HONDA MOTORCYCLE AND SCOOTER INDIA PVT. LTD. vs UNION OF INDIA
- Court
- Rajasthan High Court
[2026:RJ-JP:31407-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Civil Writ Petition No. 8258/2026
CNR: RJHC020371352026 | URN: CW / 18194U / 2026
Honda Motorcycle And Scooter India Pvt. Ltd., Having Its
Registered Office At Plot No. 1, Sector-3, Imt Manesar,
Gurugram - 122050 And Factory At Plot No. Spl - 2(D), 2 (E),
2(F) And 2(G) Tapukara, District Alwar, Rajasthan Through Its
Authorised Signatory Ms Apeksha Awasthi
----Petitioner
Versus
1. Union Of India, Through Secretary, Ministry Of Road
Transport And Highways, Transport Bhawan, 1, Parliament
Street, New Delhi - 110001
2. State Of Rajasthan, Through Principal Secretary And
Transport Commissioner, Transport Department, Jaipur -
302005
3. Additional Transport Commissioner, Transport
Department, Government Of Rajasthan, Jaipur - 302005
4. Regional Transport Officer, Distt. Alwar, Rajasthan.
5. District Transport And Taxation Officer, Bhiwadi, Alwar,
Rajasthan.
----Respondents
Connected with
D.B. Civil Writ Petition Nos. 13820/2017, 13821/2017,
13825/2017, 13828/2017, 13830/2017, 1413/2018, 4676/2018,
4677/2018, 5247/2018, 5368/2019, 4360/2020, 6280/2020,
6285/2020, 6290/2020, 9487/2020, 10463/2020, 10481/2020,
3131/2021, 4018/2021, 4174/2021, 10219/2021, 5231/2022,
5238/2022, 10212/2022, 5613/2023, 6501/2023,11302/2023,
6777/2024, 4151/2025, 4771/2025, 8810/2025, 9140/2025,
7879/2026, 11608/2026
For Petitioner(s) : Mr. Lakshami Kumaran, Sr. Advocate
Mr. Sudhir Gupta, Sr. Advocate
assisted by Mr. Umang Gupta
Ms. Shweta Chauhan
Mr. Vinay Kumar Jain
Ms. Priyavada Joshi
Mr. Sakshya Jain
Mr. Sanjay Kumar
Mr. Anshul Sehgal
Mr. Pranshu Paul
Mr. Pranav Pareek
Mr. Aman Lodiya
Mr. Rachit Somani
Mr. Madhusudan Purohit
Mr. Harshit Bansal
For Respondent(s) : Mr. Rajendra Prasad, AG assisted by
Ms. Dhrishti Laddha
Mr. Tanay Goyal
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Mr. Bharat Vyas, ASG, through V.C.
assisted by Ms. Niti Jain Bhandari
Mr. Devesh Yadav
Mr. Rakesh
HON'BLE MR. JUSTICE ARUN MONGA
HON'BLE MR. JUSTICE ASHUTOSH KUMAR
Judgment
INDEX
For the sake of convenience our Judgment is divided in following parts:
Sr.
TITLE PAGE
No.
NO.
A. INTRODUCTION 4
B. FACTS 5
C. THE STATUTORY AND CONSTITUTIONAL
6
FRAMEWORK
D. SUBMISSIONS ON BEHALF OF THE
14
PETITIONERS
E. SUBMISSIONS ON BEHALF OF THE STATE 16
F. QUESTIONS OF LAW FOR DETERMINATION 17
G. QUESTION I. THE REACH OF THE CHARGE
19
UNDER SECTION 4(1)(d)
H. QUESTION II. SECTION 39, THE TRADE
24
CERTIFICATE AND THE VIRES OF RULE 33
I. QUESTION III. THE CONSTITUTIONAL
30
VALIDITY OF THE LEVY
J. RELIEF AND THE INDIVIDUAL ASSESSMENTS 37
K. SUMMARY OF CONCLUSIONS 38
L. ORDER 39
Reportable
Reserved on: 07/08/2026
Pronounced on: 06/11/2026
Per: Arun Monga, J.
A. INTRODUCTION
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1. This batch of writ petitions turns on one central question. Is a
manufacturer of motor vehicles liable to tax under Section 4(1)(d) of
the Rajasthan Motor Vehicles Taxation Act, 1951 ("Act of 1951") for
finished vehicles he holds inside his factory before despatching them to
dealers? The petitioners say he is not, unless the vehicles are shown to
have used the roads of this State. The State says the charge attaches to
possession of such vehicles in the course of business and it does not
depend upon proof of user.
2. The petitioners also challenge the vires of four provisions. They are
the proviso to Section 39 of the Motor Vehicles Act, 1988 ("Act of
1988"), Rule 33 of the Central Motor Vehicles Rules, 1989 ("Rules of
1989"), Section 4(1)(d) of the Act of 1951, and Notification S.O. 413,
dated 31.03.2000 issued under it. In the alternative, they seek a
reading down of these provisions. In the further alternative, they seek a
declaration that Rule 33 is ultra vires the proviso to Section 39.
3. The issues in all the petitions are identical. The petitions were heard
together. There are two sets of petitions bunched together i.e. one by
M/S Honda car India Ltd. And then by M/S Hero Motocorp Ltd.. They are
being decided by this common judgment. For convenience, we have
taken the facts and recitals from D.B. Civil Writ Petition No.
13820/2017.
B. FACTS
4. The petitioner is a company incorporated under the Companies Act.
It manufactures and markets motor cars. It began production in
February 2014.
5. On 04.03.2016, the Transport Inspector, Bhiwadi, visited the factory
in exercise of his power of entry as per Section 18 of the Act of 1951. A
memo was drawn up. It recorded that, under Rule 33 of the Rules of
1989 as amended and the notification dated 31.03.2000, a
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manufacturer could keep an unregistered vehicle only after obtaining a
trade certificate. The petitioner was asked to give details of vehicles
manufactured from February 2014 onwards. It was also asked to
deposit tax.
6. The petitioner replied on 14.03.2016. Production data was also
provided. It disputed the need for a trade certificate. It said a certificate
was needed only for the purposes listed in Rule 41 of the Rules of 1989.
7. However, on 31.03.2016, the District Transport Officer assessed tax
for the period 01.04.2014 to 31.03.2015. He did so under Section 4(1)
(d) of the Act of 1951 read with the notification dated 31.03.2000. He
exercised the power of computation in Section 8A of the Act of 1951.
Demand Notice was issued the same day.
8. The petitioner appealed under Section 14 of the Act of 1951. An
order was passed on 29.07.2016 on its application for stay. On
09.08.2016, the appeal was dismissed because the deposit required by
the second proviso to Section 14(2) had not been made.
9. The petitioner then filed S.B. Civil Writ Petition No. 13405/2016
before this Court. On 18.01.2017, interim protection was granted upon
deposit of fifty per cent of the demand. The deposit was made. On
01.08.2017, the petitioner was allowed to withdraw that petition with
liberty to challenge the vires of the provisions now impugned by way of
D.B. Writ Petition. Fresh petitions were filed each year, as demands
were raised for later years. The particulars of those petitions are set out
in the Schedule A and B annexed to this judgment.
C. THE STATUTORY AND CONSTITUTIONAL FRAMEWORK
10. Three sets of provisions operate together in this case and we
propose to delve into same before adverting to merits of the case.
Those are:
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(i) The first is a constitutional entry.
(ii) The second is a State taxing statute.
(iii) The third is a Central regulatory statute and the rules made
under it.
10.1 In the order to have better understanding of the case in hand, let
us see what is the inter se , link among all three. Much of the argument
at the Bar turned upon them. We therefore propose to set them out
first.
10.2 Wherever we deemed it necessary, the relevant ones have been
reproduced and the rest of them have just been referred/discussed with
brief particulars thereof to maintain brevity.
C.1 The constitutional entries
11. Entry 57 of List II of the Seventh Schedule reads as follows.
"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."
12. Entry 35 of List III reads as follows.
"Mechanically propelled vehicles including the principles on which taxes
on such vehicles are to be levied."
