http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10

PETITIONER:

STATE OF MAHARASHTRA & ORS. ETC.

Vs.

RESPONDENT:

MADHUKAR BALKRISHNA BADIYA & ORS. ETC.

DATE OF JUDGMENT17/08/1988

BENCH:

MUKHARJI, SABYASACHI (J)

BENCH:

MUKHARJI, SABYASACHI (J)

SHARMA, L.M. (J)

CITATION:

1988 AIR 2062 1988 SCR Supl. (2) 482

1988 SCC (4) 290 JT 1988 (3) 381

1988 SCALE (2)376

ACT:

Bombay Motor Vehicles Tax Act, 1958 (as amended by

Maharashtra Act XIV of 1987, Maharashtra Act XXXIII of 1987

and Maharashtra Act lX of 1988)-Challenging validity of

amended provisions of-Whether levy of one-time tax on motor

cycles or tricycles in the State was beyond the legislative

competence of State Legislature and beyond Entry 57 of List

II of Seventh Schedule.

HEADNOTE:

These Civil appeals and special leave petitions centred

round one point, namely, the validity of the Bombay Motor

Vehicles Tax Act, 1958 as amended by Section 3 of the

Maharashtra Act XIV of 1987 and Section 6 of the said Act as

amended by Maharashtra Act XXXIII of 1987 and the

Maharashtra Act IX of 1988.

Section 3 of the said Act XIV of 1987 added sub-section

(IC) to provide for the levy of one-time tax at 15 times the

annual rate on all motor cycles in the State. The said

provisions further provided that in the case of motor cycles

owned by a company or other commercial organisation, the

one-time tax was to be levied at thrice the rate.

Section 6 of the said Act XIV of 1987 added sub-section

(6) to section 9, enabling a registered owner of a motor

cycle or tricycle to obtain refund of `Lone_time tax" under

certain conditions.

Petitions were filed in the High Court by the

respondents in the appeals and petitioners in the special

leave petitions, challenging the amended provisions of the

principal Act. The High Court held that (i) the levy of the

one-time tax was beyond the legislative competence of the

State Legislature and also beyond Entry 57 of List II of the

Seventh Schedule, and (ii) the provision for imposition of

levy at thrice the rates on the vehicles owned by a firm or

company, were neither discriminatory nor arbitrary. The

High Court struck down Act XIV of 1987. The appeals by leave

were filed by the State and the special leave petitions were

fixed by the petitioners in this Court against the decision

of the High Court. In the meanwhile, the Maharashtra

Legislature enacted Maharashtra Act XXXIII of 1987, which

deleted Section 3(4) of the principal Act as amended by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10

PG NO 482

PG NO 483

Maharashtra Act XIV of 1987, whereby the existing provisions

of refund for temporary non-user were made inapplicable in

cases of motor cycles and tricycles, restricting the right

of refund to Section 9(6) in the contingencies mentioned

therein. It also introduced sub-section (7) to section 9

conferring the right of refund in respect of motor cycles

and tricycles in accordance with the rates specified in the

Fifth Schedule. But the said schedule did not prescribe a

separate rate of refund for the company-owned vehicles.

Therefore, the refund in respect of the company-owned

vehicles was the same as that payable to individual owned

vehicles even though the tax paid on former class of

vehicles was three times. Soon thereafter, the Maharashtra

Legislature enacted Act IX of 1988, whereby the only

relevant change for the present purpose was that the rate of

refund was enhanced to three times in respect of the

company-owned vehicles.

Before this Court, the appellant-State submitted that

the amendments enacted by the Maharashtra Acts XXXllI of

1987 and IX of 1988 had brought the principal Act as amended

by the Maharashtra Act XIV of 1987 within the constitutional

requirements of making one-time tax's regulatory and

compensatory tax and that it was not necessary to decide if

the Act as it stood when it was challenged before the High

Court? was beyond the legislative competence of the State

Legislature.

The respondents in the appeals and the petitioners in

the special leave petitions urged that as even after the

amendment no refund was available in respect of a vehicle

which had been registered for more than 13 years? the effect

of that was that no refund al all was available in respect.

of the tax paid for a vehicle for the 14th and 15th

years.The impugned levy of tax ceased to be compensatory or

regulatory and was void under Entry 57 of List II and was

violative of Article 301 of the Constitution.

