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Madhya Pradesh Transport Co. Private Ltd. v. State Of Madhya Pradesh And Others
Judgment Summary — Madhya Pradesh Motor Vehicles (Taxation of Passengers) Act, 1959
Factual and Procedural Background
These proceedings comprise three petitions under Articles 226 and 227 of the Constitution brought by transport companies holding permits under the Motor Vehicles Act, 1939. The petitioners challenged the validity of the Madhya Pradesh Motor Vehicles (Taxation of Passengers) Act, 1959 (the "Act") on various grounds and sought a writ in the nature of mandamus restraining enforcement of the Act, or alternatively a direction that the Act be not enforced against them until the State Government revised fare tables under Section 43 of the Motor Vehicles Act, 1939 so as to permit recovery of the tax as extra fare.
The impugned Act was enacted in 1959 and brought into force by notification on 1 February 1961. Section 3 levies a tax equivalent to ten per cent of the fare (inclusive of tax) payable to the operator of a stage carriage. The Act contains provisions for ticketing (Section 4), monthly returns and payment by operators (Sections 5–7), assessment of escaped tax (Section 8), penalties for late payment (Section 9), recovery as arrears of land revenue (Section 10), requirements to keep accounts (Section 13) and penal provisions for fraudulent evasion or contraventions (Section 16).
A prior Division Bench decision in Mahamaya Motor Transport Co. v. State of M.P. (M.P. No. 29 of 1961, Dated 25-9-1961) upheld the validity of the Act on grounds similar to those raised here; that decision relied on the Supreme Court's decision in Sainik Motor, Jodhpur v. State of Rajasthan (Petn. No. 82 of 1959, Dated 22-3-1961; AIR 1961 SC 1480).
Legal Issues Presented
- Whether the Madhya Pradesh Motor Vehicles (Taxation of Passengers) Act, 1959 is constitutionally valid (including challenges under Articles 19(1)(g), 301 and 304(b) of the Constitution).
- Whether the Act in substance levies a tax on passengers or on operators (i.e., whether incidence of the tax falls on passengers or operators and the legal significance of the statutory liability being framed as payable by the operator).
- Whether the Act is void for vagueness or uncertainty as to who is liable to pay the tax.
- Whether the imposition and enforcement of the tax is effective in relation to an operator in the absence of revision of fare tables under Section 43 of the Motor Vehicles Act, 1939 (i.e., whether operators can lawfully recover the tax as extra fare without revision of approved fare tables).
- Whether the requirement on operators to collect, account for and pay the tax amounts to forced labour in breach of Article 23 or an impermissible restriction on trade under Article 19(1)(g).
Arguments of the Parties
Petitioners' Arguments
- The Act levies a tax on operators (because liability and procedural obligations are placed on operators in Sections 5–10), and if the tax is on operators it offends Articles 19(1)(g), 301 and 304(b).
- The Act is vague and uncertain and does not indicate with definiteness who is liable to pay the tax; the phrase "a tax on all passengers carried by stage carriages" merely describes the taxing event and does not establish passenger liability.
- The wording "fare (inclusive of tax) payable to the operator of a stage carriage" cannot be construed to mean the tax is payable by the passenger.
- If the tax is a passenger tax, the procedural obligations imposed on operators to collect and maintain accounts constitute forced labour in contravention of Article 23.
- Even if the Act is valid in principle, it cannot be effectively imposed on operators until the maximum fares are revised under Section 43 of the Motor Vehicles Act to permit recovery of the tax as extra fare; respondents were refusing to revise fare tables and thus enforcing the tax effectively on operators.
Respondents' Arguments (as set out in returns)
- In the returns the respondents stated that the tax is to be paid by the operator, although in suitable cases the operator may be in a position to pass the burden on to passengers.
