Kerala High Court
K.R.Sureshkumar vs State Of Kerala on 21 December, 2016
Author: Antony Dominic
Bench: Antony Dominic, Dama Seshadri Naidu
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE ANTONY DOMINIC
&
THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU
FRIDAY, THE 27TH DAY OF OCTOBER 2017/5TH KARTHIKA, 1939
WA.No.476 of 2017 IN WP(C)7490/2014
-------------------------------------
AGAINST THE JUDGMENT IN WP(C)7490/2014 of HIGH COURT OF KERALA DATED
21-12-2016
APPELLANT/PETITIONER:
K.R.SURESHKUMAR
PROPRIETOR,M/S KALLADA TOURS & TRAVELS,
S/O.LATE RAMAKRISHNAN,NO.14,HOSUR MAIN ROAD,
MADIWALA,BANGALORE-560 068.
BY ADVS.SRI.G.HARIHARAN
SRI.PRAVEEN.H.
SMT.K.S.SMITHA
RESPONDENTS/RESPONDENTS:
1. STATE OF KERALA
REPRESENTED BY THE PRINCIPAL SECRETARY TO GOVERNMENT,
FINANCE DEPARTMENT, NORTH BLOCK,
SERCRETARIAT,THIRUVANANTHAPURAM-695001.
2. THE TRANSPORT COMMISSIONER,
TRANS TOWERS,VAZHUTHACAUD,THIRUVANANTHAPURAM-695014.
3. THE TAXATION OFFICER,(MOTOR VEHICLE INSPECTOR),
MOTOR VEHICLE CHECK POST,AMARAVILA,
THIRUVANANTHAPURAM-695122.
4. THE TAXATION OFFICER,(MOTOR VEHICLE INSPECTOR),
MOTOR VEHICLE CHECK POST,GOPALAPURAM CHECK POST,
PALAKKAD DISTRICT,PIN-678101.
5. THE TAXATION OFFICER,(MOTOR VEHICLE INSPECTOR),
MOTOR VEHICLE CHECK POST,WALAYAR,PALAKKAD-678624.
6. THE TAXATION OFFICER,(MOTOR VEHICLE INSPECTOR),
MOTOR VEHICLE CHECK POST,MUTHANGA,(VIA)
SULTHANBATHERY,WAYANAD DISTRICT-673592.
R BY SPL. GOVERNMENT PLEADER SRI.P.RAVEENDRANATH
SENIOR GOVT. PLEADER SRI.MUHAMMED RAFIQ
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 27-10-2017,
ALONG WITH WA. 528/2017, WA. 555/2017, WA. 567/2017, WA. 574/2017,
WA. 575/2017, WA. 576/2017, WA. 585/2017, WPC. 12476/2017, WPC.
12487/2017, WPC. 17563/2017, WPC. 17724/2017, THE COURT ON THE SAME
DAY DELIVERED THE FOLLOWING:
ANTONY DOMINIC, J. & DAMA SESHADRI NAIDU, J.
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W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 &
W.P.(C)Nos.12476,12487, 17563, 17724 of 2017
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Dated this the 27th day of October,2017
JUDGMENT
Antony Dominic, J.
The issue raised in these writ appeals and the writ petitions pertained to the constitutional validity of the amendment made to the Schedule to the Kerala Motor Vehicle Taxation Act, 1976 whereby the tax payable by certain categories of contract carriages registered outside the State were increased. Some of the writ petitions were heard and dismissed. It is these judgments, which are challenged in the appeals. Subsequently, also writ petitions were filed and having regard to the pendency of the appeals, the writ petitions were referred to be heard along with the appeals. It is, accordingly, that these writ appeals and the writ petitions are listed before us.
2. We heard the counsel for the appellants and the learned Government Pleader appearing for the State. W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 2 :
3. Briefly stated, the facts of the case are that the appellants and petitioners are operators of contract carriages registered outside the State. Prior to the introduction of Kerala Finance Act, 2014 the tax payable by the petitioners as per the Schedule to the Kerala Motor Vehicles Taxation Act was that for buses with ordinary seats, Rs.1,540/- per seat per quarter and buses with push back seats, Rs.2,000/- per seat per quarter and for buses with sleeper berths, Rs.3,000/- per seat per quarter. When the Kerala Finance Act 2014 was introduced, these rates were enhanced from Rs.1,540/- to Rs.4,000/- per seat per quarter, Rs.2,000/- to Rs.6,000/- per seat per quarter and from Rs.3,000/- to Rs.7,000/- seat per quarter respectively, for the contract carriages which are registered outside the State. At the same time, the rates were not altered in respect of the contract carriages which are registered in the State. It was this increased levy, which was challenged by the appellants/petitioners contending mainly that the levy was W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 3 : discriminatory and hit by Articles 14 and 301 of the Constitution of India. The learned Single Judge having negatived the plea dismissed the writ petitions.
