Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No(s).5534-5594 of 2011
THE STATE OF HIMACHAL
PRADESH AND OTHERS …APPELLANT(S)
VERSUS
GOEL BUS SERVICE KULLU
ETC. ETC. …RESPONDENT(S)
J U D G M E N T
Vikram Nath, J.
1.
The above set of appeals were referred to larger Bench
of three Judges in terms of the order dated 05.03.2020
which reads as follows:
“Considering the fact that the issue raised in
these appeals was referred to a larger Bench of
three Judges in terms of order dated 27.02.1998
in Civil Appeal No. 10457/1995 and other
connected cases [ reported in (1998) 9 SCC 676 ]
but which appeals later on repealed by Rajasthan
Act, 1951, which is on similar lines with the
Signature Not Verified
Digitally signed by
Deepak Singh
Date: 2023.01.13
16:36:06 IST
Reason:
provision involved in the present appeals.
1
Hence, we deem it appropriate to refer these
appeals to a larger Bench of three Judges for
an authoritative pronouncement on the questions
involved.
Registry is directed to place the matters before
Hon’ble the Chief Justice of India for constituting
the appropriate 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
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, The
High Court has declared that Section 4-B(3) of the Act
is ultra vires the powers conferred on the State
Legislature under Entry 56 of List II of the Seventh
Schedule to the Constitution of India. The question
that falls for consideration in these appeals is
whether the imposition under Section 4-B(3) is
not a tax but a penalty and is ultra vires the
legislative powers of the State Legislature under
Entry 56 and Entry 57 of List II.
3. Having regard to the importance of the
question, we consider it appropriate that these
matters are considered by a Bench of three Judges.
The matter may, therefore, be placed before the
Hon’ble Chief Justice for necessary directions.”
A careful perusal of the above orders confines the question
for consideration to be whether the imposition of
additional special road tax levied on transport vehicle used
without a valid permit is not a tax but a penalty and is
ultra vires the legislative powers of the State Legislature
3
under Entries 56 and 57 of List II (the State List) of the
Seventh Schedule to the Constitution.
3. Civil Appeal No.10457 of 1995 was dismissed vide
order dated 15.04.1998 for the reason that similar
provisions enacted in the State of Rajasthan were repealed
by the Rajasthan Finance Act, 1977 and, as such, the
question raised was held to be no longer a live issue. The
said appeals along with connected appeals were
accordingly dismissed, however, the question was left
open. The said order dated 15.04.1998 is reproduced
hereunder: -
“ These appeals involve the question regarding the
validity of Section 4 (B) (3) of the Rajasthan Motor
Vehicles Act, 1951 and Rule 4 CC of the Rajasthan
Motor Vehicles Taxation Rules. While the matters
were pending in this Court the State legislature has
enacted Rajasthan Finance Act, 1977 whereby
Section 4 (B) (3) has been repealed and since Rule 4
CC was made to give effect to the provisions contained
in Section 4 (B) (3) the said rule also has ceased to
apply. In view of the aforesaid amendment that has
been made by the Rajasthan Finance Act, 1977 the
question raised by the appellant in these appeals is
4
no longer a live issue and, therefore, it is not
necessary to go into the same. The appeals are
accordingly dismissed and the question is left open.
No order as to costs.”
FACTS :
4. The respondent and several other similarly situate
public transport 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)
1
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,
th rd
PE, dated 18 December, 1999, 23 December, 1999,
1
In short “HPMVT(A) Act 1999”
5
th st
6 January, 2000, 12.2.2000 and 31 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 introduced vide HPMVT(A)
Act 1999 as also vide HPMVT(A) Act 2001. Consequent to
insertion of the said provisions, State of Himachal Pradesh
issued several notifications referred to above, which were
also assailed in a large number of writ petitions. The High
Court, vide impugned judgment dated 06.07.2007, upheld
the validity of all the Sections except Section 3A (3) under
challenge as not offending either Part III or any other
provision of the Constitution of India. With respect to
Section 3-A (3) it was held that in substance it imposes a
penalty and as such could not be treated as regulatory or
6
compensatory tax and was, therefore, beyond the
legislative competence of the State Legislature. It, further
quashed the two notifications dated 06.01.2000 and
01.04.2000 being not in consonance with the scheme of
the Constitution. It also struck down the decision dated
01.01.2000 based upon negotiations held on 31.12.1999
relating to special Toll Tax, as they were held to be against
statutory provisions of the Act. The operative portion of the
impugned judgment reads as follows:
“On account of the above reasoning and the findings,
we are of the view that Sections 3-A (1), (2), (4) and
Section 3-C do not offend either the fundamental
rights or any other provision of the Constitution of
India, therefore, these are held not ultra vires of the
Constitution. Since Section 3-A (3) in substance
imposes a fine as held above, therefore, such a nature
of penalty can neither be treated as regulatory nor
compensatory tax and is out of the legislature
competence of the State and the subordinate
legislation, that is the notifications dated 6.01.2000
and 1.04.2000 are based upon lump sum charges of
the levy thus are not in consonance with the scheme
of the Constitution, therefore, these are held to be
ultra vires. Further, the decision dated 1.1.2000
based upon negotiations held on 31.12.1999 relating
7
to SRT is against the statutory provisions of the Act
as stated above. Therefore, it is struck down being
contrary to law.