- They asserted it was not necessary to revise fare tables fixed under the Motor Vehicles Act and that there was no need to confer specific powers on operators to collect the tax as extra fare; nevertheless operators were expected to collect the tax from passengers.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mahamaya Motor Transport Co. v. State of M.P., M.P. No. 29 of 1961, Dated 25-9-1961 (MP) | Held that the tax imposed by the Act is in pith and substance a tax on passengers (Entry-56, List II, Seventh Schedule); liability framed on operators but incidence is on passengers; does not offend Articles 301/304 or Article 19(1)(g). | The court treated that decision as upholding the validity of the Act on similar grounds; it observed that the present view about effectiveness (need to revise fare tables) does not conflict with the Division Bench's conclusion on validity. |
| Sainik Motor, Jodhpur v. State of Rajasthan, Petn. No. 82 of 1959, Dated 22-3-1961; AIR 1961 SC 1480 | Upheld the Rajasthan Passengers and Goods Taxation Act; used to support the proposition that a statute framed as payable by an operator can be one whose economic incidence falls on passengers and is a State passenger tax. | The Division Bench in Mahamaya relied on this Supreme Court decision; this opinion notes that Mahamaya in turn relied on Sainik Motor in affirming validity of the tax as a passenger tax. |
| Provincial Government of Central Provinces and Berar v. Mohanlal Keshaolal, ILR (1944) Nag 173 (AIR 1944 Nag 89) | Principle that fare tables approved by authority form a condition of the permit and an operator cannot unilaterally alter fares or demand extra fare beyond the approved table. | Cited to support the proposition that an operator cannot lawfully recover extra fare (i.e., tax as extra fare) unless the approved fare table has been revised under statutory authority. |
| Corpus Juris Secundum (vol. 82, Section 73, p.131) | Statement that a statute imposing a tax must provide workable means of ascertaining the tax, but enforcement details may properly be provided by reference to other laws. | Quoted to justify the view that the impugned Act may be enforced by reference to existing provisions (e.g., Motor Vehicles Act) even though the Act does not itself provide for revision of fare tables. |
Court's Reasoning and Analysis
The court approached the matter in two strands: (a) the constitutional validity of the Act; and (b) the practical effectiveness of the Act in relation to individual operators pending revision of fare tables.
On construction of Section 3 the court emphasized the statutory language that the tax is "equivalent to ten per cent of the fare (inclusive of tax) payable to the operator of a stage carriage." The court reasoned that since the fare is the sum paid (or to be paid) by passengers, the tax expressed as a percentage of that fare—described as "inclusive of tax"—is properly regarded as a tax on passengers. The statutory scheme then frames the operator as the person who is required to collect, account for and pay the tax to the State. Thus sections dealing with returns, assessment, penalties and accounts (Sections 5–10 and Section 16) operate as provisions imposing duties on the operator qua collector, not as signifying that the economic incidence of the tax is on the operator.
The court found that the respondents' returns reflected a "total misconception" of the Act's effect and an incorrect "executive" construction: the respondents treated the tax as payable by operators and took the view that fare tables need not be revised. The court accepted that, practically, an operator cannot recover an extra amount labelled "tax" from passengers unless he has lawful authority to charge such extra fare, because Section 48 of the Motor Vehicles Act requires fares charged to be in accordance with the fare table approved by the Regional Transport Authority and those fare tables form a condition of the permit.
Consequently, the court concluded that the effectiveness of the Act in relation to any particular operator is dependent on revision of the approved fare table under Section 43 of the Motor Vehicles Act so as to permit recovery of the tax as extra fare. The court drew on the principle (and cited Provincial Government v. Mohanlal Keshaolal) that an operator may not unilaterally alter fares and that revision by the appropriate authority is necessary to create the operator's legal authority to demand an extra fare.
The court further held that the absence of an express provision in the Act stating that it becomes effective only after fare-table revision does not render the Act invalid. The legislature is presumed to have enacted the statute with knowledge of existing law, and an implication may be read into the Act that effectiveness as against operators follows upon the contingency of fare-table revision. The court cited Corpus Juris Secundum to support the proposition that an Act need not itself spell out every enforcement mechanism if existing law supplies workable means.
