Full Judgment Text
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CASE NO.:
Appeal (civil) 6462-6464 of 2001
PETITIONER:
State of Gujarat & Ors.
RESPONDENT:
Akhil Gujarat Pravasi V.S. Mahamandal & Ors.
DATE OF JUDGMENT: 08/04/2004
BENCH:
S. Rajendra Babu & G.P. Mathur.
JUDGMENT:
JUDGMENT
With Writ Petition (C) Nos.249 and 252 of 2002
G.P. MATHUR,J.
1. Civil Appeal Nos.6462-6464 of 2001 have been preferred by State of
Gujarat against the judgment and order dated 17.8.2001 of a Division Bench
of the High Court, whereby Section 3A (1) and (2) of Bombay Motor
Vehicles Tax Act, 1958 and also Rule 5 of Bombay Motor Vehicles Tax
Rules, 1959 made vide notification dated 6.2.2001 were struck down and a
writ of mandamus was issued to the State authorities not to recover any tax
in pursuance thereto from the vehicles of the respondents herein (writ
petitioners in the High Court) which were kept but were not being used. A
further direction was issued to the respondent State to grant refund of the tax
already recovered from the respondents within three months from the date of
receipt of copy of the judgment after examining their case regarding non-use
of the vehicles. After the decision of the High Court, the Bombay Motor
Vehicles Tax Act was amended by Gujarat Act No.9 of 2002 in order to
validate the imposition and collection of tax on designated omnibuses, which
was published in the Gazette on 31.3.2002. Writ Petition Nos.249 and 252
of 2002 have been filed in this Court challenging the amendments made by
the aforesaid amending Act.
2. It will be convenient to reproduce relevant provisions of the statute
which was subject matter of challenge before the Gujarat High Court. The
Bombay Motor Vehicles Tax Act, 1958 (hereinafter referred to as "the Act")
was made applicable to the State of Gujarat by the Gujarat Adoption of
Laws (State and Concurrent Subjects) Order, 1960. The Act was amended
several times and lastly on 6.2.2001 by Gujarat Act No.2 of 2001. Section 2
of this Act gives the definitions and Sub-section (1) defines "certificate of
taxation" and it means a certificate, issued under Section 5, indicating
therein the rate at which the tax is leviable, and the periods for which the tax
has been paid, Sub-section (5) defines "registered owner" and it means the
person in whose name a motor vehicle is registered under the Motor
Vehicles Act, 1939 (or, as the case may be, the Motor Vehicles Act, 1988)
and Sub-section (7) defines "Taxation Authority" or "Authority" and it
means such officer or authority as the State Government may by notification
in the Official Gazette, appoint to be the Taxation Authority for the whole
State or for any area or areas for the purposes of the Act, and the State
Government may appoint more than one officer or authority as Taxation
Authority for the whole State or for any area. The controversy here relates
to Sections 3 and 3A of the Act and the relevant part thereof are being
reproduced below :
Section 3 (1) Subject to the other provisions of this Act, on
and from the 1st day of April, 1958, there shall be levied and
collected on all motor vehicles used or kept for use in the State,
a tax at the rates fixed by the State Government, by notification
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in the Office Gazette, [but not exceeding the maximum rates
specified in the [First, Second, Third, Fourth, Fifth, Sixth and
Seventh Schedules] :
Provided \005\005\005\005\005.. [Omitted as not relevant]
Provided further \005\005\005\005. [Omitted as not relevant]
(2) Except, during any period for which the Taxation
Authority has, in the prescribed manner, certified that a motor
vehicle was not used or kept for use in the State, the registered
owner, or any person having possession or control, of a motor
vehicle of which the certificate of registration is current, shall,
for the purposes of this Act, be deemed to use or keep such
vehicle for use in the State.
(3) No tax shall be leviable under sub-section (1) on motor
vehicles on which tax is leviable under sub-section (1) of
section 3A.
Section 3A. (1) On and from the 1st day of April, 1991, there
shall be levied and collected on all omnibuses which are used or
kept for use in the State exclusively as contract carriages
(hereinafter in this section and sub-section (1A) of Section 4
referred to as "the designated omnibuses") a tax at the rates
specified in the table below :-
TABLE
--------------------------------------------------------------------------------------------
Description of Designated omnibuses Annual rate of tax
--------------------------------------------------------------------------------------------
1.(a) Ordinary designated omnibuses (Rs.2,700) per passenger permitted
permitted to be carried not more to be carried.
than twenty passengers.
(b) Ordinary designated omnibuses (Rs.4,050) per passenger permitted
permitted to be carried more to be carried.
than twenty passengers.
2.(a) Luxury or tourist designated (Rs.4,050) per passenger permitted
omnibuses permitted to be to be carried.
carried not more than twenty
passengers.
(b) Luxury or tourist designated (Rs.6,000) per passenger permitted
omnibuses permitted to be to be carried.
carried more than twenty
passengers.
Provided that in the case of the designated omnibuses
used solely for the purpose of transporting students of
educational institutions in the State in connection with any of
the activities of such educational institutions a tax shall be
levied and collected under sub-section (1) of section 3, and not
under this sub-section.
