of the

Constitution may be regarded as void. Reference in this connection may be made to the decisions of the Supreme Court in Atiabari Tea Co., Ltd.

Vs. The State of Assam and Others, , The Automobile Transport (Rajasthan) Ltd. Vs. The State of Rajasthan and Others, , Firm A.T.B. Mehtab

Majid and Co. v. State of Madras AIR 1963 SC 1928 and State of Madras v. Nutraja Mudaliar AIR 1969 SC 147.

It is also well settled that a tax may in certain cases directly and immediately restrict or hamper the flow of trade, but every imposition of tax

does not do so. It would be advantageous in this connection to refer to the following observations made by Hon'ble Gajendragadkar, J. (as his

Lordship then was) in the Atiabari Tea Co., Ltd. Vs. The State of Assam and Others, which have been followed in AIR 1969 SC 147 (supra).

Taxes may and do amount to restrictions but it is only such taxes as directly and immediately restrict trade that would fall within the purview of

Article 301. The argument that all taxes should be governed by Article 301 whether or not their impact on trade is immediate or mediate, direct or

remote, adopts, in our opinion, an extreme approach which cannot be upheld.

It is also well at this stage to refer to the following observations made by S.K. Das, J. in The Automobile Transport (Rajasthan) Ltd. Vs. The

State of Rajasthan and Others, :

As to the word 'intercourse' there has also been some argument before us. On behalf of some of the States it has been contended that the word

'intercourse' (in the context in which it occurs in Article 301) means commercial intercourse. On behalf of the appellants it has been argued that the

word 'intercourse' takes in not merely trade and commerce in the strict sense, but also activities, such as, movement of persons for the purpose of

friendly association with one Anr. , telephonic communication etc. For the purpose of the cases which we are considering nothing very much turns

upon whether we take the word 'intercourse' in wide sense or in a narrow sense. Even taking the word 'intercourse' in a wide senses, the question

will still be what does the word 'free' mean? Does it mean free from all regulations, even regulation which is necessary for an orderly society? We

have already stated that the word 'free' in Article 301 cannot be given that wide meaning.

We have, therefore, come to the conclusion that neither the widest interpretation nor the narrow interpretations canvassed before us are

acceptable. The interpretation which was accepted by the majority in the Atiabari Tea Co., Ltd. Vs. The State of Assam and Others, is correct,

but subject to this clarification, Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within

the purview of the restrictions contemplated by Article 301, and such measures need not comply with the requirements of the Proviso to Article

304(b) of the Constitution.

This case was not referred to in AIR 1963 kant 49 and AIR 1962 AP 103 relied upon by the learned Counsel for the petitioner.

In Sainik Motors, Jodhpur and Others Vs. The State of Rajasthan, where the tax levied on passengers and goods under Rajasthan Passengers

and Goods Taxation Act (18 of 1959) was challenged as violative of Articles 301 and 304 of the Constitution. Hon'ble Hidayatullah, J., (as his

Lordship then was) speaking for the court observed:

We are also of opinion that no interstate trade, commerce or intercourse is affected. The tax is for purposes of State, and falls upon passengers

and goods carried by motor vehicles within the State. No doubt, it falls upon passengers and goods proceeding to or from an extra-State point but

it is limited only to the fare and freight proportionate to the route within the State.

x x x x x x

In our opinion, the levy of tax cannot be said to offend Articles 301 and 304 of the Constitution.

Bearing In mind the principles laid down in the aforesaid rulings let me see as to whether the impugned tax operates directly or immediately on

trade, commerce or intercourse or can it be said to be merely, regulatory and compensatory. After a close and anxious consideration of the matter

I have come to the conclusion that the burden of the tax in question does not fall directly and immediately on trade, commerce or intercourse but

falls on the passengers carried by motor vehicles. Further as appears from the supplementary affidavit filed on behalf of the respondent the tax is

compensatory and regulatory and does not amount to a restriction as conceived by Article 301 of the Constitution. In return for the tax the State

Government improves and maintains roads, provides parking stands, employs personnel for controlling vehicular road traffic and carries on other

activities which confer benefits on and provide facilities to citizens including passengers and owners of motor vehicles.

Again, the tax being Intended for raising money for carrying on functions of Government and for sustaining manifold welfare activities

undertaken by the State the burden imposed by it is reasonable and in public interest. It is well at this stage to refer to the observations made by

Hon'ble Gajendragadkar, J. In Khyerbari Tea Co. Ltd. and Another Vs. The State of Assam, :

It is, of course, true that the validity of tax laws can be questioned in the light of the provisions of Articles 14, 19 and Article 301 if the said tax

directly and Immediately imposes a restriction on the freedom of trade; but the power conferred on this Court to strike down a taxing statute if it

contravenes the provisions of Articles 14, 19 or 301 has to be exercised with circumspection, bearing in mind that the power of the State to levy

taxes for the purpose of governance and for carrying out its welfare activities is a necessary, attribute of sovereignty and in that sense it is a power

of paramount character.