The court also reasoned that penal provisions such as Section 16—creating offences for evasion or contravention—presuppose a legal duty; thus, criminal liability on an operator for failure to collect or pay the tax cannot arise until the legal duty is in place, which the court held requires revision of the fare tables to make the tax payable by passengers and collectible as extra fare by the operator.
Holding and Implications
PETITIONS ALLOWED; ENFORCEMENT PROHIBITED UNTIL FARE-TABLE REVISION
Holding (direct effect): The court allowed the petitions. It prohibited the respondents from enforcing the provisions of the Madhya Pradesh Motor Vehicles (Taxation of Passengers) Act, 1959 against the petitioners unless and until the fare tables in respect of the petitioners' stage carriages are revised under Section 43 of the Motor Vehicles Act, 1939 so as to authorize the operators to recover the tax amount payable under Section 3 of the impugned Act from passengers as extra fare.
Ancillary orders: Each petitioner was awarded costs; counsels' fee in each case was fixed at Rs. 100; outstanding security deposits were ordered to be refunded to the petitioners.
Implications (scope and precedent): The court affirmed the validity of the Act (it is not rendered void by the respondents' failure or reluctance to revise fare tables) but clarified that the Act's operative effect in relation to individual operators depends on an administrative revision of fare tables under Section 43 of the Motor Vehicles Act. The decision therefore resolves the immediate enforcement issue between the parties but does not purport to set aside the Act itself; the ruling limits enforcement until the administrative condition (fare-table revision) necessary to give operators legal authority to collect extra fare is fulfilled.
This summary has been prepared strictly on the basis of the material contained in the provided opinion and does not add or infer facts beyond that text.
1. This order shall also govern Miscellaneous petitions Nos. 112 and 113, both of 1961.
2. These are three petitions under Articles 226 and 227 of the Constitution of India by transport companies holding permits under the Motor Vehicles Act, 1939, challenging the validity of the Madhya Pradesh Motor Vehicles (Taxation of Passengers) Act, 1959, (hereinafter referred to as the Act), on various grounds. The petitioners pray for the issue of a writ in the nature of mandamus for restraining the respondents from giving effect to the provisions of the Act or acting in any manner by virtue of or under the said Act. Alternatively they pray that if the Act is valid, then a direction prohibiting the respondents from enforcing the Act as against them until the State Government issues a notification under Section 43 of the Motor Vehicles Act enhancing the maximum rate of fare in respect of the stage carriages run by them, be issued.
3. The impugned Act was enacted in 1959. It came into force on 1st February 1961, which was the date appointed for the purpose by a notification issued under Section 1(3) of the Act. The long title of the Act is "An Act to provide for the levy of a tax on passengers carried in certain classes of public service vehicles in the state of Madhya Pradesh. " Section 2 is the definition Section. By Section 3 i't is inter alia provided that on the commencement of the Act under Section 1(3), "there shall be leived and paid to the State Government a tax on all passengers carried by stage carriages at a rate equivalent to ten per cent of the fare (inclusive of tax) payable to the operator of a stage carriage."
Section 4 enjoins that save as otherwise provided by the Act, no passenger shall be allowed to travel by the operator in a stage carriage unless he is issued a ticket in the prescribed form for the journey. Sections 5 to 7 deal with the submission of returns and payment of tax by the operator every month into the Government treasury. Section 8 lays down that if the whole or any portion of the tax leviable under the Act for any month has escaped assessment, then the Tax Officer may within the prescribed period assess the tax which has escaped assessment after issuing a notice to the operator.
Section 9 empowers the Tax Officer to impose a penalty if the whole or any portion of the tax payable to the State Government in respect of any stage carriage for any period has not been paid in time. Section 10 is concerned with the recovery of tax amount as arrears of land revenue from the operator. Under Section 13 every operator is required to keep and maintain accounts and registers in the prescribed form in respect of stage carriages and the fares collected in respect of passengers travelling therein. An operator is liable to punishment under Section 16 if he submits an incorrect or incomplete return or fails to submit one or if he fraudulently evades or allows to be" evaded the payment of any tax due from him or fraudulently makes or allows to be made wrong entries or omissions in the accounts or registers maintained by him or if he wilfully acts in contravention of any of the provisions of the Act or any of the rules made thereunder. These are the provisions with reference to which it has been contended that the Act levies a tax on operators and not on passengers and, thereore, offends against Articles 19(1)(g), 301 and 304(b) of the Constitution.