Disposing of the appeals and dismissing the special

leave petitions the Court.

HELD: The tax imposed on the motor vehicles or a class

of motor cycles would not be valid unless it is compensatory

or regulatory or does not have any nexus with the vehicles

using the roads. In such a case. the levy would be Section

of the said Act XIV of 1987 added sub-section (IC) to

provide for the levy of one-time tax at 15 times the annual

rate on all motor cycles in the State. The said provisions

further provided that in the case of motor cycles owned by a

company or other commercial organisation, the one-time tax

was to be levied at thrice the rate.

The fact that the act, as at present, did not provide

for refund in the 14th and 15th years, did no make the law

outside the competence of the State Legislature. he concept

PG NO 484

of "regulatory and compensatory" tax does no imply

mathematical precision of quid pro quo. [489E]

After the amendment, the Act came with in the

constitutional requirements of making he one-time tax a

regulatory and compensatory tax. It was true that the Act

has no provided for refund in the 14h and 15h years but

that does no make he law out sides the competence of the

State Legislature. It is no mathematical precision that is

necessary nor can it be. there is in the provisions as

amended, as amended, a discernible and an identifiable

object behind the levy and a nexus between the subject and

the object of the levy, [491E-F]

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10

Two principles have to be emphasised, firstly, that the

tax must be regulatory and compenstaory and secondly, there

must be no discrimination. A taxation law cannot claim

immunity from the equality clause in Article 14 of the

Constitution, but in view of the intrinsic complexity of

fiscal adjustments of diverse elements, a considerable wide

discretion and latitude in the matter of classification for

taxation purpose is permissible. The life of Motor cycles

and tricycles normally exceeds 25 years. Non-refund for

certain period is no conclusive of the matter. Even if

mathematical provision is no possible, it cannot be said

that it is wholly unmathematical. The collection of ax for a

period of 15 ears at one point of time is a convenient

method enabling the owner o use he vehicle for more than 25

years without having to pay the tax periodically and pay the

enhanced tax at may be levied during the 25 years of life

of the vehicle. Regulatory and compensatory tax can be

levied to the extent e State is required to pay for

rendering the services. [491G;492A-C]

The Act, as at present, is not violative of Article 145

of the Constitution. The fact that the company-owned

vehicles are taxed that three times the rate payable by

individuals, does not make the legislation violatvie of

Article 14. Histrocially, the company-owned vehicles are

always been taxed at a rate higher that the individually-

owned vehicles. he legislature has he power to distribute

tax burden in a flexible manner and the Court would no

interfere with the same. It could not be said that there was

differentiation without any basis and as such there was

discrimination. [492E-H]

In view of the principles applicable to the taxation

laws and various other factors, the Maharashtra Act as

amended from time to time does not suffer from any vice of

being not regulatory or compensatory taxation nor from the

vice of being violative of Article 14 of the Constitution,

and the challenge to the provisions of the Act as amended

PG NO 485

after the judgment of the High Court could not be

maintained. [494G-;495A]

After the amendments afore-mentioned the Act does no

suffer from the vice mentioned in the judgment of the High

Court . The appeals were allowed thus, and the challenge

made in the special leave petitions was dismissed. [495]

The taxes would be realised in accordance with the Act

and the necessary adjustments would be made accordingly.

[495C]

Bolani Ors. Ltd. v. State of Orissa. [1975] 2 SCR 138;

G.K. Krishnan v. The State of Tamil Nadu & Anr., [1975] 2

S.C.R. 715; Malwa Bus Service (P) Ld. v. State of Punjab

and Ors., [1983] 2 S.C.R. 1009;' International ouris

Corporation v. State of Haryana & Ors., [1981] 2 S.C.R. 364;

Income tax Officer, shillong & Anr. v. N. Takim Roy Rymbai,

etc., [1976] 2 SCR 413; Mrs. Meenakshi & Ors. v., State of

Karnataka & Ors., AIR 1983 SC 1283; Anant Mills Co. Ltd. v.

State of Gujarat and Ors., [1975] 3 S>.C.R. 220; Khandige

Sham Bhat & Ors. v. The Agricultural Income tax Officer,

[1963] 3 SCR 809 and State of Karnataka v. K. Gopalakrishna

Shenoy and Another, A.I.R. 1987 S.C. 1911, refered to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1631-33

of 1987 etc.