All the petitions are disposed of in the aforesaid
terms. No orders as to costs.
All the Misc. applications in the writ petitions are also
disposed of.”
6. The State of Himachal Pradesh is in appeal against
the aforesaid judgment of the High Court.
7. We have heard Sri Abhinav Mukerji, learned counsel
for the appellant-State of Himachal 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
8
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 be read in
the broadest possible terms and merely because the
9
levy is payable in lump sum or on one time basis
would not make it invalid or unconstitutional. Such
levy could be for administrative reasons and the
manner & mode of collection, cannot be the
conclusive test to decide the nature of levy.
• Quashing of the notifications dated 06.01.2000 and
01.04.2000 were also bad in law as imposition of
lump sum tax is by now well recognized by the
Courts.
• Reliance was placed upon the following judgments, in
support of the above submissions:
(i) State of T.N. vs. M. Krishnappan and
Anr. (2005) 4 SCC 53 (Para 18-23).
(ii) Commr. Of Agricultural Income Tax
vs. Netley ‘B’ Estate (2015) 11 SCC 462
(Para 20-22).
(iii) Ashok Leyland Ltd. vs. State of T.N.
(2004) 3 SCC 1 (Para 65 to 71).
10
(iv) Aas Mohammad vs. State of
Rajasthan (2020 2 RLW 1567 (Raj) (Para
22 to 26).
• The tax imposed under Section 3(A)3 of the 1972 Act
is regulatory and compensatory in nature. The
appellant-State being a hilly State with difficult
terrains, in order to maintain roads and bridges
which are the life-line of hilly terrains, a sizeable part
of the budget is spent on the construction,
development, repair, upkeep and maintenance of
roads and bridges.
• Reference was made to the counter affidavit filed by
the State before the High Court and also referred to
in the impugned judgment, enumerating special
circumstances for imposition and upholding of a
compensatory or a regulatory tax as valid. In this
connection, reliance has been placed upon the
following judgments:
11
(i) Ranjit Singh vs. Taxation Officer,
Rampur and etc (2002 SCC Online All 75
(Para 14,15, 22 and 23)
(ii) In State of Himachal Pradesh and
Ors. Vs. Yash Pal Garg (Dead) by LRs and
Ors. (2003) 9 SCC 92 (Para 11-13,20 and
23)
(iii) State of Uttar Pradesh and Ors. vs.
Sukhpal Singh Bal (2005) 7 SCC 615 (Para
11 to 19).
(iv) B.A. Jayaram and Ors. vs. Union of
India (UOI) and Ors. (1984) 1 SCC 168 (Para
9-11).
(v) Bolani Ores Ltd. vs. State of Orissa
(1974) 2 SCC 777 (Para 15 & 29)
(vi) Sharma Transport Rep. by D.P.
Sharma vs. Government of Andhra
Pradesh and Ors. (2002) 2 SCC 188 (Para,
1,8 and 11)).
(vii) State of Maharashtra and Ors. vs.
Madhukar Balkrishna Badiya and Ors.
(1988) 4 SCC 290 (Para 6 & 10).
(viii) Rajeev Suri vs. Delhi Development
Authority and Ors. (2021 SCC Online SC 7
(Para 220 to 226).
12
(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.
13
2
• The Motor Vehicles Act, 1988 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 complete mechanism in
respect of laws relating to motor vehicles including its
violations, consequences and penalties thereon. The
said provision specifically deals with the act of a
transport vehicle being used without a permit.
• The Himachal Pradesh Motor Vehicle Taxation Act
relates to Entry 57 of the List II of the Seventh
Schedule of the Constitution. It is subject to two
limitations (i) that the vehicle be suitable for use on
roads and (ii) any law made under this entry would
be subject to any law made under Entry 35 of list III.
2
the 1988 Act
14
• Any enactment by the State which encroaches on or
overlaps with the provisions of the 1988 Act would be
invalid to that extent.
• Reliance is placed upon the judgment of the Supreme
State of West Bengal Vs. Kesoram
Court in
Industries Ltd. & Others, (2004) 10 SCC 201 .
•
The tax sought to be levied under Section 3A (3) is in
the nature of penalty which cannot be done in view of
the provisions contained in the 1988 Act. Reliance
was placed upon the following two decisions of the
Supreme Court:
(i) M.P. AIR Permit Owners Association
and Another Vs. State of Madhya Pradesh,
(2004) 1 SCC 320,
(ii) Hardev Motor Transport Vs. State of
M.P. and Others, (2006) 8 SCC 613.