13. The framers used the words "suitable for use on roads" in Entry 57.
They did not use the words "used on roads". Nor did they use the words
"using the roads of the State". The entry identifies the object of tax by
the character of the vehicle. It does not identify it by any activity of the
vehicle. The reason is plain. The State builds and maintains roads for all
who keep vehicles capable of using them. A levy that depended on
proof that a particular vehicle used a particular road on particular days
would be unworkable. It would also be evaded simply by laying up the
vehicle.
14. Entry 57 is made subject to Entry 35 of List III. That condition
operates only where Parliament has made a law laying down the
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principles on which taxes on mechanically propelled vehicles are to be
levied. No such law appears to have been made or has been placed
before us. The said condition therefore does not, by itself, in any
manner narrow the field open to the State.
C.2 The charging provision in the Rajasthan Motor Vehicles
Taxation Act, 1951
15. Section 4(1) of the Act of 1951 is reproduced as under:-
“ 4. Imposition of tax
(1) Save as otherwise provided by this Act or by the Rules made
thereunder or any other law for the time being in force, there shall be
levied and collected on all motor vehicles used or kept for use in the
State,-
(a) a tax in respect of such vehicles which are not covered by clause
(b), (c), (cc) or (d) at such rates as may be specified by the State
Government by notification in the Official Gazette which shall not
exceed 10% of the cost of the chassis/vehicles per annum:
Provided that where the rates are not specified, on quarterly, half
yearly or monthly basis, by the State Government, by notification in
the Official Gazette and if the tax is permissible to be paid quarterly,
half yearly or monthly, the amount payable shall be equivalent to the
one forth, one half or one twelfth respectively of the annual rate of tax;
(b) a One Time Tax in the case of non transport vehicles at such rates
as may be notified by the State Government by notification in the
Official Gazette which shall not exceed-16% of the cost of the vehicle/
chassis:
Provided that in the addition to One Time Tax there shall be paid by
the owner or person having possession or control of a motor vehicle
on which one time tax is payable, any tax or penalty as was payable
under this Act for any period prior to the coming into force of the
provisions of "Chapter V of the Rajasthan Finance Act, 2005 (Act No.
15 of 2005) at such rates as were applicable to such vehicles from time
to time:
Provided further that on every transfer of ownership of motor vehicle
mentioned above, an additional one time tax shall be payable at such
rates as may be notified by the State Government in the Official
Gazette;
(c) a tax in respect of motor vehicles registered outside the State and
using roads in Rajasthan, at such rates, as may be notified by the State
Government in the Official Gazette which shall not exceed Rs. 500/-
per seat for 7 days or part thereof in case of passenger vehicles and
shall not exceed Rs. 250/-per thousand Kg. Gross Vehicle
Weight/Registered Laden Weight or part thereof for 30 days or part
thereof in case of goods vehicles and shall not exceed Rs. 5000/- per
thousand Kg. of Unladen Weight or part thereof for 30 days or part
thereof in case of Construction Equipment Vehicles;
(cc) a tax in respect of motor vehicles or motor vehicle chassis
temporarily registered and passing through the State using roads in
Rajasthan, at such rates, as may be notified by the State Government
in the Official Gazette which shall not exceed Rs. 5000/-:
(d) a tax on dealers in, or manufacturer of, motor vehicles in respect of
such vehicles as are in their possession in the course of his business as
such manufacturers, or dealer under the authorisation of a trade
certificate granted or deemed to be granted under the Motor Vehicle
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Rules for the time being in force in the State of Rajasthan, at such
rates as may be specified by the State Government by a notification in
the Official Gazette which shall not exceed rupees ten thousand for
every 50 vehicles or part thereof in respect of three or four wheeled
vehicles; and shall not exceed Rs. 10,000/- for every 100 vehicles or
part thereof in respect of two wheeled vehicles; and
(e) a one time tax in respect of transport vehicles at such rates as may
be notified by the State Government in the Official Gazette, which
shall not exceed 50% of the cost of the vehicle/chassis:
Provided that in addition to one time tax, there shall be paid by the
owner or person having possession or control of transport vehicle on
which one time tax is payable any tax or penalty as was payable under
this Act for any period prior to the coming into force of the provisions
of the Chapter V of the Rajasthan Finance Act, 2005 (Act No. 15 of
2005) at such rates as were applicable to such vehicles from time to
time:
Provided further that the owner or person having possession or
control of transport vehicles shall have option either to pay tax levied
under clause (a) or one time tax levied under clause (e).”
Section 4(1) of the Act of 1951 is thus the charging provision. It opens
with a saving clause and a common description. It then divides the
charge among five clauses.
16. Perusal of the section 4(1), ibid , reveals that clause (a) thereof
covers vehicles not covered by clauses (b), (c), (cc) or (d). It fixes a
rate by gross vehicle weight or by seat. Clause (b) covers non transport
vehicles and notified transport vehicles. It levies a one time tax by
reference to the cost of the vehicle or chassis. Clause (c) covers
vehicles registered outside the State. It expressly requires that they be
"using roads in Rajasthan". Clause (cc) covers vehicles or chassis
temporarily registered and passing through the State. It too expressly
requires that they be "using roads in Rajasthan". Clause (d) covers
dealers in, and manufacturers of, motor vehicles. Its criterion is
possession in the course of business under the authorisation of a trade
certificate granted or deemed to be granted.
17. Clause (d) is the one with which we are concerned. At the cost of
repetition, let us have a segregated look at it. It reads as follows.
"(d) a tax on dealers in, or manufacturer of, motor vehicles in respect of
such vehicles as are in their possession in the course of his business as such
manufacturers, or dealer under the authorisation of a trade certificate
granted or deemed to be granted under the Motor Vehicle Rules for the time
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being in force in the State of Rajasthan, at such rates as may be specified by
the State Government by a notification in the Official Gazette which shall
not exceed rupees ten thousand for every 50 vehicles or part thereof in
respect of three or four wheeled vehicles; and shall not exceed Rs. 10,000/-
for every 100 vehicles or part thereof in respect of two wheeled vehicles.”
18. Section 4 also carries two Explanations. It is the second which is of
importance for the purpose of adjudication in hand. It reads as follows.
"Explanation. (2) For determining the vehicles kept in possession of a
dealer or manufacturer, the number of vehicles declared by them likely to be
in their possession or the vehicles sold by them during the preceding year,
whichever is higher, shall be taken into consideration."
19. Section 2(e) of the Act of 1951 is a definition by reference. Words
used but not defined in that Act, and defined in the Act of 1988 and the
Rules of 1989, carry the meanings given to them by that Act and those
Rules, as amended from time to time. The words dealer, manufacturer,
motor vehicle and trade certificate in clause (d) therefore take their
meaning from the Central law.
C.3 The notification dated 31.03.2000
20. The notification is issued under clause (d) of Section 4(1). Its
opening words prescribe the rate of tax on manufacturers or dealers
having possession of motor vehicles in a financial year under the
authorisation of a trade certificate granted or deemed to be granted
under the motor vehicles rules. It fixes the rate at Rs. 4,000/- for every
fifty units of three or four wheeled vehicles. It fixes Rs. 2,000/- for
every hundred two wheeled vehicles. The first rate works out to Rs.
80/- per vehicle for a whole financial year. The statutory ceiling is Rs.
10,000/- for every fifty such vehicles.
21. The notification also carries a proviso and three Explanations. They
decide more than one point. They read as follows.
"Provided that in case of vehicles transferred or sold otherwise than sold
with form No. 21 prescribed in Central Motor Rules, 1989 by a dealer, the
rate of tax shall be one fourth of the rates prescribed above in column No.
3.
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Explanation. (i) Dealer shall have the same meaning as defined under
Motor Vehicles Act, 1988.
(ii) For determining the vehicles kept in possession of a dealer or
manufacturer, the number of vehicles declared by them likely to be in their
possession or the vehicles sold by them during the preceding year,
whichever is higher, shall be taken into consideration.
(iii) The tax is to be paid in advance within the first 7 days of the
commencement of the financial year. For determining the vehicles likely to
be sold or manufactured or financed by the dealer or manufacturer in the
financial year for which the tax has become due, the number of vehicles
declared by them likely to be sold or manufactured or financed, or the
vehicles actually sold or manufactured or financed by them during the
preceding financial year, whichever is higher, shall be taken into
consideration, and adjustment of tax shall take place in the next financial
year alongwith the payment of advance the next financial year."