(2) (a) The tax leviable under sub-section (1) shall be paid in
advance by every registered owner or any person having
possession or control of the designated omnibuses either
annually at the annual rate specified in the Table appearing in
sub-section (1) or in monthly instalments of one-twelfth of the
annual rate.
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(b) The annual payment of tax or the payment of monthly
instalment of tax shall be made within such period and in such
manner as may be prescribed.
(3) \005\005\005\005\005\005.. [Omitted as not relevant]
(4) \005\005\005\005\005\005.. [Omitted as not relevant]
(5) (a) Where the registered owner or any person having
possession or control of a designated omnibus who has paid tax
under this section proves to the satisfaction of the Taxation
Authority that the designated omnibus in respect of which the
tax has been paid has not been used or kept for use for a
continuos period of not less than one month, he shall be entitled
to the refund of an amount equal to one-twelfth of the annual
rate of tax paid in respect of such omnibus for each complete
month of the period for which the tax has been paid so however
that, except as otherwise provided in clause (b) the total amount
of a refund in a year shall not exceed \026
(i) six hundred seventyfive rupees per passenger permitted
to be carried, in the case of an ordinary designated
omnibus permitted to be carried not more than twenty
passengers.
(ii) one thousand twelve rupees per passenger permitted to be
carried, in the case of an ordinary designated omnibus
permitted to be carried more than twenty passengers.
(iii) one thousand one hundred twenty-five rupees per
passenger permitted to be carried, in the case of a luxury
or tourist designated omnibus permitted to be carried not
more than twenty passengers.
(iv) one thousand five hundred rupees per passenger
permitted to be carried, in the case of a luxury or tourist
designated omnibus permitted to be carried more than
twenty passengers.
Provided that for the purpose of determining the amount
of refund under this clause, only such of the period in which a
designated omnibus has not been used or kept for use shall be
taken into account as comprises of complete months.
(b) Where a registered owner or a person having possession
or control of a designated omnibus, who has paid tax under this
section proves to the satisfaction of the State Government or
such officer not below the rank of the Director of Transport,
Gujarat State, as may, by notification in the Official Gazette, be
authorised in this behalf by the State Government that the
designated omnibus in respect of which tax has been paid, has
not been used or kept for use for a continuous period of not less
than one month but exceeding three months in a year, he shall
be entitled to the refund of an amount equal to one-twelfth of
the annual rate of the tax paid in respect of such omnibus for
each complete month of the period of which the tax has been
paid :
Provided that for the purpose of determining the amount
of refund under this clause only such of the period in which a
designated omnibus has not been used or kept for use shall be
taken into account as comprises of complete months.
(6) \005\005\005\005\005\005 [Omitted as not relevant]
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Section 4(1) provides that the tax leviable under Section 3 in respect
of a motor vehicle specified in the First Schedule shall be paid in advance by
every registered owner, or any person having possession or control, of such
motor vehicles to which sub-section (IAA) does not apply.
3. The Bombay Motor Vehicle Rules, 1959 (hereinafter referred to as
’the Rules’) were amended by Bombay Motor Vehicles Tax (Gujarat
Amendment) Rules, 2001 vide notification dated 6.2.2001 and after
amendment Rule 5 reads as under :
"(1) A registered owner or any person who has
possession or control of a motor vehicle in respect of which tax
is paid in advance, not intending to use or keep for use such
vehicle in the State and desiring to claim refund of tax on that
account shall before the commencement of the period for which
the refund of tax is to be claimed, make a declaration in form
NT for any specified period not exceeding beyond the period
for which the tax is paid in advance to the Taxation Authority
in whose jurisdiction such vehicle is to be kept under non-use
along with the certificate of taxation as well as certificate of
fitness in case of transport vehicles and a fee of rupees ten.
Provided that where a vehicle is rendered incapable of
being used or kept for use on account of an accident,
mechanical defect or any other sufficient cause, which make it
impossible to give an advance declaration as aforesaid then
such declaration shall be given within a period of seven days
from the date of occurrence of such accident, mechanical defect
or such other cause, either in person or by registered post
acknowledgement due;
(2) If the Taxation Authority is satisfied that the motor
vehicle, in respect of which a declaration in Form "NT" has
been made, has not been used, or kept for use for the whole or
part of the period mentioned in the declaration and it shall
certify that the motor vehicle has not been used or kept for use
for the whole or part of such period as the case may be by
making an endorsement in the certificate of taxation to that
effect.
Provided that nothing contained in this sub-rule shall
effect the right of the Taxation Authority to recover the tax and
penalty due for the period of non-use so certified if, at any time,
it is found that the vehicle was actually used or kept for use in
the State during such period.
(3) The declaration in Form ’NT’ given under the
proviso to sub-rule (1) shall be accompanied by the certificate
of Taxation and documentary evidence if any, or any other
proof evidencing such non-use of the vehicle and the period
thereof. Where the appropriate Taxation Authority, on
considering the evidence adduced, if any, and on making such
inquiries as it deems fit, refuses to admit the declaration of non-
use or to certify the period of non-use, it shall record in writing
its reasons therefor and communicate to the applicant."
