GOVINDA BHAT, J. ( 1 ) THIS is a batch of 195 writ petitions u Art. 226, Constn. by contract carriage operators in Mysore State challenging the constitutional validity of the amendment to the Mysore Motor Vehicles Taxation Act, 1957, (Mysore act No. 35 of 1957) hereinafter referred to as 'the Act' by introducing I item No. 4a in Part A of the Schedule to the Act by the Mysore Motor vehicles Taxation (Amendment) Act 1972 (Mysore Act No. 6 of 1972) hereinafter called 'the impugned Act'. By the said amendment the tax in respect of motor vehicles which are covered by contract carriage permits has been raised from Rs. 35 to Rs. 100 per seat per quarter. The impugned act which is a short enactment contains two sections. S. 1 states the title and gives the date of commencement. S. 2 which is the material section reads thus :"2. Amendment of the Schedule In Part A of the schedule to the Mysore Motor Vehicles Taxation Act, 1957 (Mysore Act 35 of 1957): - (1) in item 4, for the words 'motor Vehicles plying for hire the words, figure and letter 'motor vehicles other than those mentioned in Hem 4a plying for hire' shall be substituted: (2) after item 4, the following item shall be inserted, namely: 4a Motor Vehicles plving 'for hire or reward used for transport of passengers in respect of which contract carriage permits have been issued under the Motor Vehicles Act, 1939 and permitted to carry more than five persons excluding the driver, for every passenger which the vehicle is permitted to carry. Rs. 100,150. " ( 2 ) THE Act was passed after the formation of tho new State of Mysore in order to consolidate and amend the law relating to the levy of tax on motor vehicles. It received the assent of the President on 30th day of november 1957. S. 3 which is the charging section levies tax on all motor vehicles suitable for use on roads, kept in the State of Mysore at the rates specified in Part A of the Schedule to the Act. Part A of the Schedule classifies motor' vehicles under several heads like, motor cycles, motor cars, goods vehicles, passenger transport vehicles etc. S. 3 which is the charging section levies tax on all motor vehicles suitable for use on roads, kept in the State of Mysore at the rates specified in Part A of the Schedule to the Act. Part A of the Schedule classifies motor' vehicles under several heads like, motor cycles, motor cars, goods vehicles, passenger transport vehicles etc. The basis of taxation in respect of goods vehicle is the laden weight of the vehicles while the tax on motor vehicles plying for hire and used for transport of passengers is the seating capacity of the vehicles. Both stage carriage and contract carriage vehicles came under item No. 4 of Part A of the Schedule before the enactment of the impugned Act. Sec. 4 of the Act provides that the tax levied under S. 3 shall be paid in advance for a quarter, half year or year at the choice of the registered owner or person having possession or control of the motor vehicle. S. 5 provides that when any person pays the amount of tax in respect of a motor vehicle, the licensing authority shall grant to such 'person a tax licence in the prescribed form. ( 3 ) S. 7 provides for refund of tax on proof that the vehicle in respect of which tax has been paid has not been used during the whole of the period or a continuous part thereof, not being less than one calendar month. Sec. 17 provides that all taxes collected under the Act shall be credited to such head in the State Accounts as the State Government may by order specify. S. 19 prohibits the Local Authorities from levying tax or tolls on motor vehicles. The Act has been enacted by the' State Legislature in exercise of the legislative powers conferred under Entry No. 57 of List II of Schedule VII of the Constitution. The said entry reads thus : 57. Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of entry 35 of list III. " entry 35 of List III reads thus :35. Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied. It is relevant to state that no legislation under Entry 35 has been enacted. " entry 35 of List III reads thus :35. Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied. It is relevant to state that no legislation under Entry 35 has been enacted. The nature of the tax levied under the Rajasthan Motor Vehicles taxation Act, 1951 came up for consideration before the Supreme Court in Automobile Transport Ltd. v. State of Rajasthan AIR. 1962 SC. 1406. In the said case, the tax levied on motor vehicles was challenged by transport operators as violative of the freedom of trade, commerce and intercourse guaranteed under Art. 301 of the Constitution. It was held by the Supreme Court that the tax levied was of a compensatory and regulatory character and that such tax was levied for use of the roads and as such it did not hinder or impede the freedom of trade guaranteed under Art. 301. As to the nature of the tax on motor vehicles, this Court in Narayana Reddy v. Commissioner for Transport in Mysore 1971 (2) Mys. L. J. 319 @ p. 321. observed thus : motor Vehicles Taxation Acts in all the States of the Indian union follow a uniform pattern. Entry 57 of List II of Schedule VII of the Constitution is the Legislative entry conferring power on the states to levy the tax. As observed by the Supreme Court in Automobile transport Ltd. v. State of Rajasthan ( AIR 1962 SC 1406 ), motor vehicle tax is a compensatory tax levied for the use of the roads. It is not a tax on ownership or possession of motor vehicles. The object of the Act is achieved by charging to tax all motor vehicles suitable for use on roads, kept in the State, the registered owner or person having possession or control being held liable to pay the tax in advance and then providing for grant of refund for non-user subject to prescribed conditions. "mr. M. K. Nambiar, learned Counsel" for the petitioners challenged the impugned Act on three grounds: (1) That stage carriage and contract carriages belong to the same class and the sub-classification of item No. 4 of Part A of the Schedule to the Act as item Nos. "mr. M. K. Nambiar, learned Counsel" for the petitioners challenged the impugned Act on three grounds: (1) That stage carriage and contract carriages belong to the same class and the sub-classification of item No. 4 of Part A of the Schedule to the Act as item Nos. 4 and 4a arbitrarily singling out contract carriages for an oppressive rate of higher taxation is violative of the fundamental rights guaranteed under Art. 14 of the constitution, (2) That the impugned levy is not compensatory in character, both because the tax levied under the Act is far in excess of the expenses required to be incurred for the maintenance and making of roads, bridges and providing other amenities for motor vehicles and also because the enhancement of the tax has been made not in respect of all motor vehicles that use the roads, but only on a small class of motor vehicles, viz. , contract carriages, the effect of which is to directly impede or hamper the freedom of trade and commerce guaranteed by Art. 301 of the Constitution and (3) That the impugned Act not being compensatory in character, it is outside the legislative competence of the State Legislature under entry 57 of List II of the 7th Schedule. ( 4 ) IN the main affidavit filed in support of writ petition No. 2351 of 1972 challenge was also made to the impugned Act on the ground that it violatod the fundamental rights guaranteed under Art. l9 (l) (g) of the Contitution, but, the said ground was rightly not pressed at the hearing, as the provisions of Art. 19 of the Constitution stood suspended during the subsistence of proclamation of emergency, the impugned Act having been passed while the proclamation of emergency was in operation. The stand taken on behalf of the State by Shri Chandrakantharaj urs, learned Government Advocate, is that the tax levied under the Act, as amended by the impugned Act, is compensatory tax levied on all motor vehicles for use of the roads in the State. ( 5 ) IT is now well established by the decisions of the Supreme Court that art. 14 of the Constitution forbids class legislation but does not forbid classification Permissible classification must satisfy two conditions viz. ( 5 ) IT is now well established by the decisions of the Supreme Court that art. 14 of the Constitution forbids class legislation but does not forbid classification Permissible classification must satisfy two conditions viz. , (1) that it must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left ou,t of the group and (2) the differentia must have a rational relation to the object sought to be achieved by the statute in question. ( 6 ) THE differentia and the object are different elements and it follows that the object by itself cannot be the basis of the classification. Vide Ram Krishna Dalmia v. Justice Tendolkar AIR. 1958 SC. 538. . It is also well established that tax laws are not immune from challenge on the ground of violation of Art. 14 of the Constitution and that tax laws shall not be arbitrary and oppressive. Vide Khandige Sham Bhat v. Agricultural income Tax Officer AIR. 1963 SC. 591. . In the light of the above principles we have to consider whether the impugned Act is violative of Art. 14. ( 7 ) THE case of the petitioners is that although the ostensible purpose of the impugned Act is the raising of additional revenue for the State, the motive for the legisation is to eliminate the competition from the contract carriage operators to the Mysore State Road Transport Corporation, a State undertaking operating its stage carriage services all over the state on most of the notified routes. It was submitted that before the impugned Act was enacted the State Government had amended Rule 111 of the Mysore Motor Vehicles Rules, 1963 by Notification dt. 4th of July 1972, which Rule as amended, laid down conditions difficult of performance by the stage Carriage operators and that the said operators in Writ Petition no. 1891 of 1972 and connected writ petitions have challenged the said Rule and that this Court has admitted the writ petitions and stayed the operation of the impugned Rule and it is thereafter that the impugned act was passed levying tax at prohibitive rates. 