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CASE NO.:

Appeal (civil) 4557 of 2006

PETITIONER:

Hardev Motor Transport

RESPONDENT:

State of M.P. & Ors

DATE OF JUDGMENT: 19/10/2006

BENCH:

S.B. Sinha & Dalveer Bhandari

JUDGMENT:

J U D G M E N T

[Arising out of S.L.P. (C) No. 22580 of 2005]

WITH

CIVIL APPEAL NO. 4558 OF 2006

[Arising out of S.L.P. (C) No. 24087 of 2005]

S.B. SINHA, J :

Leave granted.

Constitutional validity of Clause (g) of Entry IV of the First Schedule

of the Madhya Pradesh Motoryan Karadhan Adhiniyam, 1991 (for short "the

1991 Act") as amended by Madhya Pradesh Motoryan Sanshodhan

Adhiniyam, 2004 read with Explanation (7) of the First Schedule thereof is

in question in these appeals which arise out of a judgment and order dated

28.06.2005 passed by a Division Bench of the High Court of Madhya

Pradesh at Jabalpur.

Appellants herein are holders of contract carriage permits. On

allegations that they have been using their vehicles as stage carriage permits,

the vehicles were detained. They were asked to pay duty as if the vehicles

were being plied without any permit.

The Parliament enacted Motor Vehicles Act, 1988 (for short "the

1988 Act") to consolidate and amend the law relating to motor vehicles in

exercise of its legislature power under Entry 35, List III of the Seventh

Schedule of the Constitution of India. The said Act is a self-contained code.

"Permit" has been defined in Section 2(31) to mean "a permit issued

by a State or Regional Transport Authority or an authority prescribed in this

behalf under this Act authorizing the use of a motor vehicle as a transport

vehicle".

"Stage carriage", "contract carriage" and "tourist vehicle" have been

defined under Sections 2(40), 2(7) and 2(43) of the 1988 Act as under:

"2(40) "stage carriage" means a motor vehicle

constructed or adapted to carry more than six

passengers excluding the driver for hire or reward

at separate fares paid by or for individual

passengers, either for the whole journey or for

stages of the journey;

2(7) "contract carriage" means a motor vehicle

which carries a passenger or passengers for hire or

reward and is engaged under a contract, whether

expressed or implied, for the use of such vehicle as

a whole for the carriage of passengers mentioned

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therein and entered into by a person with a holder

of a permit in relation to such vehicle or any

person authorised by him in this behalf on a fixed

or an agreed rate or sum\027

(a) on a time basis, whether or not with reference

to any route or distance; or

(b) from one point to another,

and in either case, without stopping to pick up or

set down passengers not included in the contract

anywhere during the journey, and includes\027

(i) a maxicab; and

(ii) a motorcar notwithstanding the separate fares

are charged for its passengers;

2(43) "tourist vehicle" means a contract carriage,

constructed or adapted and equipped and

maintained in accordance with such specifications

as may be prescribed in this behalf;"

Section 66 of the 1988 Act deals with grant of permit. Section 72 of

the 1988 Act provides for grant of stage carriage permit. In terms of Sub-

section (1) thereof, a stage carriage permit may be granted or refused to be

granted in accordance with the application but subject to the provisions of

Section 71 and with such modification as it deems fit. Sub-section (2) of

Section 72 provides for the conditions as enumerated therein for grant of

such permit. Section 74 of the 1988 Act provides for grant of contract

carriage permit on almost similar terms. Sub-section (2) of Section 74

provides for grant of such permits on one or more of the conditions

enumerated therein including:

(i) use of the vehicle in a specified area or on a specified route or routes;

(ii) specified rates of hiring should not exceed specified maximum rates;

and

(iii) number of passengers.

Clause (ix) of Sub-section (2) of Section 74 of the 1988 Act

empowers the Regional Transport Authority to vary the conditions of permit

or attach to the permit further conditions. Clause (xii) of Sub-section (2) of

Section 74 reads as under:

"(xii) that, except in the circumstances of

exceptional nature, the plying of the vehicle or

carrying of the passengers shall not be refused;"

Sub-section (3) of Section 74 reads as under:

"(3) (a) The State Government shall, if so directed

by the Central Government, having regard to the

number of vehicles, road conditions and other

relevant matters, by notification in the Official

Gazette, direct a State Transport Authority and a

Regional Transport Authority to limit the number

of contract carriages generally or of any specified

type, as may be fixed and specified in the

notification, operating on city routes in towns with

a population of not less than five lakhs.