4. A perusal of the Act would show that Section 3 is the general
charging Section which provides for levy of tax on all motor vehicles used
or kept for use in the State and the rate of tax for different categories of
vehicles is given in the schedule appended to the Act. However, Section
3A is a special provision with regard to the "designated omnibuses" and
prescribes the annual rate of tax for ordinary, luxury or tourist designated
omnibuses having regard to their passenger carrying capacity which are used
or kept for use in the State. The challenge here is to Section 3A and,
therefore, we will confine to the said provision. Sub-section (2)(a) of
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Section 3A enjoins that the tax shall be paid in advance by every registered
owner or any person having possession or control of the designated
omnibuses either annually or in monthly instalments. Sub-section (5)(a) of
Section 3A provides for refund of the tax already paid in advance where the
registered owner or any person having possession or control of a designated
omnibus satisfies the Taxation Authority that the vehicle had not been used
or kept for use for a continuous period of not less than one month. Sub-
section (5)(b) contains a similar provision of refund where the vehicle has
not been used or kept for use for continuous period of not less than one
month but exceeding three months in a year. But here the power of refund
has been conferred upon the State Government or such officer not below the
rank of the Director of Transport, as may, by notification in the official
gazette, be authorised in this behalf by the State Government. Rule 5 shows
that for claiming refund of the advance tax already paid a declaration in
Form NT has to be made to the Taxation Authority before the
commencement of the period for which the refund of tax is to be claimed in
case it is intended not to use or keep any such vehicle in the State. However,
where the vehicle becomes incapable of being used or kept for use on
account of any accident, mechanical defect or any other sufficient cause,
which makes it impossible to give advance declaration, then such declaration
has to be given within a period of seven days from the date of occurrence of
such accident or mechanical defect or other cause.
5. The writ petitions were filed in the High Court on the ground, inter
alia, that Section 3A of the Act is violative of Articles 14, 19(1)(g), 21 and
300 A of the Constitution as designated omnibuses which are in fact contract
carriages are discriminated against from other vehicles like stage carriages,
ordinary vehicles and goods vehicles and a very high rate of tax was
imposed upon them without there being any reasonable classification and
thus the impugned provision was wholly arbitrary and discriminatory. It
was submitted that if the vehicle is "not used" or "kept for use" or
"passengers are not carried to the full capacity" no tax could be levied and
consequently the provisions of Section 3A had been enacted without any
legislative competence having regard to the fact that the Act had been made
with reference to Entry 56 and 57 of List II of Seventh Schedule of the
Constitution. In this connection it was also submitted that the provision was
bad inasmuch as the amount of annual rate of tax was fixed not as per the
capacity of the vehicle or the distance actually covered or number of days of
actual use but on a fixed rate basis. Whether the vehicle covered only one
kilometer or thousand kilometers, the same amount of tax had to be paid.
Another submission made was that tax had to be paid for the whole month
even though the actual use of the vehicle may have been for a much shorter
period. Lastly, it was submitted that the provision for depositing tax in
advance and thereafter claiming a refund was wholly illusory and in fact the
authorities had not made any such refund even though applications in that
regard were pending for a long period. The High Court has held that the
impugned tax was a composite tax and not on passengers alone; the demand
of advance tax on passengers for one month was beyond the legislative
competence as Entries 56 and 57 of List II of Seventh Schedule of the
Constitution do not authorise levy of advance tax; similarly the demand of
advance tax on vehicles which are not put on road or which are kept away
from use was also beyond the legislative competence and the provision for
payment of advance tax and Rule 5 were without any authority of law. The
High Court further held that the mere fact that there was a provision for
refund of the advance tax paid, could not save the enactment as the levy of
advance tax itself was without any authority of law. On these findings, the
writ petitions were allowed and Section 3A (1) and (2) of the Act and Rule 5
of the Rules as inserted vide notification dated 6.2.2001 and also a
subsequent circular dated 8.2.2001 were struck down.
6. Learned counsel for the writ petitioners (here as well as before the
High Court \026 operators of vehicles) have submitted that the tax is essentially
a tax on passengers since rate of tax is fixed having regard to the number of
passengers permitted to be carried and on a plain reading of the Statute it is
clear that the enactment has been made with reference to Entry 56 List II of
Seventh Schedule of the Constitution whereunder tax can be levied on
passengers actually carried. But under this Entry, no tax can be levied
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unless a passenger actually travels in the vehicle and since the tax is levied
on the basis of seating capacity, it is beyond the legislative competence of
the State legislature. It is submitted that the plea of the State before the
High Court was that it is a composite tax i.e. a tax on passengers and a tax
on motor vehicles which is also evident from the speech given by the
Hon’ble Minister in the legislature and also from the counter affidavit filed
before the High Court. Therefore, in such a case, the requirement of both
the Entries 56 and 57 have to be satisfied. The impugned tax does not
satisfy the requirements of Entry 57 because even if the vehicle is not
intended to be used or kept for use, the entire tax has to be paid. Learned
counsel has further submitted that the provision for refund of the tax is
wholly illusory as the refund is allowed only if the vehicle is not used for the
entire period of one month and the use of the vehicle even for a single day
creates a liability for payment of tax for the whole month. Learned counsel
has also assailed the provision of Rule 5 which lays down the criteria for
determining as to whether a vehicle has not been used or has not been kept
for use.