From the judgment and order dated 10.7.1987 of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10

Bombay High Court in W.P. Nos. 941, 986 and 1012 of 1987.

A.S. Bobde. Adv. General. S. K. Dholakia and A.S, Bhasme

for he Appellants.

Soli J. Sorabjee, R.N. Sachhar, Mrs. Aruna Mathur, J.

Wad, K.J. John and A.K. Sanghi for the Respondents.

The judgment of the Court was delivered by

SABYASACHI MUKHARJI, J. These civil appeals and special

leave petitions centre around one point, namely, the

validity of the Bombay Motor Vehicles Tax Act, 1958 as

amended by Section 3 of the Maharashtra Act, XIV of 1987 as

well as Section 6 of the said Act as amended by Maharashtra

Act XXXlll of 1987 as well as the Maharashtra Act IX of

1988.

PG NO 486

The Bombay Motor Vehicles Tax Act, 1958 prior to its

amendment in 1987 provided for levy of tax on vehicles

annually or quarterly. In 1987, by Section 3 of the

Maharashtra Act No. XIV of 1987, sub-section (IC) was added

to provide for levy of one time tax at 15 times the annual

rate on all motor cycles used or kept for use in the State.

The said provisions further provided that in case of motor

cycles used or kept for use by a company or other commercial

organisation, the one time tax was to be levied at thrice

the rate. Section 6 of the Maharashtra Act 14 of 1987, added

sub-section (6) to Section 9 of the principal Act. The new

sub-section (6) enabled a registered owner of motor cycle or

tricycle to obtain refund of "one time tax" in cases where

(a) the vehicle is removed outside the State; and (b) the

registration of vehicle is cancelled due to scrapping of the

vehicle, or for a similar reason. The refund was to be paid

in accordance with the Fourth Schedule. The Third and

Fourth Schedules were introduced by the Maharashtra Act 14

of 1987.

In the case of Luna Mopeds, the one time tax comes to

Rs.2925 which according to the petitioners in the S.t.P.

Nos. 1 1673-75/87, is 86% of the ex-factory price of the

Moped. In that view the petitions were filed by the

respondents in the first batch of appeals and the

petitioners in the second batch challenging the amended

provisions of the Bombay Motor Vehicles Tax Act, 1958. On or

about 9/10th July. 1987, a Division Bench of the Bombay High

Court, Nagpur Bench held that the levy of one time tax was

beyond the legislative competence of the State Legislature

and also beyond Entry 57 of List II of the Seventh Schedule.

It further held that the provisions for imposition of levy

at thrice the rates so far as the vehicles owned by the firm

or the company, were neither discriminatory nor arbitrary.

The High Court, however, in view of the fact that the refund

was restricted to the circumstances mentioned above. struck

down Act 14 of 1987. According to the High Court, the

absence of provisions for refund in cases of temporary non-

user made the Maharashtra Act XlV of 1987, confiscatory in

character and not regulatory or compensatory which alone was

in the competence of the State Legislature. The State

preferred applications for leave to appeal against the

impugned judgment and the special leave having been

granted, are the subject-matter of Civil Appeals Nos. 1631-

33/877. The petitioners also, filed special leave

applications which are the subject-matter of Special Leave

Petitions Nos. 11673-75/87 which have been heard along with

these appeals. While the State's appeal against the High

Court's judgment was pending before this Court, the

Maharashtra Legislature enacted Maharashtra Act XXXIII of

1987. It deleted Section 3(4) of the principal Act, as

PG NO 487

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10

amended by Maharashtra Act XIV of 1987. That provision made

the existing provisions of refund for temporary non-user

inapplicable in cases of motor cycles and tricycles,

restricting the right of refund to Section 9(6) in

contingencies mentioned above. It also introduced sub-

section (7) to Section 9 conferring right of refund in

respect of motor cycles and tricycles in accordance with the

rates specified in the Fifth Schedule and prescribed the

rates of refund in the Fifth Schedule. But the said Schedule

did not prescribe a separate rate of refund for company-

owned vehicles. Therefore, the refund in respect of company-

owned vehicles would be same as that payable to individual-

owned vehicles, even though the tax paid on former class of

vehicles was three times. Soon thereafter the Maharashtra

Legislature enacted Act 9 of 1988 The only relevant change

for the present purpose was that the rate of refund was

enhanced to three times in respect of company-owned

vehicles.