4. In Mahamaya Motor Transport Co. v. State of M. P. M. P. No. 29 of 1961, D/- 25-9-1961 (MP) the validity of the Act was questioned On grounds similar to those taken in the present petitions. All the grounds of attack failed in that case and it was held by a Division Bench of this Court that the tax imposed by the Act is in 'pith and substance' a tax on passengers carried by road falling within Entry-56 of List II of the Seventh Schedule of the Constitution; that the liability of the tax is on the operators and not on the passengers; that the tax is payable by the passengers and the Act impliedly
"did permit the operator to pass the burden of the tax on to the passengers by adding the tax to the existing fares"; that the levy of tax does not offend Articles 301 and 304 of the Constitution as the tax is for purposes of State and falls upon passengers carried by stage carriages within the State; and that it also does not infringe Article 19(1)(g) as it does not interfere with the rights of any operator to carry on any occupation, trade or business. In holding that the imposition of the tax did not violate Articles 301 and 304 of the Constitution, the Division Bench relied on the decision of the Supreme Court in Sainik Motor, Jodhpur v. State of Rajasthan, Petn. No. 82 of 1959, D/- 22-3-1961 : ( AIR 1961 SC 1480).
5. Shri Phadke, learned counsel appearing for the petitioners, submitted that the decision in M. P. No. 29 of 1961, D/- 25-9-1961 (MP), (Supra) required reconsideration. It was said that the decision was based on the Supreme Court's decision in Petn. No. 82 of 1959, DA 22-3-1961 : (AIR 1961 SC 1480), (Supra) relating to the Rajasthan Passengers and Goods Taxation Act, 1959, but the language of the Rajasthan Act was materially different from that used in the local Act; and that the features which weighed with the Supreme Court in upholding the validity of the Rajasthan Act were not to and in the impugned Act.
Learned counsel argued that the Act was invalid for vagueness and uncertainty; that it did not indicate with any definiteness as to who was liable to pay the tax; that the expression, "a tax on all passengers carried by stage carriages" used in Section 3 only described the taxing event, namely, the carriage of passengers that occasioned the liability of payment of tax and did not mean that the tax was to be paid by the passengers; and that the words "fare (inclusive of tax) payable to the operator of a stage carriage" used in Section 3(1) could not be construed to mean that the tax amount was payable by the passenger; and that Sections 5 to 10 all proceeded on the basis that the liability for the payment of the tax was on the operator. It was further contended that if the tax was on the operator, then it was clearly repugnant to Articles 19(1)(g), 301 and 304(b); that, on the other hand, if it was a tax on passengers, then it contravened Article 23 in that the operators were required to collect the tax for payment to the Government, to keep and maintain accounts and registers, and this labour was nothing but in the nature of begar and forced labour.
The tax is thus a percentage of the fare inclusive of tax payable to the operator. The fare, that is to say the sum paid or to be paid by passengers for being carried, thus includes the amount of tax. The fare is clearly payable by the passenger. If the passenger is liable to pay the fare, it necessarily follows that liability for payment of the tax is also on him. The operator only collects the tax from the passengers in the shape of an extra amount added to the old fare. True, the passenger pays the extra amount qua fare. But that does not alter the fact that the liability for the payment of the extra sum is on him and that extra sum is in reality the tax amount which after collection by the operator is paid to the Government and not retained by the operator himself. Once it is recognised that under Section 3 the liability for payment of the tax is on the passengers, then the provisions contained in sections 5 to 10 become provisions dealing with the operator's liability for payment of the tax as collector. Consistently with Section 3, they cannot be read as provisions throwing the incidence of tax on the operators.