7. Countering the submission made by learned counsel for the writ
petitioners, Shri Kirit N. Raval, learned Solicitor General appearing for the
State of Gujarat, has submitted that the owner of designated omnibus has to
first apply for a certificate of registration under the provisions of Motor
Vehicles Act and such a certificate gives rise to a presumption that the
vehicle in question is meant for use on roads in the State. The taxable
event occurs when the vehicle in question is ready for use and the liability to
pay tax immediately arises when the vehicle becomes usable. Once the
certificate of registration has been given and the taxable event occurs, it is
perfectly open to levy advance tax on motor vehicles and the High Court
was in error in holding that advance tax cannot be levied. This is
irrespective of the fact whether the tax in question is levied under Entry 56
or 57. Learned counsel has further submitted that if income tax can be levied
on income and there are provisions in the Income Tax Act for levy of
advance tax even when the income in question has not been earned, with a
machinery for refund, there is no reason why even under Entry 56 or 57, the
tax cannot be levied when the presumption of the vehicle being made for use
of passengers arises and taxable event has taken place. Learned Solicitor
General has also submitted that the contention that the contract carriages
have been levied a higher tax ignores the accepted position that contract
carriages are a class by themselves and a higher tax on such category of
vehicles has been specifically held to be permissible. The mere fact that
the tax falls heavily on one category is wholly irrelevant and the possibility
of better classification for imposition of tax in question is no ground for
striking down the levy.
8. The relevant entries with reference to which the impugned enactment
has been made are Entries 56 and 57 of List II of Seventh Schedule of the
Constitution which read as under :
Entry 56 \026 Taxes on goods and passengers carried by road or on inland
waterways.
Entry 57 \026 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 \026 Mechanically propelled vehicles including the
principles on which taxes on such vehicles are to be levied.
9. Before examining the contentions raised at the Bar it is necessary to
bear in mind certain fundamental principles which are too well settled. The
necessity for the same arises on account of the fact that they have been lost
sight of in the contentions raised on behalf of the operators of designated
omnibuses both here and also in the High Court.
10. In interpreting the scope of various entries in the legislative lists in
Seventh Schedule, widest possible amplitude must be given to the words
used and each general word must be held to extend to ancillary or subsidiary
matters which can fairly be said to be comprehended in it. The entries
should, thus be given a broad and comprehensive interpretation. In order to
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see whether a particular legislative provision falls within the jurisdiction of
the legislature which has passed it, the Court must consider what constitutes
in pith and substance the true subject matter of the legislation and whether
such subject matter is covered by the topics enumerated in the legislative list
pertaining to that legislature.
11. The enactment under question is a taxing statute. The indicia of tax
was explained by a bench of seven judges in Commission, Hindu Religious
Endowments, Madras v. Shri Laxmindra Thirtha Swamiar of Shri Shirur
Mutt AIR 1954 SC 284 which has since been consistently followed and it is
as under. A tax is a compulsory exaction of money by public authority for
public purposes enforceable by law and is not payment "for services
rendered". This definition brings out the essential characteristics of a tax as
distinguished from other forms of imposition which, in a general sense, are
included within it. The essence of taxation is compulsion that is to say, it is
imposed under statutory power without the tax-payers consent and the
payment is enforced by law. The second characteristic of tax is that it is an
imposition made for public purpose without reference to any special benefit
to be conferred on the payer of the tax. This is expressed by saying that the
levy of tax is for the purposes of general revenue, which when collected
forms part of the public revenues of the State. As the object of a tax is not to
confer any special benefit upon any particular individual there is no element
of ’quid pro quo’ between the tax payer and the public authority. Another
feature of taxation is that as it is a part of the common burden, the quantum
of imposition upon the tax-payer depends generally upon his capacity to pay.
12. A fee is generally defined to be a charge for a special service rendered
to individuals by some governmental agency. But the traditional view that
there must be actual quid pro quo has undergone a sea change with the
passage of time. Corelationship between the levy and the services
rendered/expected is one of general character and not of mathematical
exactitude. All that is necessary is that there should be a "reasonable
relationship" between the levy of the fee and the services rendered. It is
increasingly realized that the element of quid pro quo in the strict sense is
not a sine qua non for a fee. (See Sreenivas General Traders v. State of A.P.
AIR 1983 SC 1246, Municipal Corporation of Delhi v. Moh. Yasin AIR
1983 SC 617 and B.S.E. Brokers’ Forum v. Securities and Exchange Board
of India 2001 (3) SCC 482)
13. Entry 56 authorises a tax, the incidence of which is on goods and
passengers carried by road or on inland waterways. Even though the
amount of the tax may be measured by the fares or by the distance travelled,
the Entry does not specify who should be the assessee and, therefore, it is
open to enact a law to recover the tax from the owners or operators of the
vehicles. The tax imposed under this Entry is of regulatory and
compensatory character. The tax under Entry 57 is leviable by the State
legislature on all vehicles "suitable for use on roads" which are kept in the
State. The tax is compensatory in nature and, therefore, must have some
nexus with the vehicles using the public roads of the State. The words
"suitable for use" signify the kind of vehicles meaning thereby that the
vehicles should be such type which are normally capable of running on the
road. The entry does not indicate in any manner that tax would be leviable
only for the period when the vehicle is actually using the road and not
otherwise and, therefore, it has no corelation with the actual period of use.