Before the contentions are judged, it is imperative to

reiterate that the tax imposed on motor vehicles or a class

of motor cycles would not be valid unless it is compensatory

or regulatory or does not have any nexus with the vehicles

using the public roads. In such a case the levy would be

violative of Act. 301 of the Constitution and would not be

protected by Act. 304 of the Constitution. In this

connection reference may first be made to the observations

of this Court in Bolani Ores Ltd. v. State of Orissa, [1975]

2 SCR 138 where at page 155 this Court observed that Entry

57 of List II of the Seventh Schedule was subject to the

limitations, namely, the power of taxation cannot exceed the

compensatory nature which must have some nexus with the

vehicles using the roads. If the vehicles do not use the

roads, notwith-standing that these are registered under the

Act, these cannot be taxed. More or less the same view was

echoed in G. K. Krishnan v. The State of Tamil Nadu & Anr.,

[1975 ] 2 SCR 715.

See also Malwa Bus Service (P) Ltd. v. State of Punjab &

Ors.,[1983] 2 SCR 1009.

On behalf of the appellant-State, the learned Advocate-

General submitted that the amendments enacted by the

Maharashtra Act No. 33 of 1987 and No. 9 of 1988, have

brought the principal Act as amended by the Maharashtra Act

No. XIV of 1987 within the constitutional requirements of

making `one time tax' a regulatory and compensatory tax. It

was submitted by him that this development had made it

unnecessary for this Court to decide if the Act, as it stood

when it was challenged before the High Court, was beyond the

legislative competence of the State Legislature. It was

PG NO 488

further emphasised that the fact that the Act at present,

does not provide for refund in the 14th & v 15th years, does

not make the law outside the competence of the State

Legislature. It was urged that the concept of "regulatory

and compensatory tax" does not imply mathematical precision.

In this context one may refer to the observations of this

Court in International Tourist Corpn. v. State of Haryana &

Ors., [1981] 2 SCR 364, where at page 374 Justice Chinnappa

Reddy speaking for this Court observed as follows :

"But to say that the nature of a tax is of a

compensatory and regulatory nature is not to say that the

measure of the tax should be 'proportionate to the

expenditure incurred on the regulation provided and the

services rendered. If the tax were to be proportionate to

the expenditure on regulation and service it would not be a

tax but a fee.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10

While in the case of a fee it may be possible to

precisely identify and measure the benefits received from

the Government and levy the fee according to the benefits

received and the expenditure incurred, in the case of a

regulatory and compensatory tax it would ordinarily be well

high impossible to identify and measure, with any

exactitude, the benefits received and the expenditure

incurred and levy the tax according: to the benefits

received and the expenditure incurred. What is necessary to

uphold a regulatory and compensatory tax is the existence of

a specific. identifiable object behind the levy and a nexus

between he subject and he object of he levy."

Earlier this principal had been sated in Income tax

officer Shillong & Anr.v. N. Takim Roy Rymbai etc.,[1976] 3

SAC 413, where this Court observed though taxation law

could not claim immunity from the equality clause i n

Article 14 of the Constitution, it must be remembered that

in view of the intrinsic complexity of fiscal adjustments of

diverse element, he State has a considerably wide discretion

in the matter of classification of taxation purposes. the

fact that the tax falls more heavily on some in the same

category, is by itself no ground to render the law invalid.

Similar are he observations of this Court in Mrs. Meenakshi

& Ors. v. State of Karnataka & Ors., AIR 1983 Sc 1283; Anant

Mills Co Ltd. v. State of Gujarat & Ors.,[1975] 3 SC 220 and

Khhandige Sham Bhat & Ors. V. The Agricultural Income ax

Office, [1963] 3 SCR 809.

PG NO 489

In the instant case, the impugned legislation had been

subsequently amended to provide for the refund of a

proportionate part of the one-time tax in the event of the

vehicle not being used for a period of quarter or more than

a quarter of a year as mentioned before. This was provided

by substituting a new sub-section (7) to section 9 of the

Act and also substituting new Fifth Schedule.