(b) Where the number of contract carriages are

fixed under clause (a), the Regional Transport

Authority shall, in considering an application for

the grant of permit in respect of any such contract

carriage, have regard to the following matters,

namely:\027

(i) financial stability of the applicant;

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(ii) satisfactory performance as a contract carriage

operator including payment of tax if the applicant

is or has been an operator of contract carriages;

and

(iii) such other matters as may be prescribed by the

State Government"

Section 192A of the 1988 Act provides for a penal clause stating:

"(1) Whoever drives a motor vehicle or causes or

allows a motor vehicle to be used in contravention

of the provisions of sub-section (1) of section 66 or

in contravention of any condition of a permit

relating to the route on which or the area in which

or the purpose for which the vehicle may be used,

shall be punishable for the first offence with a fine

which may extend to five thousand rupees but shall

not be less than two thousand rupees and for any

subsequent offence with imprisonment which may

extend to one year but shall not be less than three

months or with fine which may extend to ten

thousand rupees but shall not be less than five

thousand rupees or with both:

Provided that the court may for reasons to be

recorded, impose a lesser punishment.

(2) Nothing in this section shall apply to the use of

a motor vehicle in an emergency for the

conveyance of persons suffering from sickness or

injury or for the transport of materials for repair or

for the transport of food or materials to relieve

distress or of medical supplies for a like purpose:

Provided that the person using the vehicle reports

about the same to the Regional Transport

Authority within seven days from the date of such

use.

(3) The court to which an appeal lies from any

conviction in respect of an offence of the nature

specified in sub-section (1), may set aside or vary

any order made by the court below,

notwithstanding that no appeal lies against the

conviction in connection with which such order

was made."

The 1988 Act, thus, contains penal provision for violation of the

provisions of the said Act and/ or violating the terms and conditions of the

permit. A penalty can be imposed by a court. An order of penalty is an

appellable one. The Central Government in exercise of its power conferred

upon it made rules known as the Central Motor Vehicle Rules, 1989. Rules

85 and 85A of the Rules provide for additional conditions of tourist permit.

The 1988 Act and the Rules made thereunder provide for a complete

code. The matter relating to the imposition of tax, however, is provided for

under the statutes enacted by each State. The State of Madhya Pradesh for

the said purpose enacted the 1991 Act. Section 2(c) of the 1991 Act defines

'tax' to mean a tax leviable under the Act. Section 3 provides that a tax shall

be leviable on every motor vehicle used or kept for use in the State at the

rates specified in the First Schedule. Section 16 provides for power of entry,

seizure and detention of motor vehicles in case of non-payment of tax. Sub-

sections (1) to (5) of Section 16 of the 1991 Act read as under:

"16. Power of entry, seizure and detention of

Motor Vehicles in case of non-payment of tax : (1)

The Taxation Authority or any other officer,

authorised by the State Government in this behalf,

may at all reasonable time enter into and inspect

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any motor vehicle or premises where he has reason

to believe that a motor vehicle is kept for the

purpose of verifying whether the provisions of this

Act or any rules made thereunder are being

complied with:

Provided that no officer shall be authorised under

this sub-section with respect to motor cycles and

motor cars :

(2) Any person driving a motor vehicle in any

public place shall, on being so required by the

Taxation Authority or any officer authorised in this

behalf by the State Government, produce--

(a) the certificate of registration;

(b) the token in evidence of the payment of tax ;

and

(c) the certificate of insurance relating to the use of

the vehicle and shall keep such vehicle stationary

for such time as may be required by such authority

or officer to satisfy himself that the tax in respect

of such motor vehicle has been paid :

Provided that in the case of a motor vehicle other

than a transport vehicle; the certificates so required

shall be produced for inspection within such period

and in such manner as may be prescribed under

Sub-section (4) of Section 130 of the Motor

Vehicles Act, 1988.

(3) The Taxation Authority or any officer

authorised by the State Government in this behalf

may if he has reason to believe that a motor

vehicle has been or is being used without payment

of tax, penalty or interest due, seize and detain

such motor vehicle and for this purpose take or

cause to be taken any step as may be considered

proper for the temporary safe custody of such

motor vehicle and for the realisation of tax due.

