| CITATION | AIR 1962 SC 1406 |
| DATE OF JUDGEMENT | 9th April 1962 |
| COURT | Supreme Court of India |
| PETITIONER | Automobile Transport (Rajasthan) Ltd. |
| RESPONDENT | State of Rajasthan and Ors. |
| BENCH | Sinha, Bhuvneshwar P.(Cj), Kapur, J.L., Sarkar, A.K., Subbarao, K., Hidayatullah, M. & Ayyangar, N.R. & Mudholkar, J.R. |
INTRODUCTION
In this lawsuit, it was argued that the Rajasthan Motor Vehicles Taxation Act of 1951 violated the constitution. Arguments that the challenged Act violates Article 301 of the Indian Constitution and specifically affects commercial rights were made before the court.
Since there was only one case involving an interstate tax problem, the bench relied on American and Australian law of jurisprudence, which is consistent with the position adopted in the Atalbari tea case. It is also important to note that the Hon’ble Bench successfully distinguished between the positions of those two nations and India, applying the instances exclusively to the interpretation of specific phrases and words.
FACTS
The applicants provide stage carriage services, and all three of them have their headquarters in the once-independent state of Ajmer. The Automobile Transport (Raj.)Ltd. also operates motor vehicles between Ajmer and Kishangarh with permission from the erstwhile State of Ajmer, and all three of them operate vehicles on the Nasirabad-Deoli Road. The route from Nasirabad to Deoli was primarily in the erstwhile State of Ajmer, although it also travelled across Rajasthan for a short time. Similar to this, the route from Ajmer to Kishangarh was split between the states of Rajasthan and the old Ajmer.
The applicants were required to pay tax under the Rajasthan Motor Vehicles Taxation Act (No. XI) of 1951 (hereinafter referred to as the Act) for the time period from 1 April 1951 to 31 March 1954 by the Regional Transport Officer, Jaipur, who is also the Motor Vehicles Taxation Officer. The petitioners filed these writ applications disputing, among other things, the legality of the Act in their argument that they were not responsible for paying this tax for a number of reasons.
ISSUES
Whether rights guaranteed by Article 301 of the Constitution of India, 1949 are violated by Sections 4 and 11 of the Rajasthan Motor Vehicles Taxation Act, 1951?
RULES
- Sec 4 of Rajasthan Motor Vehicles Taxation Act, 1951
- Sec 11 of Rajasthan Motor Vehicles Taxation Act, 1951
- Article 301 of the Indian Constitution
PETITIONERS ARGUMENTS
They claim that Article 301 of the Constitution states that trade, commerce, and intercourse are all free across the whole territory of India, subject to the other provisions of this chapter. The president must first approve the bill for the levying of the tax (assuming that the tax imposes reasonable restrictions on the freedom of trade, commerce, or intercourse) in light of the proviso to Article 304. Otherwise, it is urged that no tax similar to the one provided in the Act can be levied because it works against the freedom of trade, commerce, and intercourse throughout the territory of India.
It is also suggested that even if the President’s prior consent had not been used as intended by that proviso, the error might have been fixed if subsequent assent had been gained in accordance with Article 255. However, because the Act restricts the freedom of trade, commerce, and intercourse guaranteed by Article 301, it is invalid because neither the President’s prior approval to the introduction of the bill relating to this taxation nor the President’s assent after the Act was passed.
RESPONDENTS ARGUMENTS
Since the tax rates are set according to the vehicle’s size and seating capacity, they do not impose a direct or immediate limitation. The sole tax imposed on motor vehicles is a combined tax. The fee is imposed in order to increase state income and to pay for road upkeep.
Since the tax is consolidated and not based on trade or commerce, it is imposed indirectly on trade and commerce.
Only custom and inter-state barriers that existed between Indian states in British Indian territory are covered by Article 301.
Any legislative or executive action that imposes limits under Article 301is relevant not only to entries in the seventh schedule but also to other entrants.
ANALYSIS
All Indian nationals are guaranteed the freedom to unrestricted movement across India’s territory under Article 19(1)(d).
Since the state Act was created in 1955, which was after the Constitution’s inception, the first section of Article 305, which deals with existing laws, does not apply to the current situation. The questions that the court in this instance, must answer are unrelated to the second section of Article 305.
The historical context of the Indian Constitution must be taken into account, as must an analysis of the issues that the Constitution aimed to address. A similar approach is used here.
According to a textual reading of Articles 301 to 304, parliament has the authority to impose limits where doing so is in the public interest and to apply alternative standards of treatment when there is a shortage of a good. Furthermore, the taxes may be imposed by sister states in a manner akin to the use tax and gross receipts tax under American tax laws.
The terminology employed in Articles 302 and 304 differs in that the limits under the first part are not required to be reasonable, whilst the restrictions under the latter portion are.
A person does not have complete freedom in trade or business to act whatever they like. No right is unqualified, and everything is constrained by certain restrictions. If the state government intends to control commerce, it must do so in accordance with Article 304(b), which stipulates that the president’s permission is required for additional security.
Neither the Parliament nor the State Legislature has the authority to enact laws that favour one state over another or treat one state differently, infringing on its right to freedom. But when Parliament wants to address a shortage of products, special treatment is permitted.
On items imported from other states or the Union Territory that are similarly made or produced in that state, the state may levy a non-discriminatory tax.
It is vital to understand how Part XIII should be interpreted since it reveals a comprehensive plan for freedom of trade, commerce, and interaction while preserving a balance between federalism and provincial autonomy.
JUDGEMENT
The court in the judgement said that the Act’s core purpose in this instance is to regulate motor vehicles in Rajasthan and as they travel across Rajasthan. Even if it is claimed that the legislation affects interstate trade or commerce, it is not a law pertaining to interstate trade or commerce. Article 301 of the Indian Constitution is not violated by any of the provisions of the challenged Act since they are of a regulatory character.
By examining the regulations, it is determined unequivocally that the taxes imposed are in fact levied upon motor vehicles that travel on Rajasthan’s roads or are stored there for use, whether throughout the entire region or only a portion of it. All owners and dealers must also pay the tax. The issue of defining the tax’s nature and whether it is compensating or not emerges. The freedom of trade, commerce, and intercourse is unaffected in this situation when the legislation establishes the fee for a convenience or service offered by the State or an agency of the State and such fees are placed on those who choose to use such services. In this situation, the nature of the tax is compensation or consideration imposed in relation to benefit.
Since the taxes levied under the Act are compensatory in nature and do not restrict the freedom of trade, commerce, and intercourse guaranteed by Part XIII, the contested Act does not contravene the requirements of Article 301 of the Constitution.
The obstacle referred to in Article 301 might take on several shapes. The key concept is a barrier put in the way of commerce in motion at a certain moment or at several places, whether the limits are imposed prior to or after movement. The phrase “shall be free” states that such transportation or movement is free from such restrictions in an obligatory manner.
Since the limitations envisioned are exceptions to the rights granted by the Constitution, no rights are unqualified.
CONCLUSION
An obligatory contribution, tax is the state’s sovereign attribute. It belongs to the Public Finance division of every economy. Since then, the idea of compensation and regulatory taxes has been developed in India with reference to items 56 and 57 of List II. It has been used in several instances, and over time, the courts have liberalized the idea to allow for higher-level state taxation. This would not be regarded as an infringement and such a measure or tax does not even require the requirements under Article 304(b) to be validated if it is challenged in court as being an infringement or violative of the freedom under Article 301.
BY HARSHIKA BHUTDA, Student at Symbiosis Law School, Hyderabad, Intern at Legal Vidhiya
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