• The impugned judgment does not suffer from any
infirmity in holding that the special tax sought to be
levied under Section 3A (3) is a penalty. The appeals
are, thus, liable to be dismissed.
15
Relevant Constitutional & Legal provisions:
10. Before proceeding to deal with the submissions
advanced, a brief reference to statutory and constitutional
provisions may be noted.
11. Article 246 of the Constitution lays down the subject
matters of the laws to be made by the Parliament and by
the Legislatures of States. According to it, three lists of
the Seventh Schedule would be determining the subjects
over which the Parliament may have exclusive power to
make laws (List I also referred to as the Union List),
subjects over which the State would have exclusive power
to make laws (List II also referred to as the State List) and
also the subjects where the Parliament as also the
Legislature of States would have power to make laws
covered by List III (referred to as the Concurrent List).
Additional power is given to the Parliament under sub-
Article 4 to make laws with respect to any matter for any
part of the territory of India not included in a State even
16
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 of India provides for
the effect in case of inconsistency between laws made by
the Parliament and the laws made by the Legislature of
States. The same is reproduced hereunder:
17
“(1) If any provision of a law made by the Legislature
of a State is repugnant to any provision of a law made
by Parliament which Parliament is competent to
enact, or to any provision of an existing law with
respect to one of the matters enumerated in the
Concurrent List, then, subject to the provisions of
clause ( 2 ), the law made by Parliament, whether
passed before or after the law made by the Legislature
of such State, or, as the case may be, the existing law,
shall prevail and the law made by the Legislature of
the State shall, to the extent of the repugnancy, be
void
(2) Where a law made by the Legislature of a State
with respect to one of the matters enumerated in the
concurrent List contains any provision repugnant to
the provisions of an earlier law made by Parliament or
an existing law with respect to that matter, then, the
law so made by the Legislature of such State shall, if
it has been reserved for the consideration of the
President and has received his assent, prevail in that
State: Provided that nothing in this clause shall
prevent Parliament from enacting at any time any law
with respect to the same matter including a law
adding to, amending, varying or repealing the law so
made by the Legislature of the State.”
13. As already noted above, the Seventh Schedule flowing
out from Article 246 has three lists, which gives power to
the Parliament and the State Legislatures to make laws on
18
the subjects enumerated therein. It would be relevant to
mention that List I (the Union List) does not cover any
subject relating to motor vehicles or taxation relating to it.
List II (the State List) has two entries viz. 56 and 57 which
refer to subjects relating to taxes on goods and passengers
and taxes on vehicles. Both the above entries of List II are
reproduced below:
“56. Taxes on goods and passengers carried by road
or on inland waterways.
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.”
The above subjects fall within the domain of Legislature of
the State to make laws.
14. Under List III (the Concurrent List), Entry 35 spells
out 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
19
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
20
vehicles. Thus, the Concurrent List, insofar as taxes
concerned, is limited to the principles on which taxes are
to be levied. But the power to frame laws relating to
imposition of tax exclusively vests with the State
Legislatures under Entries 56 and 57 of List II. Entry 56
covers the subject of laying down law on imposition of
taxes on goods and passengers being carried by road or on
inland waterways. Whereas Entry 57 covers laws related
to taxation on vehicles, whether mechanically propelled or
not however such vehicles being suitable for use on roads.
The laws so framed would remain subject to the provisions
of entry 35 of List III.
16. Chapter V of the 1988 Act deals with Control of
Transport Vehicles. Section 66 makes it mandatory for
owners of motor vehicles to use such vehicles as a
transport vehicle whether actually carrying passengers or
goods only with a valid permit granted as provided therein.
Section 66 reads as follows:
21
“66. Necessity for permits.—(1) No owner of a motor
vehicle shall use or permit the use of the vehicle as a
transport vehicle in any public place whether or not
such vehicle is actually carrying any passengers or
goods save in accordance with the conditions of a
permit granted or countersigned by a Regional or
State Transport Authority or any prescribed authority
authorising him the use of the vehicle in that place in
the manner in which the vehicle is being used:
Provided that a stage carriage permit shall, subject to
any conditions that may be specified in the permit,
authorise the use of the vehicle as a contract carriage:
Provided further that a stage carriage permit may,
subject to any conditions that may be specified in the
permit, authorise the use of the vehicle as a goods
carriage either when carrying passengers or not:
Provided also that a goods carriage permit shall,
subject to any conditions that may be specified in the
permit, authorise the use of the vehicle for the
carriage of goods for or in connection with a trade or
business carried on by him.
(2) The holder of a goods carriage permit may use the
vehicle, for the drawing of any trailer or semi-trailer
not owned by him, subject to such conditions as may
be prescribed: 1[Provided that the holder of a permit
of any articulated vehicle may use the prime-mover of
that articulated vehicle for any other semi-trailor.]”