(4) Where a motor vehicle has been seized and

detained under Sub-section (3), the owner or the

person incharge of such vehicle may apply to the

Taxation Authority or any officer authorised in this

behalf by the State Government together with the

relevant documents for the release of the vehicle

and if such authority or officer after verification of

such documents, is satisfied that no amount of tax

is due in respect of that vehicle, may by an order in

writing release such vehicle.

(5) Where a motor vehicle has been seized and

detained under Sub-section (3), the Court taking

cognizance of the offence shall not release such

vehicle."

Section 23 of the 1991 Act empowers the State to amend the Schedule

in regard to the rates of tax by not more than fifty per cent of the rates

specified therein. As noticed hereinbefore, the rate of tax is specified in the

First Schedule appended to the said Act. Entry IV of the First Schedule

provides for public service vehicle. The relevant portions of Clauses (d), (f)

and (g) of Entry IV of the First Schedule read as under:

"Class of Motor Vehicle

Rate of Quarterly tax

for Motor Vehicles

IV.

PUBLIC SERVICE VEHICLE

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***

***

(d) Vehicles permitted to carry more than

six passengers plying as stage carriage on

routes other than city routes \026

***

(2) In respect of vehicles permitted to

play as ordinary service for every

passenger which the vehicle is permitted

to carry and where the total distance

permitted to be covered by a vehicle in a

day \026

(i) does not exceed 100 kms.

(ii) thereafter for each 10 kms.

***

Rs. 160 per seat per

month

Rs. 10 per seat per

month.

(f) Contract carriage

***

(3) Vehicle permitted to carry more than

six passengers and plying as contract

carriage covered by all India Tourist

permit issued by other State under sub-

section (9) of Section 88 of the Motor

Vehicles Act, 1988 for each seat

(excluding driver) which the vehicle is

permitted to carry.

***

(5) Vehicles permitted to carry more than

six passengers and plying as contract

carriage on special permit granted under

sub-section (8) of Section 88 of the

Motor Vehicle Act, 1988 by the other

State for each seat (other than the driver)

which the vehicle is permitted to carry

Rs. 40.00 per seat per

day for the entire period

vehicle remains in

Madhya Pradesh

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50 paise for ordinary

bus and Re. 1 for

deluxe/ air-conditioned

bus per seat per 10 kms.

or part thereof for the

entire distance to be

covered in accordance

with the conditions of

the permit, in addition

to tax paid under clause

(c), (d), (e) or (f)(2) as

the case may be.

(g) Motor Vehicle plying without permit

(a) Vehicle permitted to carry exceeding

3 but not exceeding 29 passengers

(excluding driver) \026

(b) Vehicle permitted to carry exceeding

29 passengers (excluding driver)

Rs. 600 per seat per

month in accordance

with entire registered

seating capacity;

Rs. 1000.00 per seat per

month in accordance

with entire registered

seating capacity."

Explanation (7) of the First Schedule reads as under:

"Explanation (7) - The words "plying without

permit" in Clause (g) shall include plying of a

public service vehicle on an authorised route or

making a trip not authorised by a permit granted

under the Motor Vehicles Act, 1988 but shall not

include the plying of a public service vehicle under

circumstances laid down in Sub-section (3) of

Section 66 of the Motor Vehicles Act, 1988."

Sub-clause (3) of Clause (f) and Clause (g) of Entry IV of the First

Schedule were amended in the following terms:

"(3) Vehicle permitted to carry more than six

passengers and plying as contract carriage covered

by all India Tourist permit issued by other State

under sub-section (9) of Section 88 of the Motor

Vehicles Act, 1988 for each seat (other than the

driver) which the vehicle is permitted to carry \026

Rs. 200.00 per seat per week or part thereof till the

vehicle remains in Madhya Pradesh."

"(g) Motor vehicle plying without permit;

A. Vehicle permitted to carry upto 12

passengers (excluding driver) \026 Rs. 1000.00 per

seat per month in accordance with the entire

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registered seating capacity.

B. Vehicle permitted to carry more than 12

passengers (excluding driver) \026 Rs. 1500.00 per

seat per month in accordance with the entire

registered seating capacity."

Tax imposed on motor vehicles in terms of the provisions of the 1991

Act is a regulatory one. It was so held in Bolani Ores Ltd. v. State of Orissa

[(1974) 2 SCC 777] stating:

"\005If the vehicles do not use the roads,

notwithstanding that they are registered under the

Act, they cannot be taxed\005"

We may, however, hasten to add that even if a vehicle is roadworthy

and can be plied on a road, a tax may be imposed, but if a vehicle is not

capable of being plied on the road, no tax would be leviable.