The tax being on passengers, there can be no question of any trade or business, in which the petitioners are engaged, being subjected to a restriction so as to offend Article 19(1)(g), or, as held by the Supreme Court in the case of Sainik Motor, Jodhpur Petn. No. 82 of 1959 D/- 22-3-1961 :(AIR 1961 SC 1480) (Supra) of any inter-State trade, commerce or inter-course within the meaing of Article 304(b) being affected. The duty imposed on the operator of collection of the tax from the passengers and of paying it to the Government cannot be viewed as begar or forced labour. Nor can the maintenance and keeping of accounts and registers be regarded as a restriction on the conduct of his business. It is a duty attached to the privilege of holding a permit for the running of stage carriages.
7. In the cases before us, the real grievance of the petitioners is that even though the Act itself is valid on its face, it is invalidated on account of the manner in which the respondents are administering and enforcing it. It was urged that in order to make the imposition of the tax in reality and practice a tax on passengers, it was essential first to revise under Section 43 of the Motor Vehicles Act, 1939, the maximum rate of tares in respect of stage carriages so as to include the amount of tax chargeable under section 3 of the impugned act in the fare and give to the operator the right to recover the amount of tax as extra fare, but that the respondents were refusing to revise the fare tables thus making the tax imposed by the Act effective as a tax on the operators. In the return filed on behalf of the respondents in each case, it has been stated that the tax is to be paid by the operator, that in suitable cases he may be in a position to pass off the burden on the passengers; that it is not necessary to revise the fare tables fixed under the Motor Vehicles Act, 1939, and that there is no necessity of conferring any powers on the operator for collection of the tax amount as extra-fare from the passengers, but the operators are expected to collect the tax from the passengers.
8. We must confess that the position taken by the respondents in the returns filed on their, behalf is based on a total misconception of the effect of the provisions of the Act and about the conditions necessary for the effectiveness of the Act in relation to an operator as defined in Sections 2 (3) and 4 of the Act. The 'executive' construction put by the respondents is not in accord with the provisions of the impugned Act and Section 43 of the Motor Vehicles Act, 1939. If the construction were to be acted upon by the executive uniformly and persistently, then they would be administering a valid law so as to render it invalid. Learned Additional Government Advocate, however, realised this and stated before us that instructions would be issued to all the Regional Transport Authorities for a revision of fare tables under Section 43 of the Motor Vehicles Act, 1939, so as to enable the operators to recover the tax amount from the passengers as extra-fare. The issue of instructions is no doubt a step in the right direction. But what needs to be emphasized is that unless and until the fare tables in respect of stage carriages are revised under Section 43 so as to give authority to the operator to recover from the passengers the amount of the tax payable under section 3 of the impugned act as an extra fare, the Act cannot become operative in relation to the operator concerned and till then the operator cannot be made liable for collection and payment of the tax.
9. It is obvious that an operator cannot recover from a passenger the tax amount by way of extra fare unless and until he has the requisite legal authority to do so. If he has no such authority, the passenger may well refuse to pay the tax amount and the burden of it then would fall on the operator himself. Now, under Section 48 of the Motor Vehicles Act, 1939, the fares that an operator can charge must be in accordance with the fare table approved by the Regional Transport Authority.' Such a fare table forms one of the conditions of the permit and it is not open to an operator to alter the fare table whenever he wishes and demand from the passengers any extra fare over and above the fare given in the approved fare table, (see Provincial Government C, P. and Berar v. Mohanlal Keshaolal, ILR (1944) Nag 173: (AIR 1944 Nag 89)). Under Section 43 of the Motor Vehicles Act, 1939, the State Government can issue directions to the State Transport Authority regarding the fixing of fares and freights, for stage carriages.