17. Chapter XIII of the 1988 Act lays down the provisions
for Offences, Penalties and Procedure. Section 192A
introduced in 1994 provides that any motor vehicle being
22
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:
23
“(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 section 66 or in
contravention of any condition of a permit relating to
the route on which or the area in which or the
purpose for which the vehicle may be used, shall be
punishable for the first offence with a fine which may
extend to five thousand rupees but shall not be less
than two thousand rupees and for any subsequent
offence with imprisonment which may extend to one
year but shall not be less than three months or with
fine which may extend to ten thousand rupees but
shall not be less than five thousand rupees or with
both: Provided that the court may for reasons to be
recorded, impose a lesser punishment.
(2) Nothing in this section shall apply to the use of a
motor vehicle in an emergency for the conveyance of
persons suffering from sickness or injury or for the
transport of materials for repair or for the transport
of food or materials to relieve distress or of medical
supplies for a like purpose: Provided that the person
using the vehicle reports about the same to the
Regional Transport Authority within seven days from
the date of such use.
(3) The court to which an appeal lies from any
conviction in respect of an offence of the nature
specified in sub-section (1), may set aside or vary any
order made by the court below, notwithstanding that
no appeal lies against the conviction in connection
with which such order was made.]”
24
19. The State of Himachal Pradesh, exercising the powers
drawn from Entries 56 and 57 of List II of the Seventh
Schedule enacted the Himachal Pradesh Motor Vehicles
3
Taxation Act 1972 . In the said Act various amendments
were brought from time to time. Vide Amending Act No.15
of 1999, Sections 3A, 3B and 3C were incorporated. The
object and reasons as spelled out for bringing out the
Amending Act of 1999 was mainly to augment
finances/funds for development, construction and
maintenance of roads and bridges being a vital part of
expanding and developing trading facilities in the State. It
also mentioned that Himachal Pradesh being a hilly State,
substantial amount of its budget was spent on
construction, maintenance and development of roads and
bridges. Objects and reasons as reflected in the Bill No.
10 of 1999, is reproduced here under:
“Developed roads and bridges constitute arteries of a
healthy economy. Himachal Pradesh being a hill
3
HPMVT Act 1972
25
State, the importance of roads, their construction 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.”
4
20. In the original Act of 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
Pradesh Motor Vehicles Taxation (Amendment)
Act,2004, there shall be levied, charged and paid to
4
HPMVT Act 1972
26
the State Government, a tax on motor cycles/scooters
or personal vehicles, used or kept for use in Himachal
Pradesh, for a period of fifteen years from the date of
issue of certificate of registration under sub- section
(3) of section 41 of the Motor Vehicles Act, 1988, (59
of 1988) at the rates as may be specified by the State
Government, by notification, on the basis of the price
of such motor cycle/scooter or personal vehicle,
subject to the maximum of ten percent of the price
thereof.
(3) Notwithstanding anything contained in sub-
sections (1), 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 motor
cabs or maxi cabs which are allowed to be converted
as personal motor vehicles, and on second hand
personal motor * Substituted vide H.P. Motor Vehicles
Taxation (Amendment) Act, 2004. * Substituted vide
H.P. Motor Vehicles Taxation (Amendment) Act, 1999.
6 vehicles which are to be registered in the State of
Himachal Pradesh for the first time, used or kept for
use in Himachal Pradesh, at the rates as may be
specified by the State Government, by notification,
subject to the maximum of ten percent of the price of
such motor vehicles to be determined by the taxation
authority after deducting eight percent depreciation
per annum from the original price of the motor vehicle
provided that:- (a) in the case of motor vehicles having
original price upto two lacs fifty thousand rupees, the
floor price shall not be less than fifty thousand
rupees, or (b) in the case of motor vehicles having
27
original price more than two lacs fifty thousand
rupees but not exceeding five lacs fifty thousand
rupees, the floor price shall not be less than one lac
rupees, or (c) in the case of motor vehicles having
original price more than five lacs fifty thousand
rupees but not exceeding ten lacs rupees, the floor
price shall not be less than two lacs rupees, or (d) in
the case of motor vehicles having original price more
than ten lacs rupees, the floor price shall not be less
than four lac rupees, or (e) in the case of two wheelers,
the floor price shall not be less than five thousand
rupees.”
21. By the Amending Act of 1999, Section 3A was
introduced which carries 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,
28
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 Authority and shall be payable
monthly by such date as may be notified by the State
Government from time to time.]
(3) Where a transport vehicle is plied without a valid
permit or in any manner not authorised by the permit
to be plied, there shall be levied, charged and paid to
the State Government further special road tax in
addition to the tax payable under sub-section (1), on
such vehicles at the 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.
(4) Where a transport vehicle is registered in a State
other than the State of Himachal Pradesh, enters and
is used on any public road, or kept for use, in the
State of Himachal Pradesh, the special road tax shall
become chargeable, on such entry in the prescribed
manner.