Naturally the State has to maintain the roads and to keep them in proper
condition for all those who own vehicles suitable for use on roads. This is
irrespective of the fact whether they use it or not or use it occasionally or
for short duration only. It being a tax and not a fee (as understood in the
conservative sense) the actual use of the public roads of the State cannot be
insisted upon for incurring the liability.
14. The main ground of challenge of the writ petitioners is that Section
3A mandates payment of tax in advance even though the vehicle may not at
all be used. It may be noticed that Section 3A of the Act lays down that
there shall be levied and collected on all omnibuses which are used or kept
for use in the State exclusively as contract carriages a tax at the rates
specified in the table. The incidence of tax is, therefore, on omnibuses
which are "used or kept for use in the State". A similar controversy was
examined in Travancore Tea Co. v. State of Kerala AIR 1980 SC 1547.
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Here the company alleged that the vehicles were purchased by it solely and
exclusively for use in the tea estates and intended to be used only for
agricultural purposes and were not used nor kept for use in the State, as
contemplated by Section 3 of Kerala Motor Vehicles Taxation Act. It was
further alleged by the company that for the purpose of plantation it was
maintaining the roads, fit for vehicular traffic, in the eight estates covering a
length of 131 miles. Paragraphs 4, 5 and 6 of the Reports which are
relevant are being reproduced below :
"4. The question that falls for decision is whether on the
assumption that the motor vehicles are used or kept for use
within the estate, and not intended to be used on public roads of
the State; the tax is leviable? In order to appreciate the question
raised, it is necessary to refer to the relevant entry in the
Constitution, the provisions of the Act and the Motor Vehicles
Act and the decision relating to the question rendered by this
Court. Entry 57 in List II of the Constitution relates to 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. This entry enables the State Government to
levy a tax on all vehicles whether mechanically propelled or
not, suitable for use on roads. There is no dispute that the
vehicles are mechanically propelled and suitable for use on
roads.
5. Section 3 of the impugned Act (Kerala Motor Vehicles
Taxation Act (Act 24 of 1963) provides that a tax "shall be
levied on all motor vehicles used or kept for use in the State."
The levy is within the competence of the State legislature as
entry 57 in List II authorises levy on vehicles suitable for use
on roads. It has been laid down by this Court in Bolani Ores
Ltd. v. State of Orissa (1975) 2 SCR 138 at p,155; (AIR 1975
SC 17) that under Entry 57 of List II, the power of taxation
cannot exceed compensatory nature which must have some
nexus with the vehicles using the roads i.e. public roads. If the
vehicles do not use the roads, notwithstanding that they are
registered under the Act, they cannot be taxed.
6. If the words ’used or kept for use in the State’ are
construed as used or kept for use on the public roads of the
State, the Act would be in conformity with the powers
conferred on the State legislature under Entry 57 of List II. If
the vehicles are suitable for use on public roads they are liable
to be taxed. In order to levy a tax on vehicles used or kept for
use on public roads of the State and at the same time to avoid
evasion of tax the legislature has prescribed the
procedure\005\005\005\005\005."
(emphasis supplied)
After laying down the above principle of law the question whether
estate roads are public roads was left for investigation and decision by
R.T.O.
15. The validity of payment of advance tax was examined in State of
Karnataka v. K. Gopalakrishna Shenoy AIR 1987 SC 1911, with reference
to Mysore Motor Vehicles Tax Act, Section 3(1) whereof provided for levy
of tax on all motor vehicles suitable for use on roads, kept in the State of
Mysore. The explanation appended to Sub-section (1) of Section 3 laid
down that a motor vehicle of which certificate of registration is current shall,
for the purpose of the Act, be deemed to be a vehicle suitable for use on
roads. Section 4 provided that the tax under Section 3 shall be paid in
advance by the registered owner or person having possession or control of
the motor vehicle. Section 7 provided for refund of tax if it was proved to
the satisfaction of the prescribed authority that the vehicle had not been used
during the whole of the period for which tax had been paid or a continuous
part thereof not being less than one calendar month, a refund shall be made
of such portion of the tax and subject to such conditions as may be
prescribed. In paras 6 and 7 of the Reports, it was held as under :
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"6\005\005\005\005\005On a reading of Sections 3 and 4 it may be seen
that they make the registered owner or person having
possession or control of a motor vehicle kept in the State
absolutely liable to pay tax in advance at the rates specified in
part A of the Schedule thereto for a quarter, half-year or year at
his choice. The Motor Vehicle 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. It has been
observed by this Court in Automobile Transport Ltd. v. State of
Rajasthan (1963) 1 SCR 491: (AIR 1962 SC 1406) that the tax
on motor vehicles is a compensatory tax levied for the use of
the roads and 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.