In Automobile Transport (Rajasthan) Ltd. etc. v. The State of

Rajasthan and Others [1963 (1) SCR 491], it is stated:

"We were addressed at some length on the

distinction between a tax, a fee and an excise

duty. It was also pointed out to us that the taxes

raised under the Act were not specially ear-

marked for the building or maintenance of roads.

We do not think that these considerations

necessarily determine whether the taxes are

compensatory taxes or not. We must consider the

substance of the matter and so considered, there

can be no doubt that the taxes imposed are no

hindrance to the freedom of trade, commerce and

intercourse. If a statute fixes a charge for a

convenience or service provided by the State or

an agency of the State, and imposes it upon those

who choose to avail themselves of the service or

convenience, the freedom of trade and commerce

may well be considered unimpaired. In such a

case the imposition assumes the character of

remuneration or consideration charged in respect

of an advantage sought and received."

The power of the State of Madhya Pradesh to seize a vehicle in terms

of Section 16(6) of the 1991 Act came up for consideration before this Court

in M.P. AIT Permit Owners Assn. and Another v. State of M.P. [(2004) 1

SCC 320]. The question which arose for consideration therein was that

having regard to the fact that the Parliamentary Act provides for a lesser

penalty as specified in Section 192A thereof, can the State by reason of the

taxing statute impose a higher penalty? It was held:

"Section 192-A of the MV Act provides that if a

motor vehicle is driven in contravention of Section

66(1), that is, if a vehicle is driven or caused to be

driven as a transport vehicle without permit, or in

contravention of any condition thereof relating to

the route on which or the area in which or the

purpose for which the vehicle may be used, the

user is punishable with fine for the first offence

and imprisonment for the subsequent offence but

this section does not provide for confiscation of the

vehicle. Section 16(6) of the Act provides that

subject to the provisions of sub-section (8), where

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upon receipt of report about the seizure of the

vehicle under sub-section (3), the taxation

authority is satisfied that the owner has committed

offence under Section 66 read with Section 192-A

of the MV Act of plying vehicle without permit

and he may by order in writing and for reasons to

be recorded confiscate the vehicle seized under the

said provision. Under Section 16(3) of the Act, a

vehicle seized for non-payment of tax or other

dues is liable to be returned on showing that tax

has been paid. Thus, if tax with regard to the

seized vehicle is paid that vehicle has got to be

released. So far as the link that is sought to be

established with taxation procedures is concerned,

it snaps the moment tax is paid and vehicle is

released. In such an event also motor vehicle can

be confiscated on a report that such vehicle has

been seized. The cause or basis for confiscation of

motor vehicle is driving such vehicle contrary to

Section 66 of the MV Act read with Section 192-A

of the MV Act and a report of seizure under

Section 16(3) of the Act."

The said decision, however, was rendered on the premise that the

State Act is repugnant to the Central Act.

It is, however, not in dispute that the 1991 Act has received the assent

of the President of India. While considering the question of constitutionality

of the provisions of the 1991 Act, therefore, Article 254(2) of the

Constitution of India may not have any role to play.

We may at this juncture notice that the concepts of tax, compensatory

tax and fees having regard to diverse decisions rendered by this Court over a

number of years were referred to a Constitution Bench. The decision of the

Constitution Bench of this Court is since reported in Jindal Stainless Ltd. &

Anr. v. State of Haryana & Ors. [JT 2006 (4) SC 611]. The Constitution

Bench of this Court made a deep analysis of the nature of tax, principles of

imposition of tax, compensatory tax and levy of fee and stated the law, thus:

"Tax is levied as a part of common burden. The

basis of a tax is the ability or the capacity of the

taxpayer to pay. The principle behind the levy of a

tax is the principle of ability or capacity. In the

case of a tax, there is no identification of a specific

benefit and even if such identification is there, it is

not capable of direct measurement. In the case of a

tax, a particular advantage, if it exists at all, is

incidental to the States' action. It is assessed on

certain elements of business, such as, manufacture,

purchase, sale, consumption, use, capital etc. but

its payment is not a condition precedent. It is not a

term or condition of a licence. A fee is generally a

term of a licence. A tax is a payment where the

special benefit, if any, is converted into common

burden."