Explanation.- For the purpose of special road tax
levied under this Act, transport vehicles shall include
29
non-transport vehicles when used as transport
vehicles by the owner. ”
22. Challenge before the High Court was also to the
validity of a few other provisions. However, the High Court
upheld the validity of all other provisions and it only
declared sub-section (3) of Section 3A as ultra vires . What
is, thus, required to be decided in this reference is whether
the High Court was right in declaring Section 3A(3) as ultra
vires .
23. The High Court was of the opinion that the tax
imposed by Section 3A(3) was in the nature of penalty and
for which the State Legislature had no power to make laws.
According to the High Court it was penalty because a
further special road tax was leviable where a transport
vehicle was plied without any valid permit or in any
manner not authorized by the permit to be plied. The High
Court opined that imposition of such an additional special
road tax for a default or a wrong committed with respect
to a transport vehicle would amount to a penalty and not
30
a tax. The finding recorded by the High Court is
reproduced hereunder:
“Further, the powers of State Legislature under the
entry aforesaid being subject to Entry 35 of List III, if
there is an existing law made by the Parliament laying
down the principles on which taxes on mechanically
propelled vehicles should be levied, then any State
Legislation enacted under this entry must conform to
these principles as laid down in the existing 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
31
alleged offence of plying a vehicle without a valid
permit or in any manner not authorized by the permit
to be plied. Such a penalty cannot be treated as a part
of regulatory or compensatory tax and is out of the
legislature competence of the State. The nature of
penalty without providing any mechanism for
show cause, adjudication or the appellate
authority by not providing any such mechanism,
also offends the principle of natural justice.
Therefore, it is held ultra vires the powers
conferred in the State Legislature under Entry 56
to 57 of List-II. For this, we put our reliance on
AIR 1992 Rajasthan 181 (DB).” (Emphasis added)
24. The High Court had also quashed the notifications
dated 06.01.2000, 01.04.2000 as also the decision dated
01.01.2000 being contrary to statutory provisions.
Quashing of the notifications would be dealt with at a later
stage after first dealing with the issue relating to
declaration of Section 3A(3) as ultra vires .
ANALYSIS:
A: Scope of Interference in Fiscal Statutes:
25. It is by now well settled that any tax legislation may
not be easily interfered with. The Courts must show
32
judicial restraint to interfere with tax legislation unless it
is shown and proved that such taxing statute is manifestly
unjust or glaringly unconstitutional. Taxing statutes
cannot be placed or tested or viewed on the same
principles as laws affecting civil rights such as freedom of
speech, religion, etc. The test of taxing statutes would be
viewed on more stringent tests and the law makers should
be given greater latitude. It would be useful to refer to a
couple of judgments on the above proposition.
26. In the case of R.K. Garg etc. vs. Union of India and
others, (1981) 4 SCC 675, the Constitution Bench was
judging the constitutionality of economic legislation
wherein challenge was to the validity of the provisions of
Special Bearer Bonds (Immunities and Exemption Act,
1981) on the grounds of discrimination and violation of
Article 14. P.N. Bhagwati J., speaking for himself, Chief
Justice Chandrachud, A.C. Gupta, S. Murtaza Fazal Ali
and A.N. Sen, J.J., observed in paragraph 7 regarding the
33
presumption in favour of constitutionality of the statute
and that the burden is on the person who attacks it, to
establish that there has been clear transgression of the
constitutional principles. In paragraph 8, it was laid down
that laws relating to economic activities should be viewed
with greater latitude than 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
34
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 observed that matters of economic policy should
be best left to the wisdom of the legislature. Further, it
went on to state that in the context of a changed economic
scenario the expertise of the people dealing with the
subject should not be lightly interfered with. It was also
observed that while dealing with economic legislation, this
court would interfere only in those few cases where the
view reflected in the legislation is not possible to be taken
at all.
28. In the case of Indian Oil Corporation Limited vs.
State of Bihar and another, (2018) 1 SCC 242,
provisions of the Bihar Tax on Entry of Goods into Local
Areas for Consumption, Use or Sale therein Act 1993, was
35
under challenge. Justice Nariman speaking for the Bench
observed in paragraph 25 that when it comes to taxing
statute, the law laid down by this Court is clear that it can
be said to be breach only when there is perversity or gross
disparity resulting in clear and hostile discrimination
without any rational justification for the same.
SPECIAL ROAD TAX IS REGULATORY OR
COMPENSATORY IN NATURE
29. The arguments raised before the High Court by the
respondent Transport operators (original writ petitioners
before the High Court) was that the fine imposed by
Section 3(A)(3) was in the nature of a penalty and the State
Legislature had no power to impose a penalty. The High
Court had accepted the said contention and accordingly
struck down the said provision.
30. The object and reasons for offending enactment is
already reproduced in the earlier part of this judgment. At
the cost of repetition, it is stated that the appellant State
being a hilly State, the roads and bridges are its lifeline.