7. What falls for consideration now is whether the owner or
person having the possession or control of a motor vehicle is
not bound to pay the tax under Section 3(1) of the Act because
the vehicle was in a state of repair and was not put to use on the
road and furthermore the Certificate of Fitness of the vehicle
had not been kept current even though the Certificate of
Registration was kept current. One factor which has to be
borne in mind in interpreting Section 3(1) and its Explanation is
the meaning to be given to the words "suitable for use on
roads", occurring in them as otherwise a misconception would
arise. These very words occur in Entry 57 in the State List
which reads as under:-
"Taxes on vehicles, whether mechanically propelled or
not, suitable for use on roads, including tram cars, subject to the
provisions of Entry 35 of List III".
The words "suitable for use on roads" in the said Entry have
been construed by Hidayatullah, J. as he then was, in
Automobile Transport (AIR 1962 SC 1406) case as under :
"The words ’suitable for use on roads’ describe the kinds
of vehicle and not their condition. They exclude from the
Entry, farm machinery, aeroplanes, railways etc. which though
mechanically propelled are not suitable for use on roads. The
inclusion of trams using tracks which may be on roads or off
them, makes the distinction still more apparent."
It, therefore, follows that the same meaning should be given to
those words occurring in Section 3(1) and the Explanation also.
The resultant position that emerges is that Section 3(1) confers
a right upon the State to levy a tax on all motor vehicles which
are suitably designed for use on roads at prescribed rates
without reference to the road worthy condition of the vehicle or
otherwise. Section 4 enjoins every registered owner or person
having possession or control of the motor vehicle to pay the tax
in advance. The Explanation to Section 3(1) contains a
deeming provision and its effect is that as long as the Certificate
of Registration of a motor vehicle is current, it must be deemed
to be a vehicle suitable for use on roads. The inevitable
consequence of the Explanation would be that the owner or a
person having control or possession of a motor vehicle is
statutorily obliged to pay the tax in advance for the motor
vehicle as long as the Certificate of Registration is current
irrespective of the condition of the vehicle for use on the roads
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and irrespective of whether the vehicle had a Certificate of
Fitness with current validity or not. The Act, however, takes
care to see that the owner of a motor vehicle or a person having
possession or control of it is not penalised by payment of tax in
advance for a vehicle which had not been actually used during
the whole of a period or part of a period for which tax had been
paid by him. \005\005\005\005"
After considering the provision for refund of the tax as contained in
Section 7 of the Act, it was held as under in para 8 of the Report :
"8. \005\005\005\005\005 The principle underlying the Taxation Act is
that every motor vehicle issued Certificate of Registration is to
be deemed a potential user of the roads all through the time the
Certificate of Registration is current and therefore liable to pay
tax under Section 3(1) read with Section 4. If, however, the
vehicle had not made use of the roads because it could not be
put on the roads due to repairs, even though the Certificate of
Registration was current, the owner or person concerned has to
seek for and obtain refund of the tax paid in advance after
satisfying the Authorities about the truth of his claim. It is not
for the Transport Authorities to justify the demand for tax by
proving that the vehicle is in a fit condition and can be put to
use on the roads or that it had plied on the roads without
payment of tax. It would be absolutely impossible for the State
to keep monitoring all the vehicles and prove that each and
every registered vehicle is in a fit condition and would be
making use of the roads and is therefore liable to pay the tax.
For that reason, the State has made the payment of tax
compulsory on every registered vehicle and that too in advance
and has at the same time provided for the grant of refund of tax
whenever the person paying the tax has not made use of the
roads by plying the vehicle and substantiates his claim by
proper proof. Any view to the contrary would defeat the
purpose and intent of the Taxation Act and would also afford
scope and opportunity for some of the persons liable to pay the
tax to ply the vehicle unlawfully without payment of tax and
later on justify their non-payment by setting up a plea that the
vehicle was in repair for a continuous period of over a month or
the whole of a quarter, half-year or year as they choose to
claim."
16. In Chief General Manager, Jagannath Area v. State of Orissa 1996
(10) SCC 676, the question for consideration was whether the dumpers
belonging to the appellant which were being used within the mining areas
were taxable under Orissa Motor Vehicles Taxation Act, Section 3 whereof
laid down that a tax shall be levied on every motor vehicle used or kept for
use within the State at the rates specified in the Schedule. Two contentions
were raised before this Court and the second contention was that the tax on
vehicles being compensatory in nature, levy of such tax can be sustained
only on the ground that the vehicles used the roads for which the tax is
levied and if the vehicle in question did not use the roads and yet tax is
levied on the same, the said levy is liable to be struck down. Repelling the
argument that in absence of actual use of the road, the tax would not be
leviable, this Court held as under in para 11 of the Reports :
"11. The tax imposed on the motor vehicles is basically a tax
for the use of the roads within the State. It is no doubt a
compensatory tax which facilitates trade, commerce and
intercourse within the State by providing roads and maintaining
roads in a good state of repairs. As has been held by this Court
in Automobile Transport Ltd. v. State of Rajasthan & Ors.