Even after the amendment, however, no refund is

available in respect of a vehicle which has been registered

for more than 13 years. The effect of the same is that no

refund at all is available in respect of the tax paid for a

vehicle for the 14th and 15th years, it was urged on behalf

of the respondents in the appeals and the petitioners in the

S.L.Ps. It was submitted on their behalf that so far as

four-wheelers are concerned, Section 9(1) of the act

provided for refund of the proportionate amount of tax for

every completed calendar month for which the vehicle has not

been used. It was urged on behalf of the respondents in the

appeals and the petitioners in the S.L.Ps. that there is no

justification what so ever for the non-grant of the refund

of the proportionate amount of tax paid in respect of a two

wheeler or three wheeler, which is not used in its 14th

and/or 15th year. On this score, it was urged on their

behalf that the impugned levy of tax ceases to be

compensatory or regulatory and as such is void under Entry

57 of List II and thus violative of Article 301 of the

Constitution.

In our opinion the fact that the Act, as at present,

does not provide for refund in the 14th and 15th years, does

not make the law outside the competence of the State

Legislature. The concept of "regulatory and compensatory"

tax does not imply mathematical precision of quid pro quo.

This aspect was emphasised in International Tourist

Corporation etc. etc. v. State of Haryana & Ors., (supra) as

noted before.

It was further submitted on behalf of the owners of two

wheelers that the impugned one-time levy of Rs.975 has been

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10

worked out at Rs.65 per two wheeler per annum for 15 years

and is sought to be recovered from the two wheeler owner as

a one-time down payment at the time the two-wheeler is

purchased by him. On behalf of the respondents/petitioners

it was contended that having regard to the extent of road

user by a two wheeler, in comparison with the road user by a

four wheeler, the Legislature considered that. a tax of

Rs.65 per two wheeler per annum would be a reasonable and

adequate compensatory levy. While the maximum annual rate of

tax was fixed at Rs. 200 per annum for motor cars weighing

not more than 750 kg and Rs.36O per annum for motor cars

PG NO 490

weighing between 750 kg to 1500 kg it may be noted that the

tax on four wheelers has not been increased. But as far as

two wheelers are concerned the one-time tax for the period

of 15 years is exactly 15 times the amount of tax of Rs.65

per year. It is clear from these factors, it was submitted

by the owners of the two wheelers, that the Legislature

continues to consider the tax of Rs.65 per two wheeler per

year to be an adequate compensatory tax. However, by

recovering the tax for the future period of 15 years in

advance as a one time levy, the taxing authorities are in

fact recovering not Rs.65 per two wheeler per year but in

reality about Rs.356.79 per two wheeler per year. The

respondents/petitioners sought to explain the position by

submitting that if the two wheeler owner has an amount of

Rs.975 with him at the time of purchase of the vehicle, and

is not compelled to make one-time payment, then he would

initially pay only Rs.65 as the tax for the first year. That

would leave a balance amount of Rs.9.10 which could be

invested by him at an interest yield of 15% per annum. It

was urged that the rate of interest that is recoverable as

well as paid under the Income Tax Act is 15% per annum. The

said amount of Rs.910 would yield an interest of Rs. 136.50

in the first year. Out of that amount of Rs. 136.50 an

amount of Rs.65 would be paid by the two wheeler owner as

tax at the beginning of the second year. Consequently, an

amount of Rs.71.50 would be available from out of the said

interest earning of Rs. 136.50, which also could be invested

at a yield of 15% per annum. Consequently, the amount of

interest that would be earned by the vehicle owner in the

second year would come to Rs. 147. 23, out of which only

Rs.65 would have to be paid as tax in the beginning of the

third year, leaving a balance of Rs.82.23 available for

further investment. It was submitted that by compelling the

vehicle owner to make the one-time down payment of Rs.975

at the time of the purchase of the vehicle, the owner is in

reality being deprived of a total amount of Rs.4376. 19 over

the said period of 15 years. If this amount is divided by

15, the resultant figure will be Rs.291.79. The effective

tax burden has thus in fact been multiplied by about 5 times

only as a result of the one-time levy, it was urged. It was

submitted that the said one-time levy was unreasonable,

discriminatory and not regulatory or compensatory. The fact

that a tax on motor vehicles must be compensatory and

regulatory in order to be valid, was emphasised in the

decision of this Court in Stare of Karnataka v. K.