36
The State has to allocate sizeable part of its budget for the
construction, development, repair, upkeep and
maintenance of roads and bridges. It was with this object
in the background that the offending provisions were
brought in by way of amendments in 1999 and 2001
which are described as special road tax.
31. This Court in a number of cases dealing with similar
provisions has upheld the same. It has withheld that tax
charged for non-fulfilment of any obligation would also be
compensatory and regulatory in nature. Distinction was
carved out between a penalty imposed for breach of
statutory duty and penalty imposed being a subject matter
of a complaint that would require adjudication. The view
expressed 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
37
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:
38
“15. In the light of the above judgments as applicable
to the provisions of the said 1997 Act, we are of the
view that the High Court had erred in striking down
section 10(3) as ultra vires articles 14 and 19(1)(g) of
the Constitution. "Penalty" is a slippery word and it
has to be understood in the context in which it is used
in a given statute. A penalty may be the subject-
matter of a breach of statutory duty or it may be the
subject-matter of a complaint. In ordinary parlance,
the proceedings may cover penalties for avoidance of
civil liabilities which do not constitute offences
against the State. This distinction is responsible for
any enactment intended to protect public revenue.
Thus, all penalties do not flow from an offence as is
commonly understood but all offences lead to a
penalty. Whereas the former is a penalty which flows
from a disregard of statutory provisions, the latter is
entailed where there is mens rea and is made the
subject-matter of adjudication. In our view, penalty
under section 10(3) of the Act is compensatory. It is
levied for breach of a statutory duty for non-payment
of tax under the Act. Section 10(3) is enacted to
protect public revenue. It is enacted as a deterrent for
tax evasion. If the statutory dues of the State are paid,
there is no question of imposition of heavy penalty.
Everything which is incidental to the main purpose of
a power is contained within the power itself. The
power to impose penalty is for the purpose of
vindicating the main power which is conferred by the
statute in question. Deterrence is the main theme of
object behind that imposition of penalty under section
10(3).
39
16. In the case of State of Tamil Nadu v. M
Krishnappan & Another reported in (2005) 4 SCC 53,
this Court has held that entry 57 of list II of the
seventh schedule to the Constitution provides a field
to the State legislature to impose tax in respect of
every aspect of a vehicle. The State has to find funds
for making new roads and for maintenance of existing
roads. The Motor Vehicles Act is regulatory and
compensatory in nature in the sense that it is
imposed to meet the increasing costs of maintenance
and upkeep and to that extent it is not plenary. In the
said judgment, it has been held that imposition of
higher burden of tax on vehicles based on intelligible
reasoning and differentia will not make the impugned
levy discriminatory, arbitrary or unreasonable so as
to violate article 14 of the Constitution. ”
34. From the 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
40
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. Jayaram and Ors. vs. Union of
India (UOI) and Ors. (supra) laid down the proposition
that to uphold a tax claim to be compensatory tax, there
must be existence of a specific identifiable object behind
the levy. It further laid down that the levy must have a
nexus between the subject and the object of levying. In
the said case the challenge was to a notification issued by
the State of Karnataka dated 31 May, 1981 withdrawing
the exemption granted under Section 63(7) of the 1939
41
Act. The said exemption was granted to promote tourist
traffic on an inter-state basis. This Court, after
considering the object behind the compensatory and
regulatory levy, held that such tax fell outside Article 301
of the Constitution of India and withdrawal of the
exemption granted would neither be discriminatory nor
arbitrary and, accordingly, upheld the withdrawal. In this
context, it would be useful to reproduce paragraphs 9 and
10:
“9. By virtue of the power given to them by Entries 56
and 57 of List Il each one of the States has the right
to make its own legislation to compensate it for the
services, benefit and facilities provided by it for motor
vehicles operating within the territory of the State.
Taxes resulting from such legislative activity are by
their very nativity and nature, cast (sic caste) and
character, regulatory and compensatory and, are
therefore, not within the vista of Article 301. unless,
as we said, the tax is a mere pretext designed to injure
the freedom of inter-State trade, commerce and
intercourse. The nexus between the levy and the
service is so patent in the case of such taxes that we
need say no more about it. The Karnataka Motor
Vehicles Taxation Act and the Motor Vehicles
Taxation Acts of other States are without doubt
42
regulatory and compensatory legislations outside the
range of Article 301 of the Constitution.
10. It is true that the object of enacting Section 63(7)
by the Parliament was to promote all-India and inter-
State tourist traffic.
But taxes on vehicles... suitable for use on roads is a
State legislative subject and it is for the State
Legislature to impose a levy and to exempt from the
levy. True again, Entry 57 of the State List is subject
to Entry 35 of the Concurrent List and, as explained
by us at the outset, it is therefore open to the
Parliament to lay down the principles on which taxes
may be levied on mechanically 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
43
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; and, the contribution which
a tourist carriage is required to make to its treasury
is no more than what other contract carriages are
required to make. We are firmly of the view that there
is no impairment of the freedom under Article 301.