4. Before us, the learned counsel appearing for the appellants/writ petitioners reiterated the aforesaid submissions and in order to substantiate his contention that the enhanced levy only on the vehicles which are registered outside the State is unconstitutional, relied on the Apex Court judgments in Weston Electronics and another v. State of Gujarat and another [AIR 1988 SC 2038], M/S Weston Electronics and another v. State of Maharashtra and another [AIR 1989 SC 621] and Aashirwad Films v. Union of India and others [2007 (6) SCC 624]. Yet another contention that was pressed into service was that the increased levy is in violation of the proviso to Section 3(2) of the Kerala Motor Vehicles Taxation Act itself. W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 4 :
5. These contentions were disputed by the learned Special Government Pleader and the learned Senior Government Pleader. They also brought to our notice the judgment of the Apex Court in Jindal Stainless and another v. State of Haryana and others [AIR 2016 SC 5617].
6. We have considered the submissions made. Insofar as the first question with reference to the Article 301 of the Constitution of India and Article 14 are concerned, according to us, these contentions should be answered against the appellants/petitioners in the light of the judgment of the nine member bench in Jindal Stainless and another v. State of Haryana and others [AIR 2016 SC 5617], where it was held thus:
"129. Re. Question No.4 This question touching the constitutional validity of the impugned State enactments can be split into two parts. The first part which can be briefly dealt with at the outset is whether the constitutional validity of the impugned legislations has to be tested by reference to both Articles 304(a) and 304(b) as contended by learned counsel for the W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 5 : assessees or only by reference to Article 304(a) as argued by the States. In the light of what we have said while dealing with question No.1 we have no hesitation in holding that Article 304(b) does not deal with taxes as restrictions. At the risk of repetition, we may say that restrictions referred to in Article 304(b) are non- fiscal in nature. Constitutional validity of any taxing statute has, therefore, to be tested only on the anvil of Article 304(a) and if the law is found to be non- discriminatory, it can be declared to be constitutionally valid without the legislation having to go through the test or the process envisaged by Article 304(b). Should, however, the statute fail the test of non-discrimination under Article 304(a) it must be struck down for the same cannot be sustained even if it had gone through the process stipulated by Article 304(b). That is because what is constitutionally impermissible in terms of Article 304(a) cannot be validated and sanctioned through the medium of Article 304(b). Suffice it to say that a fiscal statute shall be open to challenge only under Article 304(a) of the Constitution without being subjected to the test of Article 304(b) either in terms of the existence of public interest or reasonableness of the levy.
130. That brings us to the second part of question No.4 viz. whether the impugned State enactments violate Article 304(a) of the Constitution. That aspect will necessarily involve a careful reading of the impugned enactments and a proper appreciation of the scheme underlying the same. While we have at some length heard learned counsel for the parties on that W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 6 : aspect, we do not propose to deal with all the dimensions of that challenge based on Article 304(a) except two of them that were argued at great length by learned counsel for the parties. The first of these two dimensions touches upon the State's power to promote industrial development by granting incentives including those in the nature of exemptions or reduced rates of levy on goods locally produced or manufactured. On behalf of the assesses it was contended that grant of exemptions and incentives in favour of locally manufactured/produced goods is also one form of insidious discrimination which was impermissible in terms of article 304(a) for such exemptions and incentives had the effect of putting goods from another State at a disadvantage. Relying upon a decision of two-Judge Bench of this Court in Shree Mahavir Oil Mills and Anr. v. State of Jammu and Kashmir and Ors. (1996) 2 SCC 39 it was argued that exemptions in favour of locally produced goods from payment of taxes was constitutionally impermissible and offensive to article 304(a). That was a case where the State Government had totally exempted goods manufactured by small scale industries within the State from payment of sales tax even when the sales tax payable by other industries including manufacturers of goods in adjoining States was in the range of 8%. This exemption was questioned by manufacturers of edible oils from other States on the ground that the same was discriminatory and violative of Articles 301 and 304 of the Constitution.
W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 7 :
131. This Court held that the exemption given to manufacturers of edible oil was total and unconditional, while producers of edible oil from industries in adjoining states had to pay sales tax @ 8%. Grant of exemption to local oil producing units thereby put the former at a disadvantage. Having said that, the Court exercised its powers under Article 142 of the Constitution and struck down the exemption by moulding the reliefs to suit the exigencies of the situation. The Court no doubt noticed a three-Judge Bench decision in Video Electronics v. State of Punjab (1990) 3 SCC 87 in which notifications issued by the States of U.P and Punjab providing for exemptions to new units established in certain areas for a prescribed period of 3 to 7 years were assailed as discriminatory.