At Anr. place his Lordship observed:

Tax laws have to stand the scrutiny of Article 19. That being so, as soon as the validity of a tax law passed under Article 304(b) of the Constitution

is challenged under Article 19, the State would be entitled to rely on the fact that the revenue raised by the tax law serves public purpose and that

is its basic justification for being treated as a reasonable restriction on the individual's fundamental right under Article 19(1)(g). In this context it may

also be legitimate to bear in mind that the revenue is required by the State to raise money in order to carry on the function of Government and to

sustain the manifold welfare activities undertaken by it.

This also disposes of the contention that the Act is violative of Article 19 of the Constitution.

The contention that Section 10 of the Act confers on the executive Government uncanalised power to grant exemption and as such suffers from

the vice of excessive delegation, is also not well founded. The exemption envisaged by the section can be granted only in public interest. The

expression 'Public Interest' has well defined meaning and connotation and furnishes a safe guide for the exercise of the power conferred by the

aforesaid section. In Ram Dial and Others Vs. The State of Punjab, Mudholkar, J. observed:

The expression 'Public Interest' is of wide import and what would be a matter which is in the public interest would necessarily depend upon the

time and place and circumstances with reference to which the consideration of the question arises. But it is not a vague or indefinite ground, though

the Act does not define what matters would be regarded as being in the public interest.

Again in R.L. Butail Vs. The Union of India and Others, , Andley, J. observed:

Public interest Is not a new concept it is true that it has not been defined but the reason for that is that It is incapable of precise definition.

Nevertheless, it is not possible to say that it is a vague concept. What is included in public purpose may differ from time to time and from place to

place.

It would also be advantageous In this connection to refer to the following observations laid by Madhavan Nair, J. in the The State of Kerala

and Others Vs. Annam and Others, :

The power to exempt from the operation of the order any class of cultivators is given to the Government only and that has been specified, in the

clause itself, to be exercised only ""in the public interest"" having regard to the conditions prevailing in any area. This itself is some safeguard against

the abuse of this power.

x x x x x x

The Court cannot presume that the administration of a particular law would be done ""with an evil eye and unequal hand.

Let me now deal with the next contention of the learned Counsel for the petitioner that the impugned notification is discriminatory and as such

void.

It is now well settled that guarantee of equal protection of law and equality before the law does not prohibit reasonable classification. It only

forbids class legislation. As held in East India Tobacco Co. Vs. State of Andhra Pradesh, : It is for the person who assails a legislation as

discriminatory to establish that it is not based on a valid classification and this burden is all the heavier when the legislation under attack is a taxing

statute. In the present case the petitioner has not succeeded in discharging this burden.

The Impugned notification is not in my opinion discriminatory as the petitioners and Ors. similarly situated with him are not in the same position

as those in whose favour exemption has been granted. Moreover though a few parts of the routes used by the City Bus Service and other services

are common, the main routes are different, as the city buses go via different roads. For example in Jammu from Panjtirthi unto Mohalla Ustad only

City buses run. Then again from Kachi Chawni to Company Bagh only City Buses are plied. In Gandhi Nagar and Bakshi Nagar also the same is

the position. Again the exemption is in favour of passengers travelling in City Buses. These passengers being mostly tourists, pilgrims and students

constitute a class by themselves and it is in public interest that cheaper transport should be provided to them.

That the City Buses attract more passengers is due to variety of reasons: efficiency of service, punctuality, more comfort and less fare for

passengers etc. Whereas the respondent does and has the means of supplying a number of amenities, the other bus pliers do not afford these

amenities and comforts. Thus the attack on the ground of discrimination also fails.

The next question which falls for decision is whether the State can be treated as a class by itself when it enters the arena of trade and

commerce open to competition by private enterprise. This contention has been answered in Saghir Ahmad Vs. The State of U.P. and Others,

wherein it was held that the argument that the State ceases to function as a State as soon as it engages itself in a trade like ordinary trader cannot

be accepted as a sound proposition of law under the Constitution of India at the present day. It would be advantageous in this connection to refer

to the following observations made by Mukherjea, J., who spoke for the Court:

It is well settled that mere differentiation does not make a legislation obnoxious to the equal protection clause. The Legislature has always the

power to make classification and all that is necessary is that the classification should not be arbitrary but must bear a reasonable relation to the

object which the legislation has in view. There is no doubt that classification is inherent in the concept of a monopoly; and if the object of legislation

is to create monopoly in favour of the State with regard to a particular business, obviously the State cannot but be differentiated from ordinary

citizens and placed in a separate category so far as the running of the business is concerned and this classification would have a perfectly rational

relation to the object of the statute. No doubt if the creation of monopoly in favour of the State is itself bad on the grounds of violating some

constitutional provisions, the statute would be invalid for those reasons and the question of discrimination would not be material at all. The

argument that the State ceases to function as a State as soon as it engages itself in a trade like ordinary trader cannot be accepted as a sound

proposition of law under the Constitution of India at the present day.

In view of the above observations of the Hon'ble Supreme Court, I hold that the State can be treated as a separate class even when it enters

the arena of trade and commerce like an ordinary trader.

For the foregoing reasons all the grounds of attack levelled by the petitioner are repelled. In the result the petition fails and is hereby dismissed

but in the circumstances of the case without any order as to costs.