TaxTMI 
TaxTMI 
TaxTMI 
1963 (2) TMI 2
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.... not challenge the conclusion of the High Court that the Act is valid in so far as its prospective operation is concerned ; they have confined their appeals to its retrospective operation. Eighteen other petitioners who had joined the appellants in the High Court have accepted the decision of the High Court and have not come to this court in appeal. Before dealing with the points raised by the appellants, it is necessary to set out briefly the background of the present dispute : On March 30, 1950, the Bihar Legislature passed the Bihar Finance Act, 1950 (Bihar Act XVII of 1950) ; this Act levied a tax on passengers and goods carried by public service motor vehicles in Bihar. Nearly a year after this Act came into force, the appellants challenged its validity by instituting a suit No. 60 of 1951 in the Court of the First Subordinate Judge at Gaya on May 5, 1951. In this suit, the appellants prayed that the provisions of Part III of the said Act were unconstitutional and asked for an injunction restraining the respondent, the State of Bihar, from levying and realising the said tax. It appears that a similar suit was instituted (No. 47 of 1951) on behalf of the passengers and owners ....
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....t has been passed with the previous sanction of the President and the restrictions imposed by it are otherwise reasonable, and so it is saved under article 304(b) of the Constitution. The plea made by the respondent that the taxing provisions of the Act were compensatory in character and were, therefore, valid, was rejected by the High Court. The High Court held that the principle that a taxing statute which levies a compensatory or regulatory tax is not invalid, which has been laid down by the majority decision of this court in the case of Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan, was not applicable to the provisions of the Act. The argument that the Act was invalid because it required the appellants to act as the agents of the respondent for collecting the tax from the passengers and from the owners of the goods without payment of any remuneration, was rejected by the High Court. It was also urged that the Act contravened the provisions of article 199(4) of the Constitution, but the High Court was not impressed with this argument ; and the plea that the matters in dispute between the appellants and the respondent are really concluded by res judicata, appeared t....
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....ection. After the Act as thus amended was struck down by this court on December 12, 1960, an Ordinance was passed and its provisions were included in the impugned Act which ultimately became the law in Bihar on September 25, 1961. The Act consists of 26 sections. Section 1(3) expressly provides that the Act shall be deemed to have come into force on the first day of April, 1950. Section 2 defines, inter alia, goods, owner, passenger and public service motor vehicle. Section 3 is the charging section. Section 3(1) provides that on and from the date on which this Act is deemed to have come into force under sub-section (3) of section 1, there shall be levied and paid to the State Government a tax on all passengers and goods carried by a public service motor vehicle. Then the sub-section prescribes the rate at which the said tax has to be paid. There is a proviso to this sub-section which it is unnecessary to set out. Sub-section (2) lays down that every owner shall, in the manner prescribed in section 9, pay to the State Government the amount of tax due under this section, and sub-section (3) adds that every passenger carried by a public service motor vehicle and every person whose g....
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.... authority--- (a) any amount paid, collected or recovered or purported to have been paid, collected or recovered as tax or penalty under the provisions of Part III of the Bihar Finance Act, 1950 (Bihar Act XVII of 1950), as amended from time to time (hereinafter referred to as the " said Act "), or the rules made thereunder during the period beginning with the first day of April, 1950, and ending on the thirty-first day of July, 1961, shall be deemed to have been validly levied, paid, collected, or recovered under the provisions of this Act ; and (b) any proceeding commenced or purported to have been commenced for the assessment, collection or recovery of any amount as tax or penalty under the provisions of the said Act or the rules made thereunder during the period specified in clause (a) shall be deemed to have been commenced and conducted in accordance with the provisions of this Act, and, if not already completed, shall be continued and completed in accordance with the provisions of this Act. " There is a proviso to this section which is not relevant for our purpose. Sections 24 and 25 deal with repeals and savings ; and section 26 provides that if any difficulty arises in g....
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....r that the State Legislatures are authorised to levy taxes on goods and passengers by this entry. It is not on all goods and passengers that taxes can be imposed under this entry ; it is on goods and passengers carried by road or on inland waterways that taxes can be imposed. The expression " carried by road or on inland waterways " is an adjectival clause qualifying goods and passengers, that is to say, it is goods and passengers of the said description that have to be taxed under this entry. Nevertheless, it is obvious that the goods as such cannot pay taxes, and so, taxes levied on goods have to be recovered from some persons, and these persons must have an intimate or direct connection or nexus with the goods before they can be called upon to pay the taxes in respect of the carried goods. Similarly, passengers who are carried are taxed under the entry. But, usually, it would be inexpedient, if not impossible, to recover the tax directly from the passengers, and so it would be expedient and convenient to provide for the recovery of the said tax from the owners of the vehicles themselves. That is why it is not disputed by Mr. Setalvad that in enacting a law under entry 56 in resp....