1891 of 1972 and connected writ petitions have challenged the said Rule and that this Court has admitted the writ petitions and stayed the operation of the impugned Rule and it is thereafter that the impugned act was passed levying tax at prohibitive rates. ( 8 ) IT was argued by the learned Counsel for the petitioners that there is no intelligible differentia between stage carriages and contract carriages so far as the object of the Act is concerned and therefore the selection of contract carriages alone for purposes of enhanced levy is violative of article 14. Sec. 2 (3) of the Motor Vehicles Act, 1939 defines 'contract carriage' to mean a motor vehicle which carries passengers for hire or reward under a Contract expressed or implied for the use of the vehicle as a whole at or for a fixed or agreed rate or sum on a time basis or from one point to another without stopping to pick up passengers enroute. Sec. 51 of the Motor vehicles Act provides for grant of contract carriage permits. The permit may be issued with reference to a specified area or a specified route or routes. S. 2 (29) of the Motor Vehicles Act defines 'stage carriage' to mean a motor vehicle which carries passengers for hire or reward ait separate fares paid by or for individual passengers either for the whole journey or for stages of the journey. Ss. 57 and 58 of the same Act provide for grant of stage carriage permits. Such permits are issued with reference to definite routes fixing the time of operation. Briefly stated, a contract carriage is a motor vehicle which transports passengers on the whole vehicle being hired on a time basis or on the basis of from one point to another. In the case of stage carriages the whole vehicle is not hired but each passenger enters into a contract for his transport at separate fare which is fixed. ( 9 ) IT was argued by Sri Chandrakantharaj Urs, learned High Court government Advocaate that there is difference between contract carriages and stage carriages in regard to their field of operation, the nature of the contract, the timings, and the fares for carriage of passengers. ( 9 ) IT was argued by Sri Chandrakantharaj Urs, learned High Court government Advocaate that there is difference between contract carriages and stage carriages in regard to their field of operation, the nature of the contract, the timings, and the fares for carriage of passengers. He submitted that while the fares chargeable by !the stage carriages are subject to a ceiling fixed by the State Government, there is no such ceiling in the case of contract carriages. Therefore, he argued that contract carriages stand as a distinct class by themselve and if 'the legislature in its abundant wisdom classify them as a separate class for purposes of taxation, there is no violation of Article 14. ( 10 ) WHILE the power to classify undoubtedly exists in the Legislature, the question is whether the classification made under the impugned Act is proper. The rules governing the reasonableness of classification in taxation laws have been started by Colley in his treatise on' the Law of Taxation, vol. I (4th Edn.) at pages 712-717. Rules 1 and 9 stated therein are relevant for our purpose. They are : a particular classification is proper where based on a reason and not purely arbitrary. There must be a reason for the classification as distinguished from mere accident, whim, caprice or vindictiveness. Clear and hostile discriminations' cannot be made under the guise of classification. A discrimination is not arbitrary, of course, where based on sound reasons of public policy. On the other hand, while there must be a reason for the classification, the reason need not be a good one, and it is immaterial that the statute is unjust. The test is not wisdom but good faith in the classification. ( 11 ) CLASSIFICATION is allowed in order to avoid of correct inequalities, never to create them. Classification should be according to some reasonable, practical rule, drawn from experience, which will prevent a gross inequality in the burdens of taxation. Limitations