The challenge to the exemption was in that case also based on the alleged violation of Articles 301 and 304. This Court however upheld the notifications in question on the ground that the same related to a specific class of industrial units and the benefit under the same was admissible for a limited period of time only. The Court observed that if an overwhelmingly large number of local manufacturers were subject to sales tax, it could not be said that the local manufactures were favored as a class against outsiders.
Adverting to the decision in Video Electronics (supra) this Court in Mahavir (supra) held the same to be distinguishable on the ground that the Punjab and U.P notifications were qualitatively different from the one issued by the Government of Jammu and Kashmir in as W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 8 : much as while the former benefitted only specified units and limited the benefit to a specified period, the latter was not subject to any such limitations. This declared the Court resulted in discrimination vis-a-vis. outside goods. What is important is that in Video Electronics (supra) this Court recognized the difference between differentiation and discrimination and held that every differentiation is not discrimination. This Court noted that the word discrimination was not used in Article 14 as it has been used in Article 16, Article 303 and Article 304 (a). The use of the word in 304 (a) observed this Court involved an element of "intentional and unfavorable bias. So long as there was no such bias evident from the measure adopted by the state, mere grant of exemption or incentives aimed at supporting local industries in their growth, development and progress did not constitute discrimination.
132. We respectfully agree with the line of reasoning adopted in Video Electronics (supra). The expression "discrimination has not been defined in the Constitution though the same has fallen for interpretation of this Court on several occasions. The earliest of these decisions was rendered in Kathi Raning Rawat v. The State of Saurashtra AIR 1952 SC 123 , where a seven-Judge Bench of this Court held that all legislative differentiation is not necessarily discriminatory. Relying upon the meaning of the expression in Oxford Dictionary, Patanjali Sastri, CJ (as His Lordship then was) explained :
W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 9 : "7. All legislative differentiation is not necessarily discriminatory. In fact, the word "discrimination does not occur in Article 14. The expression "discriminate against is used in Article 15(1) and Article 16(2), and it means, according to the Oxford Dictionary, "to make an adverse distinction with regard to; to distinguish unfavourably from others. Discrimination thus involves an element of unfavourable bias and it is in that sense that the expression has to be understood in this context. If such bias is disclosed and is based on any of the grounds mentioned in Articles 15 and 16, it may well be that the statute will, without more, incur condemnation as violating a specific constitutional prohibition unless it is saved by one or other of the provisos to those articles. But the position under Article 14 is different. Equal protection claims under that article are examined with the presumption that the State action is reasonable and justified. This presumption of constitutionality stems from the wide power of classification which the legislature must, of necessity, possess in making laws operating differently as regards different groups of persons in order to give effect to its policies. .. ..
133. Fazl Ali J. in his concurring judgment explained the concept in the following words:
"19. I think that a distinction should be drawn between "discrimination without reason and "discrimination with reason. The whole doctrine of classification is based on this distinction and on the well-known fact that the circumstances which govern one set of W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 10 : persons or objects may not necessarily be the same as those governing another set of persons or objects, so that the question of unequal treatment does not really arise as between persons governed by different conditions and different sets of circumstances. The main objection to the West Bengal Act was that it permitted discrimination "without reason or without any rational basis.
Any challenge to a fiscal enactment on the touchstone of Article 304(a) must in our opinion be tested by the same standard as in Kathi's case (supra). The Court ought to examine whether the differentiation made is intended or inspired by an element of unfavourable bias in favour of the goods produced or manufactured in the State as against those imported from outside. If the answer be in the affirmative, the differentiation would fall foul of Article 304(a) and may tantamount to discrimination. Conversely, if the Court were to find that there is no such element of intentional bias favouring the locally produced goods as against those from outside, it may have to go further and see whether the differentiation would be supported by valid reasons. In the words of Fazl Ali, J. discrimination without reason would be unconstitutional whereas discrimination with reason may be legally acceptable. In Video Electronic's case, this Court noted that the differentiation made was supported by reasons. This Court held that if economic unity of India is one of the Constitutional aspirations and if attaining and maintaining such unity is a Constitutional goal, such unity and objectives can be achieved only if all parts of W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 11 : the Country develop equally. There is, if we may say so, with respect considerable merit in that line of reasoning. A State which is economically and industrially backward on account of several factors must have the opportunity and the freedom to pursue and achieve development in a measure equal to other and more fortunate regions of the country which have for historical reasons, developed faster and thereby acquired an edge over its less fortunate country cousins. Economic unity from the point of view of such underdeveloped or developing states will be an illusion if they do not have the opportunity or the legal entitlement to promote industries within their respective territories by granting incentives and exemptions necessary for such growth and development. The argument that power to grant exemption cannot be used by the State even in case where such exemptions are manifestly intended to promote industrial growth or promoting industrial activity has not appealed to us. The power to grant exemption is a part of the sovereign power to levy taxes which cannot be taken away from the States that are otherwise competent to impose taxes and duties. The conceptual foundation on which such exemptions and incentives have been held permissible and upheld by this Court in Video's case is, in our opinion, juristically sound and legally unexceptionable. Video Electronics, therefore, correctly states the legal position as regards the approach to be adopted by the Courts while examining the validity of levies. So long as the differentiation made by the States is not intended W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 12 : to create an unfavourable bias and so long as the differentiation is intended to benefit a distinct class of industries and the life of the benefit is limited in terms of period, the benefit must be held to flow from a legitimate desire to promote industries within its territory. Grant of exemptions and incentives in such cases must be deemed to have been inspired by considerations which in the larger context help achieve the Constitutional goal of economic unity."