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..... v. Union of India. In view of the recent decisions of this court Mr. Sastri also concedes that taxing statutes are not beyond the pale of the constitutional limitations prescribed by articles 19 and 14, and he also concedes that the test of reasonableness prescribed by article 304(b) is justiciable. It is, of course, true that the power of taxing the people and their property is an essential attribute of the Government and Government may legitimately exercise the said power by reference to the objects to which it is applicable to the utmost extent to which Government thinks it expedient to do so. The objects to be taxed so long as they happen to be within the legislative competence of the legislature can be taxed by the legislature according to the exigencies of its needs, because there can be no doubt that the State is entitled to raise revenue by taxation. The quantum of tax levied by the taxing statute, the conditions subject to which it is levied, the manner in which it is sought to be recovered, are all matters within the competence of the legislature, and in dealing with the contention raised by a citizen that the taxing statute contravenes article 19, courts would natural....
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....e character of the tax. If the scheme of section 3 for the levy and recovery of the tax is valid under entry 56 of List II so far as future recoveries are concerned, it is not easy to see how it can be said that the character of the tax is radically changed in the present circumstances, because it would be very difficult, if not impossible, for the owner to recover the tax from the passengers whom he has carried in the past. The tax recovered retrospectively like the one which will be recovered prospectively still continues to be a tax on passengers and it adopts the same machinery for the recovery of the tax both as to the past as well as to the future. In this connection, we ought to bear in mind that the incidence of the tax should not be confused with the machinery adopted by the statute to recover the said tax. Besides, as we will point out later, it is only during a comparatively short period that the owners' difficulties assume a significant form. Stated generally, it may not be unreasonable to assume that from the time when the Act of 1950 was brought into force it was known to all the owners that the legislature had imposed a tax in respect of passengers and goods carried ....
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.... the Amendment Act of 1948, one of the points urged before this court was that whereas sales tax is an indirect tax on the consumer, inasmuch as the idea in imposing the said tax on the seller is that he should pass it on to his purchaser and collect it from him, the retrospective operation of the Act made the imposition of the said tax a direct tax on the seller and so it was invalid. This argument was rejected. A similar objection against the retrospective operation of the Madras General Sales Tax Act, 1939, as adapted to Andhra by the Sales Tax Laws Validation Act, 1956, was rejected in the case of M. P. V. Sundararamier & Co. v. State of Andhra Pradesh. In J. K. Jute Mills Co. Ltd. v. State of Uttar Pradesh, the argument that the character of the sales tax as enacted by the U. P. Sales Tax Act, 1948, was radically altered in its retrospective operation, was likewise rejected. The same argument in respect of an excise tax raised before this court in the case of Chhotabhai Jethabhai Patel & Co. v. Union of India was for similar reasons rejected. The position, therefore, appears to be well settled that if in its essential features a taxing statute is within the legislative compet....
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.... to its retrospective operation. We do not think that such a mechanical test can be applied in determining the validity of the retrospective operation of the Act. It is conceivable that cases may arise in which the retrospective operation of a taxing or other statute may introduce such an element of unreasonableness that the restrictions imposed by it may be open to serious challenge as unconstitutional ; but the test of the length of time covered by the retrospective operation cannot, by itself, necessarily be a decisive test. We may have a statute whose retrospective operation covers a comparatively short period and yet it is possible that the nature of the restriction imposed by it may be of such a character as to introduce a serious infirmity in the retrospective operation. On the other hand, we may get cases where the period covered by the retrospective operation of the statute, though long, will not introduce any such infirmity. Take the case of a Validating Act. If a statute passed by the legislature is challenged in proceedings before a court, and the challenge is ultimately sustained and the statute is struck down, it is not unlikely that the judicial proceedings may occu....
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....retrospective operation of the Act is invalid so far as the period between December 12, 1960, when the earlier Act was struck down by this court, and the 1st August, 1961, when the Ordinance was issued, is concerned. It would be realised that in such a situation there would always be some time-lag between the date when a particular Act is struck down as unconstitutional, and the date on which a retrospective validating Act is passed. Besides, the circumstances under which the orders of injunction were passed by the trial court cannot be altogether ignored. Mr. Sastri contends that the two suits filed by the appellants and the passengers and the owners of goods respectively disclose a common design and can be treated as friendly suits actuated by the same motive, and we do not think that this contention can be rejected as wholly unjustified. Apart from it, when the injunction was issued against the respondent in the appellants' suit, the appellants gave an undertaking in writing to pay the taxes payable on the fares and freights as provided by the law in case their suit failed. As we have already seen, their suit was dismissed by the High Court on May 8, 1952, so that it was then op....
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.... cases pending inquiry, and the retrospective operation of section 3(3) read with section 1(3) only applies to cases of persons who did not pay the tax during the whole of the period, or whose cases were not pending ; and it is this limited class of persons whose interests are represented by the appellants before us. Having regard to the somewhat unusual circumstances which furnish the background for the enactment of the impugned statute, we do not think that we could accept Mr. Setalvad's argument that the retrospective operation of the Act imposes restrictions on the appellants which contravene the provisions of article 19(1)(f) and (g). In our opinion having regard to all the relevant facts of this case, the restrictions imposed by the said retrospective operation must be held to be reasonable and in the public interest under article 19(5) and (6) and also reasonable under article 304(b). There is only one more point to which reference must be made. We have already noticed that the High Court has rejected the argument urged on behalf of the State that the tax imposed by the Act is of a compensatory or regulatory character and, therefore, is valid. Mr. Sastri wanted to press tha....