TaxTMI 
TaxTMI 
2023 (1) TMI 634
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....e Bench for hearing these appeal(s)." 2. The above referred order dated 27.02.1998 passed in Civil Appeal No. 10457 of 1995 and connected matters reported in State of Rajasthan Vs. Khalsa Travels, (1998) 9 SCC 676 is reproduced below: "1. These appeals filed by the State of Rajasthan raise questions relating to the constitutional validity of Section 4-B(3) of the Rajasthan Motor Vehicles Taxation Act, 1951 (hereinafter referred to as "the Act") and Rule 4-CC of the Rajasthan Motor Vehicles Taxation Rules, 1951 (hereinafter referred to as "the Rules") which make provision of levy of special road tax on a transport vehicle which is used without a valid permit or in any manner not authorized by the permit. By the impugned judgments the High Court has held that Section 4-B(3) is ultra vires the rule-making powers conferred on the State Government under the Act. 2. According to the High Court the imposition, though described as a tax, is, in substance, a fine for an alleged offence of plying the vehicle without a valid permit or in contravention of the conditions of permit and such a penalty cannot be treated as a part of regulatory or compensatory tax. On that view....
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....operators challenged the validity of Section 3-A, Section 3-C, Section 4-A, Section 5-A along with Schedule-III under Section 3-A introduced vide the Himachal Pradesh Motor Vehicles Taxation (Amendment) Act, 1999 In short "HPMVT(A) Act 1999" to be held ultra vires the Constitution of India and further the notifications dated 18.12.1999, 23.12.1999, 31.12.1999, 06.01.2000, 12.02.2000 and 01.04.2000 be quashed and set aside. The relief as claimed in one of the petitions bearing C.W.P. No.32 of 2000 (Goel Bus Service Vs. State of Himachal Pradesh and others) is reproduced below: "(i) That the impugned Annexure-PA, PB, PC, PD, PE, dated 18th December, 1999, 23rd December, 1999, 6th January, 2000, 12.2.2000 and 31st December, 1999 may kindly be quashed and set aside; (ii) That Section 3-A, 3-C, 4-A, 5-A along with Schedule-III under Section 3-A may be struck down being ultra vires the Constitution of India. (iii) Any other relied as may be deemed just and proper keeping in view the facts and circumstances of the case may also be granted in favour of the petitioner." 5. The above provisions, validity of which was sought to be declared as ultra vires, were in....
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....achal Pradesh and Sri Siddharth Bhatnagar, learned Senior Counsel appointed as Amicus Curiae to assist the Court on behalf of the respondent-operators. SUMMARY OF SUBMISSIONS : 8. Submissions advanced on behalf of appellants are summarized as under: * The constitutional Courts must restrain from interfering in the matters of economic/tax legislation until and unless the offending provision is manifestly unjust or glaringly unconstitutional. * Laws relating to economic activities should be viewed with greater latitude and more play should be given to the Government in comparison to other laws relating to civil rights. * Reliance was placed upon the following judgments in support of the above submissions: "(i) R.K. Garg etc. vs. Union of India & Others reported in (1981) 4 SCC 675 (Para 7, 8, 16 & 2018). (ii) Bhavesh D. Parish & Others vs. Union of India & Another reported in (2000) 5 SCC 471 Para 26)). (iii) Indian Oil Corporation vs. State of Bihar reported in (2018) 1 SCC 242 (Para 25-28)." * Lump sum tax could be levied as it would be compensatory in nature. * The wisdom of the State legislature should ....