(1963) 1 SCR 491, it would not be right to say that the tax is
not compensatory because the precise or specific amount
collected is not actually used in providing any facilities. If a
statute fixes a charge for a convenience or service provided by
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the State or an agency of the State, and imposes it upon those
who choose to avail themselves of the service or convenience,
or who can use the services provided for, the imposition
assumes the character of remuneration or consideration charged
in respect of an advantage sought or received or advantage
which can be received. The mere fact that any particular
individual though can take advantage of the convenience of the
services provided by the State but for some reason or the other
chooses not to enjoy the services provided cannot escape the
taxing liability on that score nor can the provision imposing the
tax become invalid on that score. \005\005\005.."
17. This view has been reiterated in several decisions of this Court. In
State of Kerala v. Arvind Ramakant Modawdakar 1999 (7) SCC 400, the
Court ruled that it is a settled position in law that the actual user of the road
by the vehicles which are covered by the requisite permits is not always a
relevant factor since the taxable event under Section 3(1) of Kerala Motor
Vehicles Taxation Act occurs when the vehicle is used or is kept for use in
the State and once the vehicle becomes liable for payment of tax, the extent
and quantity of use by the vehicle is not a decisive factor for the purpose of
levy of tax. In Mahakoshal Tourist v. State of M.P. 2002 (7) SCC 245 the
challenge made with regard to the absence of a machinery for assessment of
tax for the vehicles plying in the State of Madhya Pradesh on the basis of All
India Tourist permit and denying them refund of tax for the period they were
not used or kept for use in the said State was considered. In view of the
language used in Section 3 of the relevant Act which provided for levy of
tax on every motor vehicle "used or kept for use in the State" at the rate
specified in the schedule, it was held that the expression "used" or "kept for
use" means, either the actual use of the vehicle on the roads of the State of
Madhya Pradesh or keeping the vehicle (which is in condition and capable
of being used) available for use in the State, if so desired. It was further
held that while plying outside the State in connection with the contract, a
vehicle will, nonetheless be within the import of "kept for use in the State"
and it is immaterial for the purpose of Section 3 whether a vehicle is actually
being used or is kept for use in the State.
18. The language used in Section 3A - all omnibuses which are used or
kept for use in the State exclusively as contract carriages - is in conformity
with Entry 57 of List II. The consistent view taken by this Court is that if a
vehicle is "used" or is "kept for use" in the State, it becomes liable for
payment of tax and the actual use or quantum of use is not material. The
fact that the statute provides for refund of the tax, if the authority is satisfied
that the vehicle has not been used, does not mean that the legislature can
only make a provision for levy of tax which is limited for the period of
actual use or that no tax can be levied during the period the vehicle is not put
to use in the State. The provision for the refund has been made only for the
advantage of the operator so that he may be relieved of the burden of tax
when he is not getting any income from the vehicle on account of its non-use
but it has no relevance to the competence or authority of the State to enact a
law providing for imposition of a tax on vehicles which are used or are kept
for use in the State.
19. Learned counsel for the writ petitioners has laid great emphasis upon
Bolani Ores Ltd. v. State of Orissa AIR 1975 SC 17 where having regard to
Bihar and Orissa Motor Vehicles Taxation Act an observation was made that
"it is not the purpose of the Taxation Act to levy taxes on vehicles which do
not use the roads or in any way form part of the flow of traffic on the roads
which is required to be regulated". Another observation in the same
judgment \026 "but Entry 57 of List II is subject to the limitation 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. If the
vehicles do not use the roads, notwithstanding that they are registered under
the Motor Vehicles Act, they cannot be taxed" has also been heavily relied
upon for contending that tax can be levied only for the period when the
vehicle is actually using the road and consequently Section 3A of the Act is
invalid. In fact, the High Court has also taken support from the aforesaid
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observation for holding that for the period, the designated omnibuses are not
using the roads and are merely standing, no tax is leviable. It is trite that any
observation made during the course of reasoning in a judgment should not
be read divorced from the context in which they were used. Bolani Ores
Ltd. had filed a suit seeking a declaration that certain machineries like
Shovels, Caterpillars, Bulldozers, Rockers, Dumpers and Tractors, etc.
which were used in mining operation in the area leased out to them were not
liable for registration under Section 22 of the Motor Vehicles Act and cannot
be taxed under Section 6 of the Bihar Taxation Act. The observation
aforesaid was made in the context of the machinery which was used for
mining operation within the leased area which obviously did not form part of
the flow of traffic on the roads. The Court was not called upon to answer
the question posed here, namely, whether a normal motor vehicle cannot be
taxed for the period during which it is kept for use but is actually not
operating. The Court did not hold as a proposition of law that for the period
a vehicle is not used on the roads, it cannot be taxed.