Gopalakrishna Shenoy and another, A.I.R. 1487 S.C. 1911

where at page 1915 of the report, it was observed that tax

on motor vehicles is a compensatory tax levied for the use

of the roads and it is not a tax on ownership or possession

of motor vehicles. It was emphasised on behalf of the owners

of the vehicles that the impugned legislation is based on

PG NO 491

the assumption that two wheelers and three wheelers have an

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10

approximate life of 15 years. It is on that basis and

footing that the rates of tax have been fixed. It was

contended that the life of two wheelers and three wheelers

is as much as 25 to 30 years and therefore, the recovery of

the one time tax for the period of 15 years actually

constitutes the conferment of a benefit on the owners of two

wheelers and three wheelers. In this connection, on the

other hand it is of importance to note that the Department

of Heavy Industry, Ministry of Industry, Government of

India, had commissioned a report from an eminent firm of

Chartered Accountants on Long Term Demand Projections for

Automotive Vehicles (including two wheelers and three

wheelers). The said report concludes, after an exhaustive

analysis of statistical data including the data provided by

vehicle manufacturers and also studies made in the past,

that the average life of scooters is 10 years, that of motor

cycles c) years and that of mopeds 5 years. But what was

emphasised was that one-time levy of tax compelled owners of

two wheelers to incur a further expenditure of about 70% of

the cost of the vehicles purchased by them at the time they

acquire the vehicle and that imposes heavy additional

liabilities. It was, therefore, submitted that it was

neither compensatory nor regulatory and further more, it was

discriminatory.

It was further submitted that section 3(IC)(c) exempts

public trusts and recognised institutions. That was bad.

In our opinion, after the amendment the mischief

mentioned in the judgment and order of the High Court of

Bombay has been remedied. On an examination of the various

provisions of the Act as amended, we have come to the

conclusion that after the amendment the Act comes within the

constitutional requirement of making the one-time tax a

regulatory and compensatory tax. It is true as was

emphasised that the Act has not provided for refund in the

14the and 15th years but does not make the law outside the

competence of the State Legislature. It is not mathematical

precision that is necessary nor can it be. There is in the

provisions as amended, a discernible and an identifiable

object behind the levy and a nexus between the subject and

the object of the levy.

In this matter two principles have to be emphasised,

firstly. that the tax must be regulatory and compensatory

and secondly, there must be no discrimination. About

discrimination it is well to remember that a taxation law

cannot claim immunity from the equality clause in Article 14

of the Constitution. But in view of the intrinsic complexity

of fiscal adjustments of diverse elements, a considerably

wide discretion and latitude in the matter of classification

PG NO 492

for taxation purpose is permissible. See the observations of

this Court in Income Tax Officer, Shillong and Anr. etc. v.

N. Takim Roy Rymbai etc. etc., (supra). Also see the

observation in Mrs. Meenakshi and others v. State of

Karnataka, (supra); Anant Mills Co. Ltd. v. State of Gujarat

& Ors., (supra) and Khandige Sham Bhat and Ors. v. The

Agricultural Income-tax Officer, (supra). The evidence on

record shows that the life of motor cycles and tricycles

normally exceeds 25 years. The so-called non-refund for

certain period is not conclusive of the matter. Even if

mathematical precision is not possible, we cannot say that

it is wholly unmathematical. The collection of tax for a

period of 15 years at one point of time is a convenient

method enabling the owner to use the vehicle for more than

25 years, without having to visit the office to pay the

tax periodically, and pay enhanced tax that may be levied

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10

during the 25 years of life of the vehicle. Regulatory and

compensatory tax can be levied to the extent the State is

required to pay for rendering the services. According to the

State, the evidence on record shows that the cost of

services is twice the total amount recovered from all types

of vehicles. The balance of expenditure is met by the State

from the general revenues. Even from this half collection,

the motor cycles and tricycles contribute only 6.4 per cent.

The percentage of motor cycles and tricycles is 56 to 58

percent of all vehicles. Thus, even insubstantial increase

in their rates cannot be said to be not a "regulatory or

compensatory" tax measure.

The Act, as at present, is not violative of Article 14

of the Constitution. The fact that company-owned vehicles

are taxed at three times the rate payable by individuals,

does not make the legislation violative of Article 14.

Historically, the company-owned vehicles have always been

taxed at a rate higher than the individually-owned vehicles.