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.... & 10). (viii) Rajeev Suri vs. Delhi Development Authority and Ors. (2021 SCC Online SC 7 (Para 220 to 226). (ix) Janhit Manch and Anr. vs. The State of Maharashtra and Ors. (2019) 2 SCC 505 (Para 13). * The High Court, though upheld the power of the State legislature to enact provisions for levy of special road tax under Sections 3-A(1)(2)(4), but at the same time erred in holding the provisions under Section 3-A(3) to be ultra vires being unconstitutional. * The appeals be allowed, the judgment of the High Court impugned be set aside and the writ petitions be dismissed. 9. On the other hand, Shri Siddharth Bhatnagar, learned Amicus Curiae made the following submissions: * The offences and penalties in respect of using vehicles without permit is covered under Chapter XIII of the Motor Vehicles Act, 1988 and in particular Section 192-A thereof. * The Motor Vehicles Act, 1988 the 1988 Act being a Central Act is relatable to Entry 35 of List III of the Seventh Schedule to the Constitution. * The penalty for use of vehicle without permit is already provided in Section 192-A of the 1988 Act. The 1988 Act provides a compl....
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....ry of India not included in a State even though such matter is enumerated in the State List. Article 246 is reproduced hereunder: "(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the "Union List"). (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the "Concurrent List"). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the "State List"). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List." 12. Article 254 of the Constitution o....
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....t the subject as mechanically propelled vehicles and also the principles on which taxes on such vehicles can be levied. Under this entry both the Parliament and the Legislatures of State could frame laws. The said Entry 35 of List III is reproduced hereunder: "35. Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied." 15. The first enactment relating to motor vehicles in India was the Indian Motor Vehicles Act, 1914. It was replaced by the second enactment which came in 1939 as Motor Vehicles Act, 1939. After the coming of the Constitution in 1950, a new Motor Vehicles Act was enacted by the Parliament in 1988, the Motor Vehicles Act, 1988. The Parliament enacted the 1988 Act drawing its source from Entry 35 of the List III (the Concurrent List). The subject covered by the above entry is mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied. The Parliament as also the Legislature of States were thus competent to make laws regarding the mechanically propelled vehicles including the principles on which taxes could be levied on such vehicles. Thus, the Concurrent List, ....
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.... Offences, Penalties and Procedure. Section 192A introduced in 1994 provides that any motor vehicle being driven in contravention of the provisions of sub-section (1) of Section 66 or in contravention of any condition of permit relating to the road on which or the area in which or the purpose for which the vehicle may be used would be a punishable offence which will result into imprisonment for a term which may extend to six months and fine of Rs.10,000/- for the first offence and for subsequent offences the imprisonment could extend to one year but would not be less than six months or with fine of Rs.10,000/- or with both. 18. Sub-section (2) thereof provides for an exception where a motor vehicle may be used in an emergency for carrying persons suffering from sickness or injury or for supply of food or materials or medical supplies to relieve distress. Other offences and penalties prescribed under Chapter XIII are not relevant for the present controversy, as such the same are not being referred to. Section 192A reads as follows: "(1) Whoever drives a motor vehicle or causes or allows a motor vehicle to be used in contravention of the provisions of sub-section (1) of s....
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....on and maintenance can hardly be over emphasized as a vital trading facility. Each year, the government has to incur considerable part of its budget on construction, maintenance and development of roads and bridges in the State. Since it is essential to finance these activities, it is considered necessary to levy road tax on transport vehicles used or kept for use on public roads in Himachal Pradesh." 20. In the original Act of 1972 HPMVT Act 1972, Section 3 provided for levy and collection of taxes on all motor vehicles which were to be used or kept for use in the State of Himachal Pradesh. Section 3 reads as follows: "SECTION-3** LEVY OF TAX. *(1) Subject to the other provisions of this Act, on and from the commencement of the Himachal Pradesh Motor Vehicles Taxation (Amendment) Act, 2004, there shall be levied, charged and paid to the State Government, a tax on all motor vehicles specified in column (2) of Schedule-I, used or kept for use in Himachal Pradesh, at the rate as may be specified by the State Government, by notification, but not exceeding the rates specified in column (3) of Schedule-I.. **(2) On and from the commencement of the Himachal ....
