LexB. A. JAYARAM AND OTHERS ETC. versus UNION OF INDIA AND OTHERS
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. ' B 624 B. A. JAY ARAM AND OTHERS ETC. v. UNION OF INDIA AND OTHERS. 1 August l!l, 1983 ' [D.' A. DESAI AND o. CHINNAPPA REDDY, JJ.] Constitution of India-Art. 301-Scope of-Compensatory Ond regzilatory taxes are outside the expanse of Art. 301. C Motor Vehicles Act, 1939~Sec. 63(7)-lntroduced by amending Act 56 of- D E F G H , 1969-Does not affect State's power either to impose or exempt tax on motor vehicles. Karnataka Motor Vehicles Taxation Act, 1957-A piece of regulatory and compensatory legislation-Read with Entries 56 and 57 of List· 11 of SevenJh Schedule to the Constitution-Taxes levied on motor_ vehicles are reiulatory and compensatory-. Not within the vista of Art. 301 of th~ Constitution. , - ,In order to promote all India- and inter-state tourist traffic, the Parl ia- mcnt amended the Motor vehicles Act, 1939 ~Y introducing in it sec. 63(7) which enabled the State Transport Authority of every State to grant permits valid .for the whole or any part of India, in respect of such number of tourist vehicles as may be specified by ,the Central Government. Later the Central Government notified that each State :rr3.nsport. Authority could issue 50 all- India pe~mits for tourist omnibuses. As each State had the eright, within its territory, to levy a tax on a motor vehicle, it was found that unless tourist vehicles with all-India permits were exempted from tax by other States than their home state the object of sec. 63(7) would be frustrated. TherCfore, the Central Governnient made a request in this behalf to all the State Govern- ments. In pursuance of that.request the ·aovernment of Karnataka exempted tourist vehicles·hoiding permit's under sec. 63(7) from payment of tax, provided the tax payable to the State in which the vehicle was registered had already been paid and provided furthei: that similar exemption_ from payment oftax was granted in respect of similar veliicles to the State of Karnataka. Many transpoz:t operators from big and. comparatively prosperous States floeked to some small and comparatively poor and less advanced States arid after getting all-India permits from them started . plying th_eir vehicles in other States like Karnataka and Maharas~tra inore or less as ·regular stage carriages. Having found that the. trarisport operators were misusing the a-11· India permits and indulging in certain malpractices, the GoVernment of Karnataka withdrew the exemption from payment of taX granted earlier. The petitioners, who were transport operators holdiqg all-India permits, challenged the withdrawal cf exen1ption as unconstitutional and bad in law. The peti· tioners Submitted that sec. 63(7) of the Motor Vehicles Act was designed to vromote all Iµdia and ioter-state tourist traffic and thus to advance trade, ( • \ . " B.A. JAYAl\AM V. UNION 625 commerce and inter-course throughout the terrHory of India. By withdrawing the exemption. the object of sec. 63(7) was defeated and therefor.e, .freedom of trade, Cominerce and inter-coi.lrse throughout the territory of India, guaranteed ·by Art. 301 of the Constitution was impaired. / Dismissing the petitions, HELD : By withdrawing the exemption there is no impairment Of the freedoip under Art. 301. [637 BJ ' Taxes of a compensatory and regulatory character are outside the expanse of Art. 301 of the Constitution. Regulatory measures and compensatory taxes far from impeding the free flow of. trade and commerce,-- often promote such free flow of trade and commerce by creating agreeable conditions 3.nd providing appropriate services. All that is necessary to uphold a tax which purports to be or is claimed to be a compensatory tax· is; the existence of a specific, identiflabie object behind the levy and a nexus between subject and the object of a levy. Once the nexus between the levy and service is seen, the levy must be upheld unless the Compensatory cha'racter is shown to be wholly' or partly a mere mockery and in truth a design which is destructive of the freedom of inter-state trade, commerce and inter-course.· [635 C-D, 636 A] ~ International Tourist Corporation v. State of Haryana, [1981] 2 S.C.R. 364. referred to. By virtue of fhe power givCn to them by Entries · 56 or 57 of List II every one of the States has the right to make its own 1egisJation to cQmpensate it for the services, benefits and facilities provided by it for motor vehicles operating within the territory of the. S
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