In regard to compensatory tax, it was opined:

"A tax can be progressive. However, a fee or a

compensatory tax has to be broadly proportional

and not progressive. In the principle of

equivalence, which is the foundation of a

compensatory tax as well as a fee, the value of the

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quantifiable benefit is represented by the costs

incurred in procuring the facility/services which

costs in turn become the basis of

reimbursement/recompense for the provider of the

services/facilities. Compensatory tax is based on

the principle of "pay for the value". It is a sub-class

of "a fee". From the point of view of the

Government, a compensatory tax is a charge for

offering trading facilities. It adds to the value of

trade and commerce which does not happen in the

case of a tax as such. A tax may be progressive or

proportional to income, property, expenditure or

any other test of ability or capacity (principle of

ability). Taxes may be progressive rather than

proportional. Compensatory taxes, like fees, are

always proportional to benefits. They are based on

the principle of equivalence. However, a

compensatory tax is levied on an individual as a

member of a class, whereas a fee is levied on an

individual as such. If one keeps in mind the

"principle of ability" vis-`-vis the "principle of

equivalence", then the difference between a tax on

one hand and a fee or a compensatory tax on the

other hand can be easily spelt out. Ability or

capacity to pay is measurable by property or rental

value. Local rates are often charged according to

ability to pay. Reimbursement or recompense are

the closest equivalence to the cost incurred by the

provider of the services/facilities. The theory of

compensatory tax is that it rests upon the principle

that if the government by some positive action

confers upon individual(s), a particular measurable

advantage, it is only fair to the community at large

that the beneficiary shall pay for it. The basic

difference between a tax on one hand and a

fee/compensatory tax on the other hand is that the

former is based on the concept of burden whereas

compensatory tax/fee is based on the concept of

recompense/reimbursement. For a tax to be

compensatory, there must be some link between

the quantum of tax and the facility/services. Every

benefit is measured in terms of cost which has to

be reimbursed by compensatory tax or in the form

of compensatory tax. In other words,

compensatory tax is a recompense/reimbursement.

Opining that compensatory tax being a judicially evolved concept, it

was observed that the scope and effect thereof must be construed within the

said parameters.

In G.K. Krishnan and Others v. State of Tamil Nadu and Others

[(1975) 1 SCC 375], Mathew, J. stated the law, thus:

"Strictly speaking, a compensatory tax is

based on the nature and the extent of the use

made of the roads, as, for example, a mileage or

ton-mileage charge or the like, and if the

proceeds are devoted to the repair, upkeep,

maintenance and depreciation of relevant roads

and the collection of the exaction involves no

substantial interference with the movement. The

expression "reasonable compensation" is

convenient but vague. The standard of

reasonableness can only lie in the severity with

which it bears on traffic and such evidence of

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extravagance in its assessment as come from

general considerations. What is essential for the

purpose of securing freedom of movement by

road is that no pecuniary burden should be placed

upon it which goes beyond a proper recompense

to the State for the actual use made of the

physical facilities provided in the shape of a road.

The difficulties are very great in defining this

conception. But the conception appears to be

based on a real distinction between remuneration

for the provision of a specific physical service of

which particular use is made and a burden placed

upon transportation in aid of the general

expenditure of the State. It is clear that the motor

vehicles require, for their safe, efficient and

economical use, roads of considerable width,

hardness and durability; the maintenance of such

roads will cost the government money. But,

because the users of vehicles generally, and of

public motor vehicles in particular, stand in a

special and direct relation to such roads, and may

be said to derive a special and direct benefit from

them, it seems not unreasonable that they should

be called upon to make a special contribution to

their maintenance over and above their general

contribution as taxpayers of the State. If,

however, a charge is imposed, not for the

purpose of obtaining a proper contribution to the

maintenance and upkeep of the road, but for the

purpose of adversely affecting trade or

commerce, then it would be a restriction on the

freedom of trade, commerce or intercourse."

We are not oblivious of a recent decision of this Court in

Vijayalashmi Rice Mill and Others v. Commercial Tax Officers, Palakol and

Others [(2006) 6 SCC 763], although we are not strictly concerned

therewith, but we notice that herein the application of Jindal Stainless Ltd.

(supra) was kept limited stating:

"It may be noted that the decision in Jindal

Stainless was given in connection with Article 301

of the Constitution, and it was not regarding the

nature of a fee. Hence, it cannot be regarded as an

authority explaining the nature of a fee."

We, however, feel that this Bench is bound by the Constitution Bench

decision of this Court.

