Supreme Court Upholds 1991 Act, Deems Compensatory Tax Constitutional

The Supreme Court allowed the appeals, quashing the High Court's judgment that declared the 1991 Act ultra vires. The Court held that the 1976 Act was unconstitutional, repealed by the compensatory 1991 Act, which fell within the State's legislative competence. The tax was deemed compensatory, covering road-related expenses. The State Legislature had the power to enact the 1991 Act to overrule the High Court's decision. No further declarations were needed, and no costs were ordered, with the intervention application also rejected.

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Issues Involved:
1. Constitutionality of the H.P. Taxation (On Certain Goods carried by Road) Act, 1976.
2. Constitutionality of the H.P. Taxation (On Certain Goods carried by Road) Act, 1991.
3. Whether the tax imposed was compensatory or regulatory in nature.
4. Validity of the State Legislature's power to enact the 1991 Act to overrule the High Court's decision.

Summary:

Constitutionality of the H.P. Taxation (On Certain Goods carried by Road) Act, 1976:
The High Court of Himachal Pradesh declared the 1976 Act unconstitutional and invalid, stating that the levy was a direct restriction on the carriage of goods by road and waterways, violating Article 301 of the Constitution. The court noted the absence of the President's assent as required u/s Article 304(b) and Article 255.

Constitutionality of the H.P. Taxation (On Certain Goods carried by Road) Act, 1991:
The 1991 Act was also declared ultra vires by the High Court, which held that the Act attracted Article 301 and required compliance with Article 304(b). The court observed that the Act was not compensatory or regulatory in nature and that the State Legislature could not overrule the previous decision pending appeal before the Supreme Court.

Compensatory or Regulatory Nature of the Tax:
The Supreme Court found that the tax was compensatory in nature, intended to cover part of the expenses incurred by the State for the construction, maintenance, and repair of roads and bridges. The Court referred to various precedents, including M/s Sainik Motors, Jodhpur & Others v. The State of Rajasthan and The Automobile Transport (Rajasthan) Ltd. v. The State of Rajasthan, which established that compensatory taxes do not hinder trade and commerce and do not fall under the restrictions of Article 301.

Validity of the State Legislature's Power:
The Supreme Court held that the State Legislature had the power to enact the 1991 Act to remove the basis of the High Court's decision. The Court cited precedents such as The Municipal Corporation of the City of Ahmedabad v. The New Shrock Spg. And Wvg. Co. Ltd. and Re. Cauvery Water Disputes Tribunal, which affirmed the Legislature's power to pass laws retrospectively and prospectively to validate legislation previously declared null and void.

Conclusion:
The Supreme Court allowed the appeals, quashing the High Court's judgment and order that declared the 1991 Act ultra vires. The Court held that the 1976 Act did not survive due to its repeal by the 1991 Act, which was found to be compensatory in nature and within the legislative competence of the State. No further declaration was required, and there was no order as to costs. The intervention application was also rejected.

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