Judgment

D. A. DESAL J.:- Next only to liquor licencees but almost comparable with them are the transport operators who have flooded this Court complaining of some imaginary or untenable grievances, the sole purpose being to snatch some interim relief under one or the other pretext.

2. Petitioners and appellants in this group of appeals and special leave petitions are either operators of omnibuses, mini buses or stage carriages in the State of Karnataka. They have a grievance against the enhancement of tax on their vehicles levied under the Karnataka Taxation and Certain Other Laws (Amendment) Act, 1979 (Taxation Amendment Act for short). They filed writ petitions in the High Court of Karnataka challenging the Taxation Amendment Act on diverse grounds but the central point of attack was that the collection of the tax since prior to its impugned enhancement was sufficient to meet the construction and maintenance of roads and bridges in the State and hence the tax imposed at the enhanced rate under the Taxation Amendment Act, 1979 is violative of freedom of trade, commerce and intercourse guaranteed by Article 301 of the Constitution and the enhanced tax is not shown to be compensatory in character and hence not saved. The second contention was that the impugned Taxation Amendment Act was brought into force with effect from March 31, 1979, yet the petitioners were made liable to pay tax from March 1, 1979 and this limited retrospectivity given to the impugned legislation is impermissible and must be struck down.

3. The Division Bench of the High Court while partly allowing all the petitions held that the enhanced tax under the impugned legislation was compensatory in character and was not violative of Art, 301 of the Constitution. The second, contention of the petitioners found favour with the High Court and it was held that as the impugned Act came into force from March 31, 1979, the petitioners did not incur any liability to pay enhanced tax under Sec. 4 of the Act from March 1, 1979 and if any such demand is made the same is without the authority of law and the authority under the taxing statute was restrained from demanding such enhanced tax under the Taxation Amendment Act for the period from March 1, 1979 to March 31, 1979 and to this limited extent, the rule was made absolute. The High Court declined to grant certificate under Art. 134 of the Constitution and hence these appeals by special leave.

4. Mr. Shanti Bhusan who led on behalf of the appellants canvassed three contentions in support of these appeals. They are: (i) the total tax that would be realised at the enhanced rate levied under Taxation Amendment Act, would be far in excess of the requirement for smooth and unhampered transport and therefore the enhanced tax has ceased to be compensatory in character and is accordingly violative of Article 301 of the Constitution and cannot be sustained; (d) if the tax at the enhanced rate is to be treated as compensatory, the burden of enhanced tax must be equitably distributed on owners of different classes of transport vehicles so that the liability to pay enhanced tax has a nexus to the facility enjoyed by that class of vehicle on which higher tax is levied and should not be disproportionate to the quantum of facility enjoyed by the owners of different classes of transport vehicles; and (iii) in the case of passenger vehicles, the fare structure is subject to stastatutory regulation under Motor Vehicles Act 1939 and therefore, there must be direct nexus between the tax structure and the fare structure, otherwise, the passenger transport business would become uneconomic. As the fare structure has not been proportionately raised keeping in view the rise in tax and other operational costs from 1966 to 1979, the unilateral enhancement of tax without proportionate increase in fare is arbitrary and therefore, violative of Art. 14 and would impose an unreasonable restriction on the fundamental freedom to carry on business guarantee