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....rries a heading: Levy of Special Road Tax. This special road tax was in addition to the tax levied under Section 3. The special road tax was also levied and charged on all transport vehicles used or kept for use in Himachal Pradesh specified in column 2 of Schedule 3 and the rate of tax was to be not exceeding the rates specified in column 3 of Schedule 3 of the Act. Section 3A is reproduced hereunder: "3-A. Levy of special road tax.- (1) In addition to the tax levied under section 3, on and from the commencement of the Himachal Pradesh Motor Vehicles Taxation (Amendment) Act, 1999, there shall be levied, charged and paid to the State Government, a special road tax on all transport vehicles specified in column (2) of Schedule-III, used or kept for use, in Himachal Pradesh, and, at such rates as may be specified by the State Government, by notification, but not exceeding the rates specified in column (3) of Schedule-III of this Act. 2 [(2) The rates of special road tax, as may be specified under subsection (1), in respect of stage carriages shall be applicable to and charged on the entire distance covered as per time table fixed by the Regional Transport A....
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....laws or the earlier law made by the Parliament. If the provisions of the State Laws are repugnant to those principles, the Law made by the State Legislature must fail to the extent of repugnancy, unless reserved for the consideration of and assented to by the President. The tax under this entry is leviable by the State Legislature or all vehicles suitable for use on roads, which are kept in the State, but such tax must have some nexus with the vehicles using the public roads of the State because it is compensatory in nature, even though registered under the Motor Vehicles Act. Contra the State Legislature is not competent to levy, under the present entry, an impost which is not in substance a regulatory or compensatory tax for the transport of the vehicle along the road, but a fine , for example using a vehicle without a valid permit or for issuing it in a manner not authorized by the permit, is beyond the competence of the State Legislature, thus ultra vires. (Please See AIR 1992, Rajasthan 181 DB). Further on the perusal of Section 3-A (3), it transpires that the tax specified therein is in substance a fine for the alleged offence of plying a vehicle without a valid permit or in ....
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....n laws touching civil rights such as freedom of speech, religion, etc. The views of Justice Frankfurter in the case of Morey vs. Doud, 354 US 457 was relied upon. The same is reproduced hereunder: "In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events - self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability." 27. In case of Bhavesh D. Parish and others vs. Union of India and another, (2000) 5 SCC 471, the challenge was to the validity of section 9 of Reserve Bank of India Act as amended by the Amendment Act 1997 on the ground that it was violative of Article 14 and Article 19(1)(g) of the Constitution. This Court dismissed the challenge to the said provision in paragraph 26 of the report. It obs....
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....ssed consistently is that it would be compensatory or regulatory where it is imposed for breach of a statutory duty. 32. In the case of the State of U.P and others vs. Sukhpal Singh Bal, (2005) 7 SCC 615, Justice Kapadia speaking for the Bench held that section 10(3) of U.P. Motor Vehicles Taxation Act, 1997, which provided for charging of such tax or additional tax along with penalty where transport vehicles were found plying in Uttar Pradesh without payment of tax or additional tax under the said Act to be valid as being regulatory and compensatory. 33. The High Court had struck down the said provision. This Court allowed the appeal of the State. After referring to the judgments in the case of Bhavesh D. Parish and R.K. Garg, this Court went on to hold that section 10(3) was enacted to protect public revenue and as a deterrent for tax evasion. Deterrence was the main theme and object behind the imposition of penalty under Section 10(3) as such would be regulatory in nature. Paragraphs 15 and 16 of the report in the case of Sukhpal Singh Bal (supra) are reproduced below: "15. In the light of the above judgments as applicable to the provisions of the said 1997 Act, w....
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....very object and reasons of the Amending Act 1999, it is apparent that the special road tax was introduced as a compensatory measure. The object and reasons as spelled out in the original bill at the cost of repetition is reproduced below: "Developed roads and bridges constitute arteries of a healthy economy. Himachal Pradesh being a hill State, the importance of roads, their construction and maintenance can hardly be over emphasised as a vital trading facility. Each year, the government has to incur considerable part of its budget on construction, maintenance and development of roads and bridges in the State. Since it is essential to finance these activities, it is considered necessary to levy road tax on transport vehicles used or kept for use on public roads in Himachal Pradesh." 35. What is to be seen is whether the tax imposed will have identifiable object and a nexus between the subject and the object of the levy. The power has been given to the States to make its own legislations by imposing tax on motor vehicles as also the goods being transported in order to compensate itself for the services, benefits and facilities provided by it. 36. This Court in B.A. Jay....