C.4 The machinery of the Act of 1951
22. Section 5(1) requires the tax under Section 4 to be paid in advance
in the prescribed manner. Section 8 requires a declaration to be
delivered to the Taxation Officer. Section 8A confers the power of
assessment. It reads as follows.
" 8A. Computation of tax.
If the Taxation Officer is satisfied that tax has not been correctly paid, he
shall, after giving the owner a reasonable opportunity of being heard,
proceed to compute the amount of tax due and recover the same."
23. Section 14 provides the remedies. Sub section (1) gives an appeal,
within thirty days, to the appellate authority appointed by the State
Government. Sub section (2) makes the appellate order final. It then
carries four provisos.
24. By the first proviso, the Commissioner may call for the record and
revise the order in appeal. He may do so on his own motion or on an
application filed within ninety days. By the second proviso, no appeal
shall be entertained unless it is accompanied by proof of payment of
fifty per cent of the amount due under the order appealed against, or of
the amount admitted, whichever is higher. The same proviso says the
appellate authority shall not stay recovery of tax. By the third proviso,
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where an appeal or revision is pending, the Commissioner may stay
recovery on a written application if the owner furnishes sufficient
security. By the fourth proviso, tax so stayed carries interest. Sections
2(a) and 2(aa) define Commissioner to include the Additional Transport
Commissioner.
25. Section 18 empowers an officer of the Transport Department, not
below the rank of Sub Inspector, to enter premises between sunrise and
sunset. He may do so where he has reason to believe that a motor
vehicle is kept there in contravention of the Act. The Act therefore
expressly contemplates that vehicles liable to tax may be kept on
private premises.
C.5 Registration under the Motor Vehicles Act, 1988
26. Section 39 of the Act of 1988 reads as follows.
" 39. Necessity for registration.
No person shall drive any motor vehicle and no owner of a motor vehicle
shall cause or permit the vehicle to be driven in any public place or in any
other place unless the vehicle is registered in accordance with this Chapter
and the certificate of registration of the vehicle has not been suspended or
cancelled and the vehicle carries a registration mark displayed in the
prescribed manner. Provided that nothing in this section shall apply to a
motor vehicle in possession of a dealer subject to such conditions as may be
prescribed by the Central Government.”
(Emphasis is ours)
27. Three features of the section stand out. First, the prohibition covers
not only a public place but "any other place". Second, the prohibition
says "no person shall drive". It is therefore not confined to the owner,
on whom Section 40 casts the duty to register. Third, the exemption in
the proviso is defined by status, namely possession by a dealer. The
prohibition, on the other hand, is defined by conduct, namely driving.
28. Section 2(28) defines a motor vehicle as any mechanically
propelled vehicle adapted for use upon roads. Among other things, it
excludes a vehicle of a special type adapted for use only in a factory or
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in any other enclosed premises. Section 43 provides for temporary
registration. It is valid for not more than one month. It may be
extended in the case of a chassis awaiting a body.
29. Section 64 confers the rule making power of the Central
Government for Chapter IV. Its heads run from clause (a) to clause (p).
We have examined them. None of them deals with trade certificates.
None deals with the exemption of vehicles in the possession of a dealer.
The only head that can support Rule 33 is the residuary clause. It reads,
"any other matter which is to be, or may be, prescribed by the Central
Government".
30. Section 65 confers the corresponding power on the State
Government. It does deal with this subject by name. Clause (m) of sub
section (2) reads as follows.
"(m) the exemption from the provisions of this Chapter and the conditions
and fees for exemption, of motor vehicles in the possession of dealers."
31. Section 2(8) defines dealer. The definition is inclusive. As first
enacted, its clause (a) spoke of a person engaged in the manufacture of
motor vehicles. That clause now stands omitted. Section 2(21A) now
separately defines manufacturer as a person engaged in the
manufacture of motor vehicles. We return to the effect of this change in
Part H of our judgment.
C.6 The trade certificate scheme under the Central Motor
Vehicles Rules, 1989
32. Rule 33 of the Rules of 1989 reads as follows.
" 33. Condition for exemption from registration.
For the purpose of the proviso to section 39, a motor vehicle in the
possession of a dealer or manufacturer of automobiles or automobile
ancillaries or a test agency specified in rule 126 shall be exempted from the
necessity of registration subject to the condition that he obtains a trade
certificate from the registering authority having jurisdiction in the area in
which the dealer or manufacturer of automobiles or automobile ancillaries
or a test agency specified in rule 126 has his place of business in
accordance with the provisions of this Chapter."
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33. The words describing the different class i.e. dealer, manufacturer,
automobile, test agency were substituted, by Notification G.S.R. 291(E)
dated 24.04.2014. Before that, the rule as it originally existed spoke of
a dealer alone.
34. The rest of the group must be read with Rule 33. Rule 34
prescribes the application. It requires a separate application for each
class of vehicle. Rule 35(1) provides for grant or renewal. It assigns a
trade registration mark made up of the State code, the district code and
the letters TC with a number. Rule 35(2) reads as follows.
"(2) No application for trade certificate shall be refused by the registering
authority unless the applicant is given an opportunity of being heard and
reasons for such refusal are given in writing."
35. Rule 37 makes the certificate valid for twelve months throughout
India. Rule 39(1) forbids use of a trade registration mark on more than
one vehicle at a time. It also forbids its use on any vehicle other than
one bona fide in the possession of the holder in the course of his
business. Rule 39(2) requires the certificate to be carried in a weather
proof folder and the mark to be shown conspicuously. Rule 40 confines
use of the certificate to the holder and those acting under his authority.
36. Rule 41 lists, in eight clauses, the purposes for which the holder
may use a vehicle in a public place under the certificate. Rule 42 says
no holder shall deliver a motor vehicle to a purchaser without
registration, whether temporary or permanent. Rule 43 requires a
register in Form 19 and a trip record carried by the driver. Rule 44
permits suspension or cancellation for breach of Rules 39 to 43, after a
hearing.
37. The opening words of Rule 41 deserve emphasis, because much
turns on them. They say the holder of a trade certificate "shall not use
any vehicle in a public place under that certificate for any purpose other
than the following". The rule restricts use of vehicle to what a certificate
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permits in a public place. On its terms, it does not describe the
occasions on which a certificate must be taken out.
38. Having travelled the road starting from Constitution of India,
Central Acts, State Acts and respective Rules framed thereunder, let us
now see what is the collective import thereof. Read as a whole, the
design is plain. A person who trades in motor vehicles necessarily holds
unregistered vehicles. To register them in his own name would be
artificial, because he is not the intended user. It would also force
cancellation and fresh registration on every sale. The law therefore puts
a class authorisation in place of individual registration. That removes
individual identification. So the scheme supplies other controls in its
place. There is a trade registration mark to be displayed. It may be
used on one vehicle at a time. There is a closed list of permitted uses in
a public place. There is a bound register with trip records. There is a
duty to register before delivery. There is a power to suspend for breach.
It is a controlled dispensation and not a free pass.
C.7 How the three instruments fit together
39. The Act of 1988 and the Rules of 1989 are referable to Entry 35 of
List III. They regulate. They do not tax. The Act of 1951 is referable to
Entry 57 of List II. It taxes. It does not regulate.
40. In our view, the link between them is this. The State Legislature
chose to describe the subject of its charge by borrowing a concept from
the Central Rules. Through Section 2(e), it imported the Central
meanings. That device does not make the validity of the State charge
depend on the Central Rules. It makes only the identification of the
persons and vehicles charged depend on them.
D. SUBMISSIONS ON BEHALF OF THE PETITIONERS
41. Learned Senior Counsel Mr. Lakshami Kumaran and Mr. Sudhir
Gupta assisted by the team of briefing Counsels for the petitioners
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advanced various contentions, but we crystallise them from brevity as
below:-
42. First, Section 4(1)(d) taxes only vehicles that are used or kept for
use in this State and that are, in addition, held under a trade certificate.