7. Insofar as these cases are concerned, the pleadings show that the objects sought to be achieved by the State by the amendment was to provide a concession to the operators with vehicles registered in the State to make them competitive to the operators having vehicles registered outside the State. Therefore, this object that was sought to be achieved by the State shows that the differentiation was not intended to make an unfavourable bias and was intended to benefit a specified class of operators. Secondly, it is also the accepted position that the levy as increased by the Finance Act, 2014 was reduced with the introduction of the Kerala Finance Act 2016. This also shows that the benefit of lesser W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 13 : tax levied on the vehicles registered in the State of Kerala was limited in terms of period. Therefore, the tests that are indicated by the Apex Court in paragraph 133 of the judgment are also satisfied in this case.
8. Then, what remains is the other contention of the learned counsel that the levy in question is violative of the proviso to Section 3(2) of the Motor Vehicles Taxation Act itself. Section 3 of the Act provides for levy of Motor Vehicles Tax. Section 3(2) empowers the Government to increase the rate of tax specified in the Schedule from time to time by notification. The proviso to this Section states that such increase shall not in the aggregate exceed 50% of such rate.
Section 3(2) and the proviso read thus:
"Section 3(2) The Government may, from time to time, by notification in the Gazette, increase the rate of tax specified in the Schedule:
Provided that such increase shall not in the aggregate exceed fifty percent of such rate."
W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 14 :
9. According to the learned counsel, even by a legislative amendment, the increase shall not in the aggregate exceed 50% of the rate fixed and it was argued that the levy in question exceeded the 50% ceiling imposed in the proviso.
10. However, we are not in a position to accept this contention for the reason that Section 3(2) authorises the Government to increase the rates specified in the Schedule by issuing a notification. In other words, such increase can be by a process of subordinate legislation. When rates fixed in the Schedule are increased by subordinate legislation on the issuance of a notification, the proviso comes into operation and the increase shall not in the aggregate exceed 50% of the rate already issued. This limitation in the increase as provided in the proviso cannot apply when the legislature itself amends the Schedule by an enactment. Therefore, when in this case, the Schedule was W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 15 : amended by the Kerala Finance Act, 2014 this proviso could not have been of any relevance.
11. Learned counsel for the petitioners relied on the judgment of the Apex Court in J.Srinivasa Rao v. Govt.of A.P. and another [2006 (12) SCC 607] to drive home to his point that this proviso applied even to the amendment of the Act. However, reading of the judgment shows that the Motor Vehicle Tax in the State of Andra Pradesh was revised by a notification and it was the validity of that notification, which was considered by the Supreme Court. It was in that context, the Supreme Court said that a similar proviso in the relevant enactment restricted the power of the Government to increase the rate of tax.
12. In that view of the matter, we do not think that the judgment would be of any assistance to the appellants.
13. Having regard to the pendency of these writ petitions and the interim orders that were passed and the huge liability that is W.A.Nos.476, 528, 555, 567, 574, 575, 576, 585 of 2017 & W.P.(C)Nos.12476, 12487, 17563, 17724 of 2017 : 16 : now fastened on the appellants and petitioners, it is ordered that the petitioners will be permitted to pay the arrears due in three equal monthly instalments. The first instalment shall be paid on or before 30th November, 2017 and the subsequent instalments shall be paid on or before 30th of December, 2017 and 30th January, 2018 without default. It is made clear that in the event any default is committed, it would be open to the State to take coercive action for realisation of the dues.
For the aforesaid reasons, we do not find any merit in these writ appeals and the writ petitions. Appeals and the writ petitions are accordingly dismissed. hold sd/-
ANTONY DOMINIC JUDGE sd/-
DAMA SESHADRI NAIDU JUDGE jes