The special submission on behalf of the 'Karnataka
Operators' that the withdrawal by the Karnataka
Government of the exemption granted to 'outsiders
has resulted in the 'Karnataka Operators' having to
pay tax in every State in the country and, therefore,
the withdrawal has impaired the freedom under
Article 301 is but the same general submission, seen
through glasses of a different tint. It does not even
have the merit that the withdrawal of the Karnataka
exemption affects them directly. The submission is
rejected.”
37. Similarly, in the case of Bolani Ores Ltd. vs. State
of Orissa (supra), a question arose with regard to the
taxes imposed under Entry 57 of List II being in the nature
of regulatory and compensatory measures. The appellants
in the said case were companies engaged in mining
operations and were seeking a declaration that rockers,
dumpers and tractors were not taxable under the Bihar
44
and Orissa Motor Vehicles Taxation Act 1930 as they were
not motor vehicles defined under the Act. The contention
of the appellants was that the tractors, dumpers and
rockers were not using any roads but were only plied
within the premises of the mining area which was privately
owned by the companies, and would not be liable to any
tax so long as they are within the premises. However, if
they use the roads, then the tax component will be
applicable. In para 29 of the report, this Court again
explained the nature of the State Legislation relating to
taxation on motor vehicles as being regulatory measure
and compensatory in nature to raise revenue. Relevant
extract is reproduced hereunder:
“The Taxation Act is a regulatory measure imposing
compensatory taxes for the purpose of raising
revenue to meet the expenditure for making roads,
maintaining them and for facilitating the movement
and regulation of traffic. The validity of the taxing
power under Entry 57 List I of the Seventh Schedule
read with Article 301 of the Constitution depends
upon the regulatory and compensatory nature of the
taxes. It is not the purpose of the Taxation Act to levy
45
taxes on vehicles which do not use the roads or in any
way 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 enacted, Section 192A provides for
46
penalty being imposed on vehicles being used without
permit or in contravention of the provisions of sub-section
(1) of Section 66 (providing for necessity for permits).
According to him once the central Act contains a penal
provision for such a violation of imprisonment as also fine,
the State could not have imposed a tax for the same
violation. This submission of Shri Bhatnagar can be
sustained only if any repugnancy or any conflict can be
established between the State law and the Central law.
The provisions under Section 192A are in no way violated
or conflicted by imposing an additional special tax for
violation of use of vehicles without permit. It can be said
to be in addition to the penalty provided in Section 192A
of the 1988 Act. This Court, in the case of Sukhpal Singh
Bal (supra) has already upheld that such imposition of tax
for violation of statutory provisions, is to be treated as a
regulatory measure and only to work as a deterrent of the
vehicle owners’ violating the law. Such a tax would be
regulatory in nature and would only check violations of
47
the statutory provisions. In the case of Sharma
Transport Rep. by D.P. Sharma vs. Government of
Andhra Pradesh and Ors. (supra), a similar issue was
considered and this Court was of the view that under
Entry 35 of List III the permission is to lay down the
principles on which the tax may be levied whereas the
State had a right to levy such tax. Paras 8 and 11 of the
said report dealing with the aforesaid aspect are
:
reproduced hereunder
“8. This is not a case where the theory of occupied
field can be made applicable. The Taxation Act
essentially deals with fares charged from passengers
and freight collected from them. On the contrary, the
Act deals with levy on vehicles. They are conceptually
different. Whatever has been stated above in the
background of Article 73 is equally applicable to
Articles 256 and 257 of the Constitution. Article 256
provides that the executive power of every State shall
be so exercised as to ensure compliance with the laws
made by Parliament and any existing laws which
apply in that State and the executive power of the
Union shall extend to the giving of such directions to
a State as may appear to the Government of India to
be necessary for that purpose.
48
This article has application only when any law has
been made by Parliament 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 admittedly have been formulated by
Parliament. In that sense, the Government of India's
communication dated 30-8-1993 does not in any
sense violate the power of the State Legislature or its
delegate to levy or exempt taxes from time to time.”
49
39. Mr. Mukerji, learned counsel for the appellants, has
referred to a number of judgments of this Court relating to
levy of tax being compensatory and regulatory in nature.
The same are not being discussed in detail to unnecessary
burden the judgment. However, a reference has already
been made to the said judgments quoted earlier.
40. In the above backdrop of the legal position, the
validity of Section 3A(3) of the 1972 Act introduced vide
Amending Act of 1999 is being discussed hereunder.
41. Section 3 of the 1972 Act provided for levy of taxes on
all motor vehicles kept or used in the State of Himachal
Pradesh as per the schedules appended to the said Act.