imposed by Art. 14 on the'state is clear. It must not be exercised in clear and hostile discrimination between particular persons and classes. The petitioners have furnished at pages 71-72 of their paper book a statement showing the number of motor vehicles registered and kept in the State of Mysore for use as on 31-3-1971 and 31-3-1972. The correctness of the said statement has not been disputed by the learned Government advocate Sri Urs. The petitioners have furnished at pages 71-72 of their paper book a statement showing the number of motor vehicles registered and kept in the State of Mysore for use as on 31-3-1971 and 31-3-1972. The correctness of the said statement has not been disputed by the learned Government advocate Sri Urs. According to the said statement, the total number of motor vehicles registered and kept for use in Mysore State as on 31-3-1972 was 1,38,139. Their particulars are as follows : ( 12 ) IT is seen from the above statement that out of the total number of 1,38,139 motor vehicles, the number of contract carriages is only 693 which include contract carriages owned by public undertakings, educational institutions and contract carriages operated under permits issued under sub-sec. (6) of s. 63 of the Motor Vehicles Act. The total number of stage carriages is 5,985. Under the Act stage carriages as well as contract carriages were classed as one class under item No. 4 and were subjected to the same rate of tax. They were also subject to the same rate of tax under the Mysore motor Vehicles Taxation on Passengers and Goods Act, 1961, under which the levy on a vehicle of 45 seating capacity is Rs. 5,300 per annum. The tax receipts from motor vehicles under the Act for the financial year 1972-73 was Rs. 11. 10 crores according to the statement furnished by the petitioners which has been accepted by the learned Government advocate, The tax receipts under the Mysore Motor Vehicles Taxation on passengers and Goods Act for the same year was Rs. 3. 20 erodes. The anticipated revenue in a full year by virtue of the impugned Act is only about Rs. 45 lakhs, which is about 4 percent of the total revenue under the act. If the impugned Act had imposed a general increase of less than five per cent on all motor vehicles, the State would have realised an additional revenue of about Rs. 50 lakhs. By singling out the contract carriages alone for the purpose of the additional impost, each contract carriage operated by a private operator is called to pay as much as three times the tax paid by a stage carriage vehicle. Even as between the contract carriage operators all contract carriages have not been subjected to the same burden. 50 lakhs. By singling out the contract carriages alone for the purpose of the additional impost, each contract carriage operated by a private operator is called to pay as much as three times the tax paid by a stage carriage vehicle. Even as between the contract carriage operators all contract carriages have not been subjected to the same burden. Although under the impugned Act all contract carriages are charged tax at the rate of Rs. 100 per seat per quarter, the State Government in exercise of the powers vested under sub-sec. (1) of S. 16 of the Act has issued three notifications dt. 13-10-1972, by which the tax payable by public undertaking companies like Hindusthan Aeronautics Ltd. , Hindusthan Machine tools, Indian Telephone Industries, Bharath Electronics Ltd. , etc. have been reduced to one half of the tax payable under the Act with effect from 1st of July 1972. Similarly the tax payable in respect of contract carriages run by the Educational Institutions has been reduced to one half of the tax. lax payable by contract carriages run under special permits issued under sub-sec. (6) of S. 63 of the Motor Vehicles Act has been reduced to Rs. 70 per seat per quarter. The effect of the impugned Act read with the Notifications is that contract carriages operated by private operators alone are subjected to the levy as charged under the impugned Act. ( 13 ) THE difference between a contract carriage and a stage carriage is that in the case of the former the whole vehicle is taken on contract basis while in the case of the latter each passenger pays the fare fixed. The points of difference between the two types of carriages relied on by the learned government Advocate, in our opinion, are in no way relevant and have no nexus to the object of the Act viz. , to levy compensatory tax for use of roads. Under the scheme of the Act, the tax is levied on the basis of seating capacity of the vehicles in the case of passenger transport vehicles and on laden weight of the vehicles in the case of goods transport vehicles. Before the impugned Act was passed, all passenger transport vehicles