Vehicles lying in a factory yard awaiting despatch meet neither
condition. About ninety five per cent of the production leaves this State
on trailers and never touches a road here.
43. Second, Section 39 of the Act of 1988 prohibits the driving of an
unregistered vehicle. It has no application where the vehicle is not
driven at all. The proviso cannot travel beyond the field of the main
enactment. Reliance was placed on Commissioner of Income Tax vs
1
Indo Mercantile Bank Limited , Ram Narain Sons Limited vs
2
Assistant Commissioner of Sales Tax , Abdul Jabar Butt vs State
3 4
of Jammu and Kashmir , Dwarka Prasad vs Dwarka Das Saraf ,
Haryana State Cooperative Land Development Bank Limited vs
Haryana State Cooperative Land Development Bank Employees
5 6
Union and Romesh Kumar Sharma vs Union of India .
44. Third, a trade certificate is needed only for the purposes in Rule 41.
Rule 35 leaves the registering authority a discretion to refuse one. Rule
42 would lead to an absurdity if a certificate were needed for the whole
of a manufacturer's stock.
45. Fourth, the power under Entry 57 of List II is limited to a regulatory
and compensatory levy. Such a levy must bear a nexus with vehicles
using the public roads. Reliance was placed on Bolani Ores Limited vs
7
State of Orissa and Tarachand Logistic Solutions Limited vs
8
State of Andhra Pradesh .
1AIR 1959 SC 713.
2AIR 1955 SC 765.
3AIR 1957 SC 281.
4AIR 1975 SC 1758.
5(2004) 1 SCC 574.
6(2006) 6 SCC 510.
7(1974) 2 SCC 777.
82025 SCC OnLine SC 1851.
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46. Fifth, a levy computed on the number of vehicles manufactured is
in substance a duty of excise. That falls within the Union field. It is
therefore beyond the competence of the State and its officers.
47. Sixth, taxing the manufacturer and then the dealer amounts to
double taxation. It also discriminates against vehicles made in this
State, in breach of Article 14.
48. Seventh, and in the alternative, Rule 33 is ultra vires the proviso to
Section 39. The proviso speaks only of a dealer. The rule extends to a
manufacturer and to a test agency.
49. Lastly, the assessment order and the orders that followed it are
vitiated by breach of natural justice.
E. SUBMISSIONS ON BEHALF OF THE STATE
50. Mr. Rajendra Prasad, learned AG-cum-Senior Counsel and Mr.
Bharat Vyas, learned Additional Solicitor General for the State submitted
that clause (d) of Section 4(1) creates a special charge on a distinct
class, namely dealers in and manufacturers of motor vehicles. It fixes a
distinct taxable event, namely possession in the course of business. The
general words in the opening part of Section 4(1) cannot displace the
specific words of the clause.
51. He submitted that Entry 57 of List II empowers the State to tax
vehicles suitable for use on roads. The entry nowhere makes actual user
an ingredient. Reliance was placed on State of Gujarat vs Akhil
9
Gujarat Pravasi V.S. Mahamandal , State of Orissa vs Bijaya C.
10
Tripathy and Chief General Manager, Jagannath Area vs State of
11
Orissa .
9(2004) 5 SCC 155.
10(2004) 7 SCC 139.
11(1996) 10 SCC 676.
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52. He submitted that the compensatory tax doctrine relied on by the
petitioners no longer survives. A Bench of nine learned Judges
12
discarded it in Jindal Stainless Limited vs State of Haryana .
53. He submitted that Section 39 prohibits driving an unregistered
vehicle "in any public place or in any other place". A storage yard and
the internal roads of a factory are "any other place". The vehicles are in
fact driven from the assembly line to the yard. They are then driven
onto the carriers. Reliance was placed on Tata Engineering and
13
Locomotive Company Limited vs State of Bihar and Tata Motors
14
Limited vs State of Jharkhand .
54. Lastly, he submitted that the claim that no vehicle ever touches a
road in this State is a bare averment. Not a single despatch record
supports it. The burden of showing that a subject otherwise within the
charge falls outside it lies on the person who asserts it.
F. QUESTIONS OF LAW FOR DETERMINATION
55. The contentions on either side are many. However, eventually they
resolve into three heads of questions of law. Each head has distinct
ancillary questions. For our own clarity, we frame them as follows.
56. Question I. The reach of the charge under Section 4(1)(d) of
the Act of 1951.
(a) What is the taxable event under Section 4(1)(d)? Is it the
possession of motor vehicles by a dealer or manufacturer in the
course of his business? Or is it the use of those vehicles on the
roads of Rajasthan?
(b) Does the expression "used or kept for use in the State" in the
opening part of Section 4(1) require actual use of a road? Or is
availability for use enough?
12(2017) 12 SCC 1.
13AIR 1999 Patna 62.
14[2018] 14 SCR 1241.
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(c) Are finished vehicles held by a manufacturer inside his factory
in Rajasthan, awaiting despatch to dealers within or outside the
State, "kept for use in the State"?
57. Question II. Section 39 of the Act of 1988, the trade
certificate and the vires of Rule 33.
(a) Does Section 39 apply to the driving of an unregistered
vehicle inside private factory premises? Put differently, are a
factory yard and the internal roads of a factory "any other place"
within that section?
(b) Is a manufacturer holding unregistered vehicles bound to
obtain a trade certificate? If so, when does that obligation arise?
(c) Is Rule 33 ultra vires the proviso to Section 39, because it
extends to manufacturers and test agencies an exemption that
the proviso gives only to dealers?
58. Question III. The constitutional validity of the levy.
(a) Is the levy under Section 4(1)(d) and the notification dated
31.03.2000 in substance a duty of excise on manufacture, and so
beyond the competence of the State Legislature?
(b) Having regard to Jindal Stainless, and to the later decisions in
Tarachand Logistic and Ultratech Cement, can the levy be struck
down for want of a compensatory character, or for want of a
nexus with the use of roads, or under Articles 301 and 304?
(c) Does the levy offend Article 14, either as double taxation or as
discrimination against vehicles made in this State?
59. The order in which we have framed the questions is the order
which we propose to answer them. Until the charge is construed, one
cannot know what the trade certificate scheme has to do with it. Until
both are understood, the constitutional attack cannot be measured. The
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relief against the individual assessments follows upon all three. We deal
with it separately in Part J.
G. QUESTION I. THE REACH OF THE CHARGE UNDER SECTION
4(1)(d)
60. The charge is created by clause (d) read with the opening part of
Section 4(1). It is not created by either alone. The three parts of
Question I must therefore be answered together. We first identify the
taxable event. We then examine the expression "used or kept for use in
the State", first on its temporal side and then on its territorial side.
G.1 The taxable event under clause (d)
61. In our view, the construction advanced by the State is correct. Five
reasons emerge from the statutory language itself.
62. First, the clause charges a person and not a journey. Its words are
"a tax on dealers in, or manufacturers of motor vehicles in respect of
such vehicles as are in their possession". The words "in respect of"
identify the measure of the charge. The subject of the charge is the
trader. The criterion chosen by the Legislature is possession.
63. Second, possession in the course of business is the only fact the
clause requires the assessing authority to find. The language
contemplates no enquiry into the use of any particular vehicle.
64. Third, the clause speaks of a trade certificate "granted or deemed
to be granted". If liability arose only where a certificate had actually
been taken out, the deeming words would be surplusage. Worse, an
assessee could fix his own liability at nil simply by never applying for a
certificate. A construction that lets the subject decide the incidence of a
charge by his own abstention cannot be accepted.
65. Fourth, the structure of Section 4(1) tells against the petitioners.
Clause (c) taxes vehicles registered outside the State and "using roads
in Rajasthan". Clause (cc) taxes vehicles temporarily registered and
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passing through the State "using roads in Rajasthan". In both, the
Legislature has said in terms that use of the roads of this State is an
ingredient of the charge. It has said nothing of the kind in clause (d).
Where a draftsman uses an expression in two neighbouring clauses of
the same sub section and leaves it out of a third, the omission must be
taken as deliberate. To read the words "and using roads in Rajasthan"
into clause (d) would be to supply a casus omissus . That is not
permissible. It is doubly impermissible in a taxing statute, where the
subject is to be taxed by the words used and by no others.