It is thus plain that until the fare tables in respect of the stage carriages, are revised under Section 43 of the Motor Vehicles Act so as to permit the operators to recover the amount of tax as extra fare the operators cannot legally make any such recovery. The effectiveness of the Act m relation to any operator is, therefore, dependent on a revision of fare tables. It is true that the impugned Act does not provide for revision of fare tables required: for its enforcement. But this is a matter of detail and the Act is not rendered invalid or void because of the failure of the Act to make, provisions for enforcement. An Act can be carried into effect and, enforced by reference to the provisions of other laws-having a bearing. It has been stated in Corpus Juris Secundum (vol. 82, Section 73, at p. 131) that
"A Statute imposing a tax must provide workable means of ascertaining the amount of tax to be paid. But it is not necessary to make specific provisions as to such matters concerning the enforcement of the tax as may be properly provided by reference to other laws."
The Legislature is presumed to enact a valid and effective law with full knowledge and information as to the subject-matter of the statute and as to existing law and legislation bearing on the subject. Therefore, although the impugned Act does not contain a provision saying that it will become effective on the revision of fare tables, such a condition has to be implied therein. The implication of such a. contingency is in no way contrary to the opening words of Section 3, namely, "On the commencement of this Act . . . there shall be levied " In the contest, the words "On the commencement of this Act" mean 'after' or 'following upon' and not simultaneous with' the commencement of the Act.
10. That a revision of fare table is essential before any liability under the Act can be imposed on an operator is clear also from Section 16 of the Act which makes it an of offence for an operator to fraudulently evade the payment of any tax due from him or to wilfully act in contravention of any of the provisions of the Act or the rules made thereunder. When an act is condemned as an 'offence' or as an 'evasion' or as a 'contravention' what is meant is that it is an act done in violation of a legal condition or obligation. There can be no obligation on an operator to collect or pay the tax or maintain or keep the accounts and do the various things required of him under the Act unless a legal duty is imposed on him in regard to these matters. That legal duty does not arise till the fare tables are revised and an obligation is cast on the passenger to pay the tax amount as extra fare and on the operator to so recover it. An operator is not liable to any prosecution under Section 16 unless and until on a revision of fare table the Act becomes effective as against him.
11. The view we have taken about the effectiveness of the Act in relation to individual operators in no Way runs counter to that taken in MP No. 29 of 1961 D/- 25-9-1961 (MP) (supra) about the validity of the Act. The Act is valid. It is not rendered void because of the reluctance of the respondents to revise the fate tables. It takes effect in relation to individual operators only on the revision of faro tables of his stage carriages. In the case of Mahamaya Motor Transport Co. M. P. No. 29 of 1961 D/- 25-9-1961 (MP) (Supra) the question of the effectiveness of the Act did not arise for consideration for the reason that in the return filed in that case the respondents did not take the stand that they were not obliged to revise the fare tables. While dealing with the contention that the Act altered the conditions of the permits granted to the operator under the Motor Vehicles Act, 1939, the Division Bench made the following observations.
"The contention that under Section 43 the maximum fares that could be charged had already been fixed and unless these were revised as provided in that section the Operator could not be permitted to charge a higher fare, proceeds on a misreading of the section which, as amended, permits the State Government to issue directions to the State Transport Authority from time to time regarding the fixing of fares for stage carriages etc. The Regional Transport Authority, therefore, can re-fix the faro table and so amend the pemits as to permit the operators to charge amended fares inclusive of the passenger tax, which they were not liable to collect from the passengers as agents of the State".
These observations also are to the effect that until the fare tables are revised there is no. liability on the operator to collect the tax from the passengers. The Regional Transport Authority can under instructions of the State Government no doubt revise the fare tables as and when it likes. But so long as the fare table is not revised for enabling the operator to recover the tax amount from the passengers as extra fare, no liability of any kind under the Act can be fastened upon the operator.
12. For these reasons, all these petitions are allowed and the respondents are prohibited from enforcing the provisions of the Act as against the petitioners unless and until the fare tables in respect of their stage carriages are revised under Section 43 of the Motor Vehicles Act, 1939, so as to author them to recover the tax amount payable under section 3 of the impugned act from passengers as extra fare. The petitioner in each case shall have costs. Counsel's fee in each case is fixed at Rs. 100/-. The outstanding amounts of security deposits shall the refunded to the petitioners.
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