Insertion of Section 3A provided for levy of special road
tax. The special road tax as provided under sub-sections
(1), (2) and (4) of Section 3A have been upheld by the High
Court. It is only the levy of special road tax under sub-
section (3) which has been struck down. Testing the
provisions of the offending section with regard to the
50
settled principles of interpretation of taxing statutes, it is
to be ascertained on the following three aspects:
(1) Whether it is manifestly unjust or glaringly
unconstitutional;
(2) Whether it is regulatory or compensatory in nature;
and
(3) Whether there is any repugnancy with the provisions
in the Central enactment.
Manifestly unjust or glaringly unconstitutional:
42. The Legislatures of the State have not only the power
to make laws on the taxation to be imposed on motor
vehicles as also the passengers and goods being
transported by motor vehicles but also the power to lay
down principles on which taxes on vehicles are to be
levied. In the absence of any principles having been laid
down by the Parliament, no fault could be found in the law
enacted by Legislature of the State of Himachal Pradesh.
The offending provision is regulatory in nature and
51
therefore within the competence of the Legislature of State
of Himachal Pradesh. There is nothing on record to indict
the offending provision as being manifestly unjust or
glaringly unconstitutional.
Regulatory or Compensatory:
43. The objects 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
52
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.
45. This Court in the case of Sukhpal Singh Bal (supra)
relating to challenge to Section 10(3) of the U.P. Motor
Vehicles Taxation Act, 1997 where a similar provision was
incorporated and even though termed as penalty, was held
to be regulatory and compensatory in nature. The High
Court had struck down the said provision but this Court
held that such penalty imposed under Section 10(3) to
53
protect public revenue and as a deterrent for tax evasion.
In view of the above, it cannot be said that levy of such an
additional special road tax would be said to be manifestly
unjust or glaringly unconstitutional. It was, in effect, to
ensure payment of the chargeable taxes and use of the
vehicles as per the terms of the permit.
Repugnancy, if any, with Central enactment :
46. Entry 35 of List II conferred the power on the
Parliament as also the State Legislatures to make laws
relating to mechanically propelled vehicles of all kinds and
also to lay down the principles on which taxes on such
vehicles are to be levied. The central enactment i.e. the
law made by the Parliament has not laid down any
principles for levy of taxes. The State Legislatures had the
power to levy taxes not only under Entries 56 and 57 of
List II but also to lay down the principles under Entry 35
of List III. Therefore, no repugnancy of any kind could be
alleged or pleaded or proved in the absence of there being
54
any central law laying down principles of levy of tax. In
view of the above, no repugnancy or conflict of the State
enactment with the central enactment could be sustained.
47. The next argument of the learned amicus with respect
to the 1988 Act containing Section 192A wherein violation
of Section 66(1) would constitute a criminal offence
punishable with sentence and also fine, as such the
offending section being repugnant to the said provision,
cannot be sustained. Under Section 192A a punishment
of imprisonment along with fine is provided whereas under
the offending section, an additional special road tax is
being charged for such a violation of using vehicle without
permit or in contravention of the terms of the permit. The
offending section was incorporated with a view to augment
more revenue in order to construct and maintain the roads
of the state which uses a large chunk of its finances being
a state having a completely hilly terrain. The additional
special road tax chargeable under Section 3A(3) would be
55
in addition to any sentence or fine imposed under Section
192A. Punishment for offence is with an object to create
deterrence and curtailing such offences as it creates a fear
in the mind of offender likely to commit the offence. The
same is the object of the additional special road tax to
make it work as a deterrent from the transport operators
in plying vehicles without permit and in contravention of
the terms of the permit. As such there is no repugnancy
or any conflict caused by the offending provision with the
central enactment.
48. For all the reasons recorded above, the validity of
Section 3A(3), in our opinion, has been wrongly held to be
ultra vires by the High Court. The tax imposed under
Section 3A(3) is regulatory in character and is not a
penalty.
Lumpsum taxation :
49. The High Court had also quashed the notifications
issued by the State for levy of the taxes under Section
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3A(3) holding that lumpsum taxes could not be levied on
general assessment and it had to be levied as per actual
default. Levy of lumpsum tax has been upheld by a three
Judge Bench of this Court in the case of State of Tamil
Nadu vs. M. Krishnappan and Anr. reported in (2005) 4
SCC 53 . We find no reason to take a different view. It may
also be noted that the learned Amicus Curiae has also not
advanced any arguments on this point.
50. In view of the above, it would not be a futile exercise
to send the matters back to the regular Bench as we have
held that said Section 3A(3) of the 1972 Act being within
the legislative competence of the State Legislature, and
lumpsum tax could be levied. Nothing further remains to
be examined by the regular Bench in these appeals.
51. We, accordingly, allow the appeals, set aside the
impugned judgment and order of the High Court and
further dismiss the writ petitions.
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52. There shall be no order as to costs.
53. Pending application(s), if any, are disposed of.
…..……..........................J .
[SANJAY KISHAN KAUL]
………….........................J.
[ABHAY S. OKA]
………….........................J.
[VIKRAM NATH]
NEW DELHI
JANUARY 13, 2023.
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