66. Fifth, and this places the matter beyond argument, the Legislature
has itself said how the charge is to be measured. Explanation (2) to
Section 4 says that, to determine the vehicles kept in possession of a
dealer or manufacturer, the number taken is the number they declare
as likely to be in their possession, or the number they sold in the
preceding year, whichever is higher. Explanation (iii) to the notification
adds that the tax is payable in advance within the first seven days of
the financial year on such a declaration. Adjustment follows in the next
year. A levy that falls due in the first week of a year, on a declaration of
vehicles likely to come into possession during that year, cannot depend
on proof that a particular vehicle later used a particular road. The
machinery of the levy and the construction urged by the petitioners
cannot stand together.
67. The view we take accords with Tata Motors Limited ( supra ) .
Hon’ble the Supreme Court there considered Section 6 of the Bihar
Motor Vehicles Taxation Act, 1994. That section levied a tax at an
annual rate on a manufacturer or dealer in respect of the motor vehicles
in his possession, in the course of his business as such, under the
authorisation of a trade certificate granted under the Rules of 1989. It is
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a charge in terms closely similar to clause (d). Explaining the place of
the trade certificate in that scheme, the Court said the following.
"For this reason, a dealer or a manufacturer of motor vehicle is permitted
to obtain trade certificate so that he is exempted from registering the
vehicle in his name. The Bihar Act, even in such a case, contemplates levy
of tax."
68. The Supreme Court concluded that "the appellants are liable to pay
tax under Section 6 of the Bihar Act". The appellants there were
manufacturers. The tax related to chassis in their possession before
delivery to dealers or purchasers.
69. At the same time, we should also record one argument of the State
that we do not accept. It was urged that, because of the position of a
comma in clause (d), the words "under the authorisation of a trade
certificate" qualify only a dealer and not a manufacturer. Punctuation is
a frail guide to the construction of statute. It cannot control the plain
sense of the words.
G.2 "Used or kept for use in the State", the temporal limb
70. The opening words of Section 4(1) are common to all its clauses.
They cannot be treated as ornamental. A vehicle charged under clause
(d) must therefore also answer the description "used or kept for use in
the State". That description has a temporal limb and a territorial limb.
They thus ought to be treated separately.
71. In Akhil Gujarat Pravasi V.S. Mahamandal ( supra ) , Hon’ble
the Supreme Court considered Entry 57 of List II. Adopting the words of
an earlier larger Bench, it noted that the words "suitable for use"
"describe the kinds of vehicle and not their condition". It then also held,
that the tax under the entry "has no corelation with the actual period of
use". Because the levy is a tax and not a fee, the Court said that "the
actual use of the public roads of the State cannot be insisted upon for
incurring the liability". It reasoned that "the State has to maintain the
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roads and to keep them in proper condition for all those who own
vehicles", and that this is so "irrespective of the fact whether they use it
or not".
72. Jagannath Area ( supra ) is to the same effect. It concerned
dumpers used within mining areas. The argument that the levy could be
sustained only on proof of actual use of public roads was rejected. It
was observed that an individual who can take advantage of the facility
provided by the State "cannot escape the taxing liability on that score".
73. In Bijaya C. Tripathy ( supra ) , it was held that a transport vehicle
with a valid certificate of fitness and a valid certificate of registration
must be presumed to be kept for use. The statute there contained an
express Explanation to that effect. Section 4 of the Act of 1951 has no
Explanation in those terms. The decision therefore helps on the general
approach. It is not a source of any statutory presumption in this State.
Nothing turns on the difference. Section 4 supplies its own measure in
Explanation (2), which we have already noticed.
74. On these principles, the temporal objection fails. A motor car or a
two wheeler lying in a factory yard is a vehicle adapted for use upon
roads within Section 2(28) of the Act of 1988. It is made for no other
purpose. It is sold for no other purpose. That it was not driven on a
given day is irrelevant to the charge. Section 2(28) excludes a vehicle
of a special type adapted for use only in a factory or other enclosed
premises. The petitioners do not say, and could not say, that their cars
answer that description. They are motor vehicles precisely because they
are adapted for the roads.
G.3 "Used or kept for use in the State", the territorial limb
75. The territorial objection was rather pressed with some extra force.
The vehicles, it was urged, are sent on trailers to dealers in other
States. About ninety five per cent of the production leaves Rajasthan. A
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vehicle never meant to be used in this State, it was argued, cannot be
"kept for use in this State". We were told that the State's authorises all
concerned vehicles kept in the taxing State for use in that State, so the
point is open. That is a fair description of those decisions. We have
therefore examined the question afresh.
76. The objection does not survive a reading of the words. They are
"kept for use in the State". They are not "kept for use only in the
State". Nor are they "used in the State". The keeping referred to is the
keeping that actually takes place. Here it takes place within Rajasthan.
Throughout the time the vehicle lies in the yard, it is physically in this
State. It is also capable of being used on the roads of this State. That
satisfies the description. Where the vehicle finally goes is a matter of
the petitioners' commercial arrangements. It is foreign to the charge.
77. Two further considerations confirm this. First, the charge under
clause (d) falls due in advance, in the first week of the financial year, on
a declaration of vehicles likely to come into possession. At that point no
one can say which vehicle will go where. If the levy depended on the
destination of each vehicle, the charge could never be quantified when
it falls due. Explanation (iii) to the notification would become
unworkable. A construction that makes the machinery of a levy
unworkable must be avoided.
78. Second, the incidence of the levy would otherwise depend on
events after the taxable event is complete. It would vary with orders
later placed by dealers in other States. A charge cannot be made to
depend on such contingencies unless the Legislature says so. It has not.
G.4 Answer to Question I
79. We answer Question I as follows. The taxable event under Section
4(1)(d) of the Act of 1951 is the possession of motor vehicles by a
dealer or manufacturer in the course of his business as such. It is not
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the use of any road by any vehicle. The expression "used or kept for
use in the State" in the opening part of Section 4(1) denotes availability
for use and not actual use. It is not confined to vehicles destined for use
within this State. Motor vehicles adapted for use on roads, held by a
manufacturer inside his factory in this State pending despatch to
dealers within or outside the State, are therefore within the charge.
H. QUESTION II. SECTION 39, THE TRADE CERTIFICATE AND
THE VIRES OF RULE 33
80. The three parts of this question arise in sequence. If Section 39
does not mean movement within private premises, the exemption in its
proviso and the condition in Rule 33 never come into play. If it does, the
next question is whether the condition in Rule 33 is obligatory or
optional. Only if the condition binds does it matter whether the rule
imposing it is within the power of the delegate. We take the three in
that order.
H.1 Whether Section 39 applies to movement within factory
premises
81. The petitioners' proposition seeking the benefit of a proviso to Rule
33 seems sound, at first flush, but on closer consideration, it is
untenable. A proviso carves out an exception from the main enactment.
It covers only the field of the main provision. However, it is not an
independent enactment and cannot be read divorced from its context.
In Indo Mercantile Bank Limited ( supra ) , the Supreme Court put it
thus.
"The proper function of a proviso is that it qualifies the generality of the
main enactment by providing an exception and taking out, as it were, from
the main enactment, a portion which, but for the proviso, would fall within
the main enactment. Ordinarily, it is foreign to the proper function of a
proviso to read it as providing something by way of an addendum or
dealing with a subject which is foreign to the main enactment."
82. Earlier, in Ram Narain Sons Limited ( supra ) , the Supreme Court
said as below:-
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"It is a cardinal rule of interpretation that a proviso to a particular
provision of a statute only embraces the field which is covered by the main
provision."
83. The other decisions cited, down to Romesh Kumar Sharma
( supra ) , say no less.
84. The difficulty for the petitioners lies not in the proposition but in its
application. They define the field of the main enactment too narrowly.
Section 39 does not prohibit driving an unregistered vehicle only in a
public place. It prohibits driving it "in any public place or in any other
place". The closing words are not surplusage. They cannot be read out
of the section.