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....hanically propelled vehicles. But the Parliament while enacting Section 63(7) of the Motor Vehicles Act refrained from indicating any such principles, either expressly or by necessary implication. The State's power to tax and to exempt was left uninhibited. It may be that a State legislation, plenary or subordinate, which exempts "non-home-State tourist vehicles" from tax would be advancing the object of Section 63(7) of the Motor Vehicles Act and accelerating inter-State trade, commerce and intercourse. But merely by Parliament legislating Section 63(7), the State Legislatures are not obliged to fall in line and to so arrange their tax laws as to advance the object of Section 63(7), be it ever so desirable. The State is obliged neither to grant an exemption nor to perpetuate an exemption once granted. There is no question of impairing the freedom under Article 301 by refusing to exempt or by withdrawing an exemption. Not to pat on the back is not to stab in the back. True, straw by straw, the burden of taxation on tourist vehicles increases as each State adds its bit of straw, but, then, each State is concerned with its coffers and has the right to tax vehicles using its roads....
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.... form part of flow of traffic on the roads which is required to be regulated. The regulations under the Motor Vehicles Act for registration and prohibition of certain categories of vehicles being driven by persons who have no driving licence, even though those vehicles are not plying on the roads, are designed to ensure the safety of passengers and goods etc. etc. and for that purpose it is enacted to keep control and check on the vehicles. Legislative power under Entry 35 of List III (Concurrent List) does not bar such a provision. But Entry 57 of List Il is subject to the limitations referred to above, namely, that the power of taxation thereunder cannot exceed the compensatory nature which must have some nexus with the vehicles using the roads viz. public roads." 38. The argument by Mr.Bhatnagar, learned amicus that the offending provision contained in Section 3A(3) being repugnant to the central legislation, will have to give way and cannot be sustained. His submission is that the power to impose penalty is given in Section 192 A of the 1988 Act. According to him, Entry 57 of List II being subject to the provisions of Entry 35 of List III under which the 1988 Act has been en....
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....ment and the executive power of the State is made subservient to it by requiring it to ensure compliance with such laws. Where it appears to the Government of India that it is so necessary to do, directions can be issued. Article 257 provides that the executive power of every State shall be so exercised as not to impede or prejudice the exercise of the executive power of the Union. Where the Government of India feels it so necessary to do so, it can issue a direction. At the cost of repetition it may be noted that there is no law specifying the principles of taxation on the subject-matter of controversy so as to bring in application of either Article 256 or Article 257 of the Constitution. 11. Power to levy taxes on vehicles, whether mechanically propelled or not vests solely in the State Legislature, though it may be open to Parliament to lay down the principles on which the taxes may be levied on mechanically propelled vehicles in the background of Entry 35 of List III. To put it differently, Parliament may lay down the guidelines for the levy of taxes on such vehicles, but the right to levy such taxes vests solely in the State Legislature. No principles admitte....
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....cts and reasons for bringing in the 1999 Amendment was clearly compensatory in nature. The object was to augment funds and finance for construction, maintenance, repair and upkeep of the roads in the State of Himachal Pradesh which has a totally hilly terrain. The offending section only provided that if any vehicle used without a valid permit or in any manner not authorised by the permit, further special road tax would be levied, charged and paid to the state government in addition to the tax payable under sub-section (1) at such rates as may be specified by the state government by notification. However, the restriction was that the same would not exceed the rates specified in column 3 of Schedule 3 of the Act. 44. Imposition of such additional special road tax was only to keep a check or a discipline on the transport vehicle operators to use their vehicles in accordance with the statutory provisions. This could work as a deterrent for the transport operators to not commit any breach and to follow the mandate of the law. Such additional special road tax could be termed as regulatory in nature so as to regulate other statutory provisions being implemented and strictly followed. ....