As appears from the records produced. the motor cycles and

tricycles constituting 56 to 58 per cent of all types of

vehicles contribute only 6.4 per cent of the total revenue

earned through the tax imposed by the Act. It is well-

settled that the Legislature has the power to distribute tax

burden in a flexible manner and the Court would not

interfere with the same. This principle has been reiterated

in G.K. Krishnan etc. etc. v. The State of Tamil Nadu &

Anr. etc., (supra) where this Court observed that in the

context of commercial regulation, Article 14 is offended

only if the classification rests on grounds wholly

irrelevant to the achievement of the objective and this

lenient standard is further weighted in the State's favour

by the fact that a statutory discrimination will not be set

aside if a state of facts may reasonably be conceived by the

PG NO 493

Court to justify it. Tax laws have to respond closely to

local needs and Court's familiarity with these needs is

likely to be limited. Therefore, the Court must be aware of

its own remoteness and lack of familiarity with the local

problems. Classification is dependent upon peculiar needs

and specific difficulties of the community. The needs and

the difficulties of a community are constituted out of facts

and information beyond the easy ken of the Court.

It appears that in the instant case, the State

Government has specifically averred that the company-owned

vehicles travel more and use roads more often. No evidence

have been produced to the contrary. In view of the well-

settled principles, we cannot say that there was without

any basis and as such there was discrimination.

It further appears that the Government of lndia has

liberalised the licensing policy and granted large number of

industrial licences for the manufacture of two wheelers. In

Maharashtra itself following is the new registration of two

wheelers during the last four and five year:

" 1983-84 - 1,13,949

1984-85 - 1,24,877

1985-86 - 1,66,124

1986-87 - 2,01,904"

In 1986-87 per working day on an average 929 new two

wheeler have been registered. There was tremendous strain on

Motor Vehicles Department due to increase in the number of

two wheeler. The following statistics and figures indicate

the position that one time tax on two wheelers have

beneficient effect:

"As on 1.4.1987 there were 10,93,170 two wheelers in

Maharashtra and total number of vehicles was 1841 lakhs.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10

In 1985-86 the total revenue by way of Motor Vehicles

Tax was Rs.98 crores out of which only Rs. 6 to 7 crores was

from two wheelers.

That means 58% vehicles (3 wheelers) used to give only

6.4% Motor Tax for which 22,000 man days were required to be

spent.

All the two wheeler owners were required to come to

R.T.O. for payment of tax every year.

PG NO 494

Almost 70 to 75% Motor Vehicle Tax arrear cases were of

2 wheelers.

Because of new system of one time tax if the owner pays

it, he is not required to pay the tax again during the life

time of the 2 wheeler.

Any further increase in one time tax rate will not be

applicable to the 2 wheelers which have already paid the one

time tax.

Statistics show that the 2 wheelers are being used for

more than 25 years.

The rate of increase of 2 wheelers because of easy

availability and affordability is almost 25%. The total

number of two wheelers projections in the State will be as

follows:

By the end of 1986-87 -10.94 lakh

1987-88 -13.33 lakh

1988-89 -16.20 lakh

1989-90 -19.69 lakh

1990-91 -23.77 lakh

1991-92 -28.73 lakh

Existing vehicles will have to pay one time tax in

sliding scale rate. Older the vehicles, less will be the tax.

This tax system is already in existence in Karnataka

since 1.4.1986 and also in Gujarat, Rajasthan.

This new system will definitely give relief to the two

wheeler owners as they will not be required to come to R.T.

Office for annual payment."

Having regard to these factors and having regard to the

principles applicable to taxation laws, we are of the

opinion that the Maharashtra Act as amended from time to

time and mentioned hereinbefore, does not suffer from any

vice of being not regulatory or compensatory taxation nor

from the vice of being violative of Article 14 of the

Constitution.

In that view of the matter, the challenge to the

provisions of the Act as amended after the judgment of the

PG NO 495

Bombay High Court cannot be maintained.

In that view of the matter, Civil Appeals Nos. 1631-1633

of 1987 are disposed of by saying that after the amendments

noted here in before the Act does not suffer from the vice

mentioned in the judgment of the High Court of Bombay. The

appeals are, therefore, allowed and disposed of accordingly.

In that view of the matter the challenge made in the

special leave petitions Nos. 11673-75 of t987 is dismissed.

In the facts and circumstances of the case, there will be no

orders as to costs. Interim orders, if any, are vacated. The

taxes will be realised in accordance with the Act and

necessary adjustments will be made accordingly.

S.L.