85. The reason for that width is plain. Registration exists so that every
vehicle in motion can be identified and the person responsible for it
traced. The occasions that make identification necessary, namely
accident, injury to a third person, theft and the commission of offences,
arise on private premises as much as on a public road. Had the section
stopped at a public place, a whole class of movement elsewhere would
have escaped identification. Parliament deliberately provided otherwise.
Section 18 of the Act of 1951 confirms that vehicles may stand on
private premises. It authorises entry on any premises where an officer
has reason to believe a motor vehicle is kept.
86. On any ordinary understanding, a storage yard and the internal
roads of a factory are "any other place". The Patna High Court took the
same view in Tata Engineering and Locomotive Company Limited
( supra ) . That case concerned a manufacturer of chassis and the very
section now before us. The High Court held that Section 39 "prohibits in
absolute terms the driving of a motor vehicle in any public place or in
any other place". It said that the section is "not limited in its application
to vehicles being used in a public place only". On the incidence of the
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State tax, it held that "as soon as a completed chassis suitable for use
on roads comes into existence, the liability of the manufacturer arises".
87. Patna judgment was considered by the Supreme Court in Tata
Motors Limited ( supra ) and the Special Leave Petition was dismissed.
The construction of "any other place" adopted by the Patna High Court
commends itself to us and we are in respected agreement with same
view.
88. It follows that if the petitioners' vehicles are driven at all within the
factory, whether from the assembly line to the yard or from the yard
onto the carriers, Section 39 applies of its own force. The exemption in
the proviso, read with Rule 33, is then the only cover available. The
State has said in terms that the vehicles are so driven. The petitioners
have denied it without producing any material.
H.2 Whether a trade certificate is obligatory upon possession
89. At the threshold we may note that on this part, neither side is
wholly right. Let us see how.
90. Rule 33 is not framed as a command. It is framed as a conditional
exemption. It says the vehicle "shall be exempted from the necessity of
registration subject to the condition that he obtains a trade certificate".
Grammatically, the rule confers a benefit on terms. A person who does
not want the benefit is not, in terms, commanded to take out a
certificate.
91. But he does not escape. He falls back on the main enactment. That
forbids driving an unregistered vehicle in any public place or in any
other place. The compulsion is therefore practical and not textual. If a
vehicle is truly never moved, no exemption is needed and no certificate
is required. If it is moved anywhere at all, the holder must either
register it or hold a trade certificate. So understood, the petitioners are
right that a certificate serves no purpose for a stationary vehicle. But,
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that is correct as far as it goes. It is irrelevant to a vehicle that is put to
movement, in whichever mode.
92. Three subsidiary arguments remain.
93. It was urged that Rule 35 gives a discretion to refuse a certificate,
and that a mandatory duty to obtain one would make that discretion
illusory. The text does not bear this out. Rule 35(2) says no application
shall be refused unless the applicant is heard and reasons are recorded
in writing. That is a safeguard attending refusal. It is not a general
discretion to refuse. Rule 45 gives an appeal against refusal. The
argument does not survive these provisions.
94. It was next urged, relying on Rule 42, that if a certificate were
needed for the whole stock, registration would have to be obtained in
the dealer's name before every sale. That, it was said, could not have
been intended. The answer lies in the rule itself. It speaks of
registration "whether temporary or permanent". Section 43 of the Act of
1988 provides for temporary registration. Rules 53A to 53C of the Rules
of 1989 now prescribe the procedure. Rule 53A expressly contemplates
a vehicle being registered in a State other than the dealer's. That is
exactly the pattern the petitioners describe. No absurdity arises.
95. It was lastly urged that a certificate would serve no purpose for
stock that does not move. Rule 39(1) answers this. A trade registration
mark may not be used on more than one vehicle at a time. It may be
used only on a vehicle bona fide in the holder's possession in the course
of his business. The scheme therefore contemplates one certificate
covering a floating stock, carried on whichever vehicle is being moved.
It does not contemplate a certificate fixed permanently to every
stationary car in a yard. The argument built on that supposed absurdity
is misconceived.
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H.3 Whether Rule 33 is ultra vires the proviso to Section 39
96. The alternative challenge is this. The proviso speaks only of "a
motor vehicle in possession of a dealer". Rule 33 extends the exemption
to "a dealer or manufacturer of automobiles or automobile ancillaries or
a test agency specified in rule 126". The delegate, it is said, has
enlarged the parent.
97. Two matters bear on this challenge. The first is that clause (a) of
the definition of dealer in Section 2(8) of the Act of 1988, which once
spoke of a person engaged in manufacture, now stands omitted.
Manufacturer is now separately defined by Section 2(21A). The second
is that Section 64 has no head referable to trade certificates. Rule 33
must therefore rest on the residuary clause of Section 64, read with the
words "subject to such conditions as may be prescribed by the Central
Government" in the proviso to Section 39. It is also significant that
Section 65(2)(m), which confers the corresponding State power, deals
with this very subject and again speaks only of dealers.
98. We are therefore unable to hold, as the learned AG for State invited
us to, that a manufacturer is necessarily included in the word dealer.
Nor can we hold that the opening words of Rule 33 are mere recital. The
proviso to Section 39 is the source of the power. Its reach does bear on
the reach of the rule. To that extent, the petitioners' argument has
some foundation. It is right that we say so.
99. The challenge must nevertheless fail for two reasons which are
equally decisive.
100. The first is that Rule 33 does not impose a burden. It confers an
exemption. It is the only source of the dispensation from registration
that a manufacturer enjoys for unregistered stock. A rule that confers a
benefit wider than the parent may have contemplated stands on a very
different footing from a rule that imposes an obligation beyond the
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parent. The petitioners do not complain that Rule 33 burdens them.
They ask that it be struck down so that the measure of a State tax that
refers to it may be defeated. If we agreed, they would lose the
exemption. Every movement of an unregistered vehicle in their
premises would then fall squarely within the prohibition in Section 39.
They would have no cover at all. A Court will not strike down, at a
person's instance, the very provision that protects him, merely so that a
collateral consequence may follow.
101. The second is that Section 4(1)(d) of the Act of 1951 would not
fall with Rule 33. The State charge draws its validity from Entry 57 of
List II. It does not draw it from a Central rule. The most that could
follow from striking down Rule 33 is that the description in clause (d)
would lose part of its referent. That goes to the workability of the
charge, not its validity. It is also not the relief the petitioners seek.
Clause (d) speaks of a certificate "granted or deemed to be granted".
Explanation (2) to Section 4 fixes the measure by reference to vehicles
kept in possession of a dealer or manufacturer. The State charge is
therefore addressed to manufacturers in its own terms, independently
of the language of the Central rule.
H.4 Answer to Question II
102. We answer Question II as follows. Section 39 of the Act of 1988
extends to the driving of an unregistered motor vehicle within private
premises. A factory yard and the internal roads of a manufacturing unit
fall within the words "any other place" in that section. The need for a
trade certificate arises on possession coupled with any movement of the
vehicle. The exemption from registration is available only if that
condition is fulfilled. The challenge to the vires of Rule 33 of the Rules of
1989 fails. The rule confers an exemption and not a burden. Section
4(1)(d) of the Act of 1951 would not fall with it in any event. It is
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neither necessary nor appropriate to decide finally whether the rule
travels beyond the proviso to Section 39.
I. QUESTION III. THE CONSTITUTIONAL VALIDITY OF THE LEVY
103. The third question gathers the whole constitutional attack. It is
made on three fronts. They are (i) legislative competence, (ii) the
supposed need for a compensatory character, and (iii) Article 14 read
with Articles 301 and 304. We deal with them turn by turn.
I.1 Whether the levy is in substance a duty of excise
104. It was urged that the demand, being computed on the number of
vehicles manufactured in the year, is in substance a duty of excise on
manufacture. It was said to be beyond the competence of the State
Legislature and its officers.
105. The contention confuses the subject of a charge with its measure.
A tax does not become a tax on manufacture merely because a
manufacturer is the person charged. Nor does it become one because a
figure linked to production is a convenient yardstick. The subject of the
charge under clause (d) is not the act of manufacture. It is possession
in the course of business. That state of affairs comes into being only
after manufacture is complete. The same clause charges dealers, and a
dealer manufactures nothing. That puts the matter beyond doubt. Nor is
the measure chosen by the Legislature a measure of production.