The issue which arises for our consideration in the light of the

aforementioned authoritative pronouncement, as noticed hereinbefore, is

whether the impugned provision specifies the test laid down by the

Constitution Bench.

Section 3 of the 1991 Act is the charging section. It provides that the

tax shall be levied on every motor vehicle used or kept for use in the State at

the rates specified in the First Schedule. The levy of tax, therefore, is on the

motor vehicles. Its rate may vary keeping in view its use or the nature

thereof. However, the use of a motor vehicle so far as public service

vehicles are concerned would depend upon the nature of permit held by it. It

is not in dispute that Appellants herein have been granted permit for plying

their buses as contract carriage. Allegation against this is that they have

been violating the terms and conditions of the permit by plying their vehicles

as stage carriage. It is, however, not in dispute that the rate of tax of a

contract carriage permit is more than the stage carriage. Clause (g) of Entry

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IV specifies the rate of tax of motor vehicle plying without permit at the rate

of Rs. 1500/- per seat per month.

Explanation (7) of the First Schedule of the 1991 Act does not create

any legal fiction. It provides for a inclusive definition stating that the words

"plying without permit" in Clause (g) shall include plying of a public service

vehicle on an authorized route or making a trip not authorized by a permit

granted under the 1988 Act.

The role of an explanation of a statute is well-known. By inserting an

explanation in the Schedule of the Act, the main provisions of the Act

cannot be defeated. By reason of an explanation, even otherwise, the scope

and effect of a provision cannot be enlarged. It was so held in S. Sundaram

Pillai, etc. v. R. Pattabiraman [AIR 1985 SC 582 : (1985) 1 SCC 591] in the

following terms:

"Thus, from a conspectus of the authorities

referred to above, it is manifest that the object of

an Explanation to a statutory provision is\027

"(a) to explain the meaning and intendment of the

Act itself,

(b) where there is any obscurity or vagueness in

the main enactment, to clarify the same so as to

make it consistent with the dominant object which

it seems to subserve,

(c) to provide an additional support to the

dominant object of the Act in order to make it

meaningful and purposeful,

(d) an Explanation cannot in any way interfere

with or change the enactment or any part thereof

but where some gap is left which is relevant for the

purpose of the Explanation, in order to suppress

the mischief and advance the object of the Act it

can help or assist the Court in interpreting the true

purport and intendment of the enactment,\005"

[See also Swedish Match AB and Another v. Securities & Exchange

Board of India and Another, (2004) 11 SCC 641]

We have noticed that the Constitution Bench categorically states that

compensatory tax cannot be progressive. We have furthermore noticed that,

according to the Constitution Bench, imposition of tax cannot be a term or

condition of a licence. If a permit has been granted, the holder of a permit is

liable to comply with the conditions of permit. If he violates the terms and

conditions of permit, law will take its own course. A permit is granted under

the 1988 Act. If there is violation of the terms of permit, the consequences,

therefor, shall ensue as contained in Section 192A of the 1988 Act. A

distinction must be borne in mind that a tax cannot be imposed by way of

penalty although penalty can be imposed for non-payment of tax or evasion

of tax. The State may make suitable legislations in this behalf. But the same

would not mean that while specifying a rate of tax, the executive

government of the State can indirectly levy a penalty which it cannot do

directly.

Our attention has been drawn to a decision of this Court in State of

U.P. and Others v. Sukhpal Singh Bal [(2005) 7 SCC 615] and in particular

the following passage:

"In the case of State of Madras v. V.G. Row (AIR

at p. 200, para 15) this Court observed as follows:

(SCR p. 607)

"It is important in this context to bear in mind that

the test of reasonableness, wherever prescribed,

should be applied to each individual statute

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impugned, and no abstract standard, or general

pattern of reasonableness can be laid down as

applicable to all cases. The nature of the right

alleged to have been infringed, the underlying

purpose of the restrictions imposed, the extent and

urgency of the evil sought to be remedied thereby,

the disproportion of the imposition, the prevailing

conditions at the time, should all enter into the

judicial verdict.""

Kapadia, J. in that case was dealing with the constitutionality of a

penal provision. It was stated that before a penalty can be imposed, mens

rea on the part of the defaulter is required to be established. The said

decision is merely an authority for the proposition that a statute may provide

for a fixed penalty or minimum penalty. But it was not laid down therein

that penalty can be imposed without giving an opportunity of hearing to the

defaulter or without satisfying the other conditions laid down therefor. [See

also State of T.N. v. M. Krishnappan and Another, (2005) 4 SCC 53].