stage carriages as well as contract carriages were classed as one class under item No. 4 of Part A of the Scedule to the Act. Before the impugned Act was passed, all passenger transport vehicles stage carriages as well as contract carriages were classed as one class under item No. 4 of Part A of the Scedule to the Act. That was the case even under the Mysore Motor Vehicles Taxation and Tolls Act, 1951 which was repealed by the Act. It was for the first time, by the impugned Act, that contract carriages were singled out as a separate class for purpose of imposing as much as three times the tax on stage carriages. When the tax is a compensatory tax for the use of the roads, the classification of the vehicles for purposes of charging tax must have relation to the object of the Act, viz. the levy of compensatory tax for the use of the roads. The state has not produced any reliable material before us to show nor is it pleaded that the contract carriage vehicles make more use of the roads than the stage carriage vehicles or that the former damage the roads more than the latter. Roads and bridges in the State arc used by all motor vehicles. If there has been an increase in the cost of making and maintaining roads and bridges the same should be charged on all motor vehicles proportionate to the increase. By singling out contract carriage vehicles alone and requiring them to bear the entire burden of increase in cost, if any, the owners of contract carriages have been subjected to hostile discrimination in contravention of Article 14 of the Constitution. If what is sought to be imposed is tax of a compensatory character, the same has to be levied on a rational basis on owners of all the motor- vehicles who use the roads and bridges and other facilities provided by this State and not on a few users of those facilities only. In the instan. 1 case we are of the opinion, that the impost is unconscionably high as to make it oppressive. It appears to us from the facts and circumstances of the case that the impugned Act has made a clear and hostile discrimination against contract carriage operators and the classificaton between stage carriages and contract carriages has resulted in gross inequalities in the burden of the Motor Vehicle Tax, therefore, the impugned Act is unconstitutional being violative of Art. 14 of the Constitution. ( 14 ) OUR view finds support from the following passage in Cooley's treatise on Law of Taxation, Vol. 1 (4th Edn.), at pages 786 and 787 : 365. Vehicles mav be made a separate class for a license fee, or tax. Furthermore, different kinds of vehicles may be separately classified for the purpose of a license fee or tax or an occupation tax. For instance motor vehicles may be separately classified and subclassified. Vehicle taxes mav be graduated according to horse ' power, or seating capacity and a higher license tax may be imposed on motor vehicles used for hire than on other motor vehicles. Horsedrawn vehicles may he sub-classified acrording to whether one or two horses are used, but a tax for a four-horse wagon nearly three times as much as for a three-horse wagon has been held an unjust discrimination, as has a fee for 100 for express wagons used in delivering express matter, and of only 12 for other light vehicles. A tax of so much per thousand feet for the use of roads in hauling lumber over them is not discriminatory because no tax is exacted on other conveyances whch do less damage and for which the legislative judgment is that the regular road tax was a sufficient return. On the other hand, a. vehicle tax for use of streets is bad as discriminator 11 where larger for vehicle used to carry oil than for other vehicles. ( 15 ) SINCE we have upheld the first ground urged by the learned Counsel for the petitioners and the petitioners are entitled to succeed on that ground alone it is unnecessary to deal with the cither two grounds viz. that the impugned Act 5s violative of Art. 301 of the Constitution and that the same is beyond the competence of the Legislature of the State. In the result, for the reasons stated above, we allow these writ petitions, strike down the Mysore Motor Vehicles Taxation (Amendment) Act, 1972 (Mysore Act No. VI of 1972) as unconstitutional. ( 16 ) DURING the pendency of the above writ petitions we granted stay of the levy of higher tax under the impugned Act for the quarters ended 30-9-1972 and 31-3-1972. We did not grant stay for the quarter ended 31-12-1972. Such of the petitioners as have paid the tax under the impugned act are entitled to refund of the same. We did not grant stay for the quarter ended 31-12-1972. Such of the petitioners as have paid the tax under the impugned act are entitled to refund of the same. We make no order as to costs. --- *** --- .