Explanation (2) to Section 4 and Explanation (ii) to the notification both
fix it by the vehicles declared as likely to be in possession, or the
vehicles sold in the preceding year, whichever is higher.
106. Furthermore, Entry 84 of List I was substituted by the
Constitution (One Hundred and First Amendment) Act, 2016. As
substituted, it covers duties of excise only on petroleum crude, high
speed diesel, motor spirit, natural gas, aviation turbine fuel, and
tobacco and tobacco products. Motor cars and two wheelers fall outside
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it. For the assessment years after that substitution, which cover most of
this batch, the complaint of trespass on the Union field of excise has no
basis or substance.
107. The contention is therefore rejected in so far as it attacks the
vires of the provision.
I.2 The compensatory character of the levy and the effect of
Jindal Stainless
108. The petitioners' constitutional case rests on a proposition drawn
from Bolani Ores Limited ( supra ) . The proposition is that the power
under Entry 57 of List II is a power to impose taxes of a regulatory and
compensatory character. Such a levy, it is said, must bear a nexus with
vehicles using the public roads. Vehicles that do not use the roads
cannot be taxed, even if registered. Hon’ble the Supreme Court in
Bolani Ores observed as follows.
"If the vehicles do not use the roads, notwithstanding that they are
registered under the Act, they cannot be taxed."
109. That proposition can no longer be treated as a constitutional limit
on the State's taxing power. The doctrine on which it rests has been
discarded by a Constitutional Bench of nine Hon’ble Judges of the
Supreme Court.
110. In Jindal Stainless Limited ( supra ) , the majority answered the
reference in a series of propositions. Taxes simpliciter, it held, are not
within the contemplation of Part XIII of the Constitution. On the scope
of Article 304(a), it held as follows.
"Only such taxes as are discriminatory in nature are prohibited by Article
304(a)."
111. On the compensatory tax theory, the majority held as follows.
"The compensatory tax theory evolved in Automobile Transport case and
subsequently modified in Jindal's case has no juristic basis and is therefore
rejected."
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112. The Court went on to overrule Automobile Transport
15
(Rajasthan) Limited vs State of Rajasthan , and the decisions that
followed it, to the extent that they relied on that theory.
113. Three consequences follow for the present case. They are all
decisive.
114. First, the compensatory character of a tax on motor vehicles is no
longer an independent constitutional limit on the power under Entry 57
of List II. Any limit must be found in the language of the entry itself.
That language is "vehicles suitable for use on roads". It fastens on the
character of the vehicle, not its use. Once the vehicle answers that
description and the State Legislature has framed a charge referable to
it, the enquiry ends.
115. Second, the reasoning in Automobile Transport (Rajasthan)
Limited ( supra ) , on which the observations in Bolani Ores partly
rested, no longer holds the field in so far as it rested on the
compensatory tax doctrine. Passages from that line of authority cannot
be used as though the doctrine survived.
116. Third, the grounds under Articles 301 and 304 must also fail. After
Jindal Stainless, a tax simpliciter is not a restriction on the freedom of
trade, commerce and intercourse under Article 301. No case of
discrimination under Article 304(a) is made out, or could be. The
petitioners do not say that goods brought into this State bear a heavier
burden than goods made within it. Their complaint is the reverse.
Article 304(a) does not help them.
117. In Bolani Ores. the decision turned partly on the meaning of a
motor vehicle. The question was whether dumpers and rockers used
within mining areas were vehicles adapted for use on roads at all. That
reasoning is independent of the compensatory tax doctrine. Jindal
15AIR 1962 SC 1406.
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Stainless does not affect it. It is also reflected, as noticed under
Question I, in the exclusionary words of Section 2(28) of the Act of
1988. It simply does not help a manufacturer of passenger cars and two
wheelers. These are adapted for use on roads. They are made for no
other purpose. They are sold to buyers for that sole purpose.
I.3 The decisions in Tarachand Logistic and Ultratech Cement
118. Two more decisions of the Supreme Court, rendered after Jindal
Stainless also call for our discussion. The first is Tarachand Logistic
Solutions Limited ( supra ) . The second is Ultratech Cement
16
Limited vs State of Gujarat . Both bind us under Article 141. Both
were concerned with vehicles confined to private premises. We must
therefore see exactly what each decides.
119. In Tarachand Logistic, the vehicles were used inside the central
dispatch yard of the Visakhapatnam Steel Plant. Access to the yard was
restricted. The charging section, Section 3 of the Andhra Pradesh Motor
Vehicles Taxation Act, 1963, levies tax "on every motor vehicle used or
kept for use, in a public place in the State". The Supreme Court
identified the charge in these words, at paragraph 45.
"The taxable event under Section 3 is when a vehicle is used or kept for use
in a 'public place' in the State."
120. The Supreme Court said, "Motor vehicle tax is compensatory in
nature. It has a direct nexus with the end use." It went on to explain
that a person using public infrastructure such as roads must pay for
that use. A person who does not use the vehicle, or keep it for use, in a
public place derives no such benefit.
121. We have given this observation our anxious consideration. Three
features of the decision persuade us that it does not govern the present
case.
162026 INSC 43.
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122. First, the decision turned on the express words "in a public place"
in the Andhra Pradesh charging section. The Court held that Rule 12A of
the Andhra Pradesh Rules had to be read so as to give effect to those
words, since a rule cannot travel beyond its parent statute. The
description of the tax as compensatory explained why the Legislature
had chosen those words. It was not a holding that Entry 57 of List II
forbids a State to tax a road worthy vehicle unless it uses a public road.
The validity of the levy was not in question. The question was one of
construction.
123. Second, the decision itself draws the very distinction we draw. The
State there relied on Akhil Gujarat Pravasi. The Supreme Court itself
said that "the decision rendered in Akhil Gujarat Pravasi V.S.
Mahamandal (supra) is on an entirely different issue". The reason it
gave was that the Bombay Act considered in Akhil Gujarat Pravasi did
not use the words "public place" or "public road" at all. Section 4(1) of
the Act of 1951 is in the same position as the Bombay Act. It uses the
words "in the State". It does not use the words "in a public place". On
Tarachand Logistic's own reasoning, our statute falls on the Akhil
Gujarat Pravasi side of the line.
123. Third, the decision did not consider Article 301 or Article 304. It
makes no reference to Jindal Stainless. It cannot be read as reviving, as
a constitutional limit on the taxing power, a doctrine that a Bench of
nine learned Judges has rejected. Read in this way, the two decisions sit
together. Jindal Stainless governs the constitutional question. Tarachand
Logistic governs the construction of a charging section that confines the
charge to a public place.
124. Now we turn to Ultratech Cement. To be fair to petitioners, that
case is closer in one respect, because Section 3(1) of the Gujarat Motor
Vehicles Tax Act, 1958 levies tax "on all motor vehicles used or kept for
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use in the State". Those words match the opening words of Section 4(1)
of the Act of 1951. The equipment there consisted of dumpers, loaders,
excavators, surface miners, dozers, drills and rock breakers. It was
confined to the cement works of the appellant. It was carried to the site
in a dismantled state on trailers.
125. The Supreme Court held that this equipment fell within the second
part of Section 2(28) of the Act of 1988. It was a vehicle of a special
type adapted for use only in a factory or other enclosed premises. The
Supreme Court described the machines as off road equipment. It held
them excluded from the definition of motor vehicle in Section 2(28),
and also from tax under Entry 57 of List II. The Court added that if such
vehicles are found using roads, "they would not be free from the rigors
of Section 2 (28)".
126. Ultratech Cement thus rests on the definitional limb of Bolani
Ores. That is the limb, we have held, which survives Jindal Stainless.
The description of the tax as regulatory and compensatory appears in
the Court's account of Bolani Ores. The decision does not refer to Jindal
Stainless. Nor does it rest its own conclusion on the compensatory tax
doctrine.
127. The said decision does not help the petitioners. Their passenger
cars and two wheelers are not equipment of a special type adapted for
use only in a factory. They fall within the first part of Section 2(28) and
outside its exclusion. They are suitable for use on roads within Entry 57.