20. The principle laid down in State of Mysore v. Sundaram Motors Pvt.
Ltd. AIR 1980 SC 148 reliance on which has been placed by the High Court
has also no application here. Section 3 of Mysore Motor Vehicles Taxation
Act provided that a tax shall be levied on all motor vehicles suitable for use
on roads, kept in the State of Mysore. M/s Sundaram Motors were dealers
in motor vehicles which were manufactured in Bombay and some of these
vehicles passed through the territory of State of Mysore on way to their
destination in another State (Tamil Nadu) and during the course of the
journey, the vehicles halted for rest and food, etc. of the drivers. It was held
that the short break taken during the course of journey could not fasten
liability for tax as the words "kept" employed in Section 3 had an altogether
different connotation, which has an element of stationariness. The principle
laid down in this case can hardly have any application here. Similarly, the
writ petitioners can derive no assistance from State of Gujarat v.
Kaushikbhai K. Patel AIR 2000 SC 2175, wherein the words "for reasons
beyond the control of such owner or person" previously occurring in Section
3A(5)(b) were held to be beyond the legislative competence of the State. In
this case the High Court had held that once the statute provided for refund of
tax on account of non-use of the vehicle, the legislature could not have
imposed a further condition to the effect "for reasons beyond the control of
such owner or person" and the said expression was held to be beyond the
legislative competence. The appeal preferred by the State of Gujarat was
dismissed by this Court and the view taken by the High Court was affirmed.
We would like to point out that the judgment does not show that the
attention of the Bench was invited to any of the decisions which we have
referred to above, wherein it has been held that actual user of the road is not
material and mere keeping of the vehicle which is capable of being used is
enough to attract liability of tax.
21. Learned counsel for the writ petitioners has submitted that the purpose
for which the Act was enacted was to augment the financial resources of the
State to meet the huge expenditure on account of natural calamities etc. as
has been mentioned in the Statement of Objects and Reasons. Therefore the
Act is not a compensatory enactment which may have been passed for
collecting revenue for the purpose of maintenance of roads and consequently
the same is invalid. In our opinion, the contention raised has no substance.
In G.K. Krishnan v. State of Tamil Nadu AIR 1975 SC 583 this Court has
clearly ruled that if the State Legislature was competent to pass the Act, the
question of motive with which the tax was imposed is immaterial and there
can be no plea of a colourable exercise of power to tax if the Government
had the power to impose the tax. It was further held that if the Government
had an authority to impose a tax, the fact that it gave a wrong reason for
exercising the power would not derogate from the validity of the tax.
22. Learned counsel for the writ petitioners has also submitted that only
contract carriages which are designated as omnibuses and luxury or tourist
designated omnibuses have been subjected to a very heavy tax under Section
3A of the Act, whilst all other vehicles are taxed under Section 3 of the Act
and whereunder the quantum of tax is much lower as would be evident from
First to Seventh Schedule of the Act. The submission is that these vehicles
have been discriminated against in the matter of taxation and there is no
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lawful justification for meeting out such differential treatment to them. We
are unable to accept the submission made. A similar contention was
negatived in G.K. Krishnan v. State of Tamil Nadu AIR 1975 SC 583 on the
ground that the classification of vehicles as Stage carriage and contract
carriage for the purpose of imposing a higher tax on the latter is presumed to
be reasonable having regard to the fact that it was based on local conditions
of which the Government was fully cognizant and the differentiation thus
made has reasonable relation to the purpose of the Act. A similar
contention made in Malwa Bus Service v. State of Punjab AIR 1983 SC
634 was repelled and it was held as under :
"\005\005..There is no dispute that even a fiscal legislation is
subject to Article 14 of the Constitution. But it is well settled
that a legislature in order to tax some need not tax all. It can
adopt a reasonable classification of persons and things in
imposing tax liabilities. A law of taxation cannot be termed as
being discriminatory because different rates of taxation are
prescribed in respect of different items, provided it is possible
to hold that the said items belong to distinct and separate groups
and that there is a reasonable nexus between the classification
and the object to be achieved by the imposition of different
rates of taxation. The mere fact that a tax falls more heavily on
certain goods or persons may not result in its invalidity\005\005\005"
It was further held that the Courts lean more readily in favour of
upholding the constitutionality of taxing law in view of the complexities
involved in the social and economic life of the community. Unless the
fiscal law in question is manifestly discriminatory, the Court should refrain
from striking it down on the ground of discrimination. This being the
position of law, it is not possible to accept the contention of the writ
petitioners that the tax imposed upon the designated omnibuses is
discriminatory.
23. Nothing new has been pointed out to challenge Gujarat Act No.9 of
2002 by which the Bombay Motor Vehicles Taxation Act, as adopted in the
State of Gujarat with up to date amendments, was further amended after the
decision of the High Court which was rendered on 17th August, 2001. In
fact, the main argument of the learned counsel for the writ petitioners is that
the said amending Act merely rearranged the Sections and suffered from the
same infirmity as the previous Act. Since we are of the opinion that the
view taken by the High Court is not correct and Section 3A and Rule 5 of
the Rules, as incorporated vide notification dated 6.2.2001 are intra vires and
are perfectly valid, the challenge made to Gujarat Act No.9 of 2002 has no
substance and must fail.
24. In the result, Civil Appeal Nos.6462-6464 of 2001 filed by the State
of Gujarat are allowed and the impugned judgment and order dated
17.8.2001 of the High Court is set aside. Writ Petition Nos.249 and 252 of
2002 filed in this Court are dismissed. No costs.