The transport authorities of the State indisputably have a power to

check a vehicle so as to ascertain whether payment of tax is being evaded.

They have been conferred with the power to detain a vehicle. They can

release the vehicle only when tax as demanded is paid. Even the power of

the court to release the vehicle has been taken away unless tax is paid and

the court can satisfy itself as to whether a tax is paid or not only on the

receipt of the certificate issued by the transport authorities of the State. The

power of the transport authorities, therefore, is very wide. We, however, do

not mean to suggest that only because a wide power has been conferred the

same by itself would lead to a presumption that the same is capable of

misuse or on that count alone the provisions of Article 14 of the Constitution

of India would be attracted. But, when a statue confers a wide power upon a

statutory authority, a closer scrutiny would be required.

The 1991 Act also does not make any provision for compliance of the

principles of natural justice or for determination of a question as to whether

the conditions of permit have been violated by an independent authority.

Appellants have paid tax. They have paid tax as specified for in

permits granted in their favour as a contract carriage. The rate of tax

payable by a contract carriage is higher than the rate of tax imposed on a

stage carriage. For non-payment of tax or for payment of tax for a wrong

purpose, a penalty can be imposed but it is difficult to conceive that a

different rate of tax which is not contemplated under Section 3 of the 1991

Act can be imposed by way of penalty.

The interpretation clauses contained in the 1988 Act are incorporated

in the 1991 Act by reference. The interpretation of the expressions "permit",

"contract carriage" and "stage carriage" must, thus, be understood on the

premise that the said expressions carry the same interpretation as contained

in the 1988 Act.

A distinction between "contract carriage" and "stage carriage" has

been noticed by this Court in State of A.P. and Others v. B. Noorulla Khan

and Another [(2004) 6 SCC 194] stating:

"The distinction between a stage carriage

permit or a contract carriage permit as envisaged

by the legislature has to be maintained as the two

types of permits are intended to meet different

requirements. The contract carriages are for those

who want to hire the vehicle collectively or

individually for a group or a party for their

transport to a destination/destinations. The vehicle

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has to be hired as a whole for the carriage of

passengers mentioned in the contract. There has to

be only one contract for carrying the passengers

mentioned in the contract from one destination to

another. An agent or a group of

persons/individuals cannot hire a public service

vehicle for going from one place to another with

passengers having different purposes. If such a

construction is put then there would be no

distinction between stage carriage or contract

carriage permits. If contract carriage permit-holder

is permitted to pick up an individual or a few of

them from the starting point of the journey and

drop them at the last terminus of the route it would

virtually be a stage carriage with corridor

restriction. Stage carriage is intended to meet the

requirements of the general public travelling from

one destination to another having different

purposes whereas a contract carriage is meant for

those who want to hire a public service vehicle as a

whole collectively for their transport from one

destination to another having the same purpose\005"

As a logical corollary the mode and manner in which the permits are

granted must necessarily be considered to be part of the provisions of the

1991 Act. Article 254(2) of the Constitution of India as such may not be

attracted but it is a trite law that the executive while fixing a rate of duty

cannot be permitted to usurp the legislative power and make a provision

which would be inconsistent with the substantive provision of the statute. In

other words, the provisions contained in the Schedule must be in consonance

with the substantive provisions in the main Act. It must be in conformity

with the charging Section. As in terms of Section 3 of the 1991 Act, the

legislature directed that the tax can be levied on motor vehicles subject to the

rates fixed; by taking recourse to Explanation (7), firstly, no new definition

could be introduced and, secondly, an owner of a vehicle having one kind of

permit could not have been treated as having no permit at all only because

the transport authorities have reasons to believe that the conditions of permit

have been violated. By way of example we may notice that recently a

Constitution Bench of this Court in State of Kerala and Others v.

Maharashtra Distilleries Ltd. and Others [(2005) 11 SCC 1] has laid down

guidelines for reading of the entries in the Schedule vis-`-vis the provisions

of the Act.

For the reasons aforementioned, Clause (g) of Entry IV of the First

Schedule of the Madhya Pradesh Motoryan Karadhan Adhiniyam, 1991 (for

short "the 1991 Act") as amended by Madhya Pradesh Motoryan

Sanshodhan Adhiniyam, 2004 read with Explanation (7) of the First

Schedule is declared unconstitutional. The appeals are allowed. No costs.