They are made for the roads and sold for the roads. Ultratech Cement
confirms, rather than weakens, the line we have drawn in Part G.2.
128. There is a further and independent reason why neither decision
assists the petitioners. Both concerned a charge on the owner of a
vehicle measured by its use or intended use. Clause (d) of Section 4(1)
is a charge of a different kind. As held under Question I, it fastens on
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the possession of stock by a trader in the course of his business. The
use or non use of any particular vehicle is not an ingredient of it.
I.4 Article 14, double taxation and discrimination
129. Two grounds were urged under this head. The first is double
taxation. The second is discrimination against vehicles made in this
State.
130. On the first, the taxable events are distinct. Clause (d) charges a
trader on possession of stock in the course of business. It does so at a
block rate that works out to Rs. 80/- per four wheeled vehicle for a
whole year. That falls to one fourth in the cases covered by the proviso
to the notification. The tax borne later by or through the dealer or
registered owner arises on a different event, under a different clause,
and on an entirely different measure. That measure is the cost of the
vehicle under clause (b). In any case, double taxation is not by itself a
ground of invalidity without an express constitutional or statutory bar.
None was shown.
131. On the second, the classification is not based on where the vehicle
comes from. It is based on the presence in this State of a person
holding stock in the course of business. Every manufacturer with a plant
in Rajasthan is treated alike. So is every dealer. A manufacturer with no
plant here is outside the charge for want of territorial nexus, not
because of any preference. The differentia is intelligible. It bears a
rational relation to the object of the charge, which is to bring within the
net those who hold road worthy vehicles in this State in the course of
trade.
I.5 Answer to Question III
132. We answer Question III as follows. The levy under Section 4(1)(d)
of the Act of 1951 and the notification dated 31.03.2000 is not a duty of
excise on manufacture. It is within the legislative competence of the
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State under Entry 57 of List II. The objection to the measure adopted in
making the assessments is left open. After Jindal Stainless Limited
( supra ) , a compensatory character is not a condition of the validity of
such a levy. The challenge based on its absence, and on Articles 301
and 304, fails. Tarachand Logistic Solutions Limited ( supra ) turned
on the words "in a public place" in the Andhra Pradesh charging section,
which the Act of 1951 does not use. Ultratech Cement Limited
( supra ) turned on the exclusion in Section 2(28) of the Act of 1988 for
vehicles adapted for use only in enclosed premises, which does not
reach passenger cars and two wheelers. Neither decision assists the
petitioners. The levy does not offend Article 14, whether as double
taxation or as discrimination. The impugned provisions and the
notification are constitutionally valid.
J. RELIEF AND THE INDIVIDUAL ASSESSMENTS
133. Our answers to Questions I to III mean that the constitutional and
statutory challenge fails in its entirety. The proviso to Section 39 of the
Act of 1988, Rule 33 of the Rules of 1989, Section 4(1)(d) of the Act of
1951 and the notification dated 31.03.2000 are all valid. The prayer for
reading down does not survive. That course is open only where a
provision would otherwise have to be struck down. We find these
provisions valid on their plain construction.
134. We accordingly hold that the impugned assessment orders and
demand notices are not liable to be interfered with under Article 226 on
any ground touching the validity of the levy. The other grievances about
the opportunity of hearing under Section 8A of the Act of 1951, and
about the measure used in computing the tax, are to be raised before
the statutory authorities. The petitioners' factual claims about the
movement and despatch of vehicles can be tested there on documents.
Having upheld the levy, we think it just that the petitioners should be
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able to raise these grounds on the merits. They should not be hindered
by limitation or by any further demand for deposit. These proceedings
have been pending in this Court since 2017. Substantial amounts stand
deposited under the interim orders of this Court.
K. SUMMARY OF CONCLUSIONS
135. Our conclusions may be summarised as follows.
136. On Question I, the taxable event under Section 4(1)(d) of the Act
of 1951 is the possession of motor vehicles by a dealer or manufacturer
in the course of his business. Proof of use of a road is not an ingredient
of the charge. The words "used or kept for use in the State" denote
availability for use and not actual use. They are not confined to vehicles
destined for use within this State. Vehicles adapted for use on roads,
held by a manufacturer inside his factory in this State, are within the
charge.
137. On Question II, Section 39 of the Act of 1988 extends to the
driving of an unregistered vehicle within private premises. A factory
yard and internal factory roads are "any other place". The need for a
trade certificate arises on possession coupled with any movement of the
vehicle. The challenge to Rule 33 of the Rules of 1989 fails. The rule
confers an exemption and not a burden. Section 4(1)(d) would not fall
with it in any event. It is unnecessary to decide whether the rule travels
beyond the proviso to Section 39.
138. On Question III, the levy is not a duty of excise. It is within the
competence of the State Legislature. The objection to the measure
adopted in the assessments is left open. After Jindal Stainless, a
compensatory character is not a condition of the validity of a levy under
Entry 57 of List II. The grounds under Articles 301 and 304 fail with it.
Tarachand Logistic and Ultratech Cement are distinguishable. The first
turned on the words "in a public place". The second turned on the
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exclusion in Section 2(28) for vehicles adapted for use only in enclosed
premises. The levy does not offend Article 14.
L. ORDER
139. For the reasons recorded above, we pass the following order.
(i) The challenge to the vires of the proviso to Section 39 of the
Motor Vehicles Act, 1988, Rule 33 of the Central Motor Vehicles
Rules, 1989, Section 4(1)(d) of the Rajasthan Motor Vehicles
Taxation Act, 1951 and Notification S.O. 413, No.
F6(179)/Pari/Tax/Hqrs/95/5B dated 31.03.2000 is repelled. All the
said provisions are held to be intra vires .
(ii) It is declared that the taxable event under Section 4(1)(d) of the
Act of 1951 is the possession of motor vehicles by a dealer or a
manufacturer in the course of his business as such. Proof of the
use of any road within this State by any particular vehicle is not
an ingredient of the charge.
(iii) It is declared that the expression "used or kept for use in the
State" in Section 4(1) of the Act of 1951 denotes availability for
use and not actual use. Motor vehicles adapted for use on roads,
held by a manufacturer within his premises in this State, answer
that description, whatever the State to which they may later be
despatched for sale.
(iv) It is declared that Section 39 of the Act of 1988 extends to the
driving of an unregistered motor vehicle within private premises.
The storage yard and the internal roads of a manufacturing unit
fall within the expression "any other place" in that section.
(v) The writ petitions are dismissed in so far as they challenge the
vires of the said provisions and seek a declaration that no demand
may be raised under Section 4(1)(d) of the Act of 1951 on the
manufacture and stocking of vehicles.
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(vi) The interim orders operating in these petitions shall stand
vacated.
(vii) Liberty is, however, reserved to the petitioners to challenge the
individual assessment orders and demand notices impugned in
these petitions. They may do so by filing or, as the case may be,
reviving appeals under sub section (1) of Section 14 of the Act of
1951. The appeals may be on the following grounds and no
others. (a) Breach of the requirement of a reasonable opportunity
of being heard in Section 8A of the Act of 1951, including the non
consideration of replies already on the file. (b) The basis on which
the number of vehicles has been arrived at, having regard to
Explanation (2) to Section 4 of the Act of 1951 and Explanations
(ii) and (iii) to the notification dated 31.03.2000. This includes, in
particular, the contention that the assessments proceed on the
number of vehicles manufactured rather than the number
declared or sold. (c) The computation of interest, surcharge and
penalty.
(viii) Any such appeal filed within eight weeks from today shall be
entertained without reference to limitation. The period during
which these petitions remained pending in this Court shall be
excluded.
(ix) In every matter in which fifty per cent of the demand has already
been deposited under the interim orders of this Court, that
deposit shall be treated as sufficient compliance with the second
proviso to sub section (2) of Section 14 of the Act of 1951. No
further deposit shall be insisted on as a condition for the appeal
being entertained or heard on the merits.
(x) It is clarified that the power to stay recovery during the pendency
of an appeal or revision is that of the Commissioner under the
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third proviso to sub section (2) of Section 14 of the Act of 1951.
In any event, recovery of the balance demand shall remain stayed
in every matter in which an appