TaxTMI 
TaxTMI 
1999 (8) TMI 980
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.... respect of the contract carriage vehicles operating inter-State. They also sought certain other incidental reliefs. The primary contention of the petitioners in these petitions was that the reduction of tax liability in favour of the vehicles covered by intra-State contract carriage permit without granting the same benefit to inter-State contract carriages amounted to an arbitrary discrimination between the vehicles of persons similarly situated, hence, the same is violative of Article 14 of the Constitution of India. The learned Single Judge who heard the batch of writ petitions by an elaborate judgment came to the conclusion that the contract carriages covered by intra-State permit formed a different class for the purpose of levying motor vehicles tax as compared to contract carriages which are covered by inter- State permits. After discussing the various case-laws on the subject, he held that the legislature has under Entry 56 or 57 of List II of the 7th Schedule a power to impose taxes which are compensatory and/or regulatory in nature, and by virtue of the power vested in the State under Section 22 of the Act, the State has the power to reduce the tax with reference to a part....
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....to tax a particular class of vehicle differently from another class of vehicle and the courts cannot review these decisions if there is no abuse of its powers and transgression of the legislative function. He also questioned the wisdom of the Division Bench of the High Court in assessing the hardships suffered by particular owners of the contract carriages, taking into consideration hypothetical factors such as the possible distances covered by these two types of contract carriages. Per contra, defending the judgment of the appellate Bench, Mr. TLV Iyer, learned senior counsel appearing on behalf of the respondents, contended that as has been held by a catena of decisions of this Court, the taxing power under Entry 56/57 of List II of the 7th Schedule being regulatory and compensatory in nature, the same cannot be discriminatory, He attacked the reasoning of the classification which, inter alia, relied upon the difference in seating capacity between the contract carriages covered by inter-State permits and those covered by intra- State permits. It was his contention that the difference in seating capacity cannot be a ground to form an artificial classification from amongst similar ....
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....under Section 3(1) of the Act occurs when the vehicle is used or is kept for use in the State. Therefore, once the vehicle becomes liable for payment of tax the extent and quantity of use by the vehicle is not a decisive factor for the purpose of levy of tax as could be seen from the judgment of this Court in the case of M/s. International Tourist Corporation etc. etc. v. State of Haryana & Ors. (AIR 1981 SC 774). Coming to the power of the State in legislating taxation law, the court should bear in mind that the State has a wide discretion in selecting the persons or objects it will tax and thus a Statute is not open to attack on the ground that it taxes some persons or the objects and not others. It is also well-settled that a very wide latitude is available to the Legislature in the matter of classification of objects, persons and things for the purpose of taxation. While considering the challenge and nature that is involved in these cases, the courts will have to bear in mind the principles laid down by this Court in the case of M/s. Murthy Match Works etc. etc. v. The Asstt. Collector of Central Excise (AIR 1974 SC 497) wherein while considering different types of classificati....
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....he various representations of the operators of intra-State contract carriages, the Government considered it necessary to reduce the rate of tax in order to avoid hardship, the Notification in question reducing the rate of taxation to this class of vehicles was introduced. It is also stated in the counter affidavit that the contract carriages covered by inter- State permits do form a separate class as against the contract carriages covered by intra-State permits inasmuch as the former, namely, the contract carriages having inter-State permits have a seating capacity of 35 whereas intra-State carriages have a seating capacity varying from 50 to 55. This is also a relevant factor, according to the State, to classify reasonably the two types of contract carriages we have referred to above. Whereas the arguments on behalf of the writ petitioners- respondents have been that both types of contract carriages are covered by a permit issued under Section 74 of the Act and, in fact, there is hardly any difference between these two types of carriages with reference to the nature of operation except that in the case of inter-State carriages they have the right to go beyond the territorial limit....
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....s. As argued on behalf of the respondents, even the types of vehicles used by the holders of these permits, in most cases, if not in all cases, are different. The carrying capacity of the vehicles concerned covered by these two permits is different. Thus in many factual ways these vehicles covered by two different permits do form separate and distinct class. So long as this classification is not arbitrary or unreasonable, the courts will not interfere with this classification which is the prerogative of the legislature. Now coming to the nexus of the classification with object of taxation, it should be noted that in the present cases the classification is made for the purpose of granting exemption under Section 22 of the Act. Grant of exemption/reduction under this Section is in "Public interest", therefore, nexus of this classification will have to be traced to "Public interest" which is again within the realm of legislative wisdom unless tainted by perversity or absurdity. The validity of Section 22 of the Act has not been questioned which Section empowers the State in public interest to grant exemptions in such a manner as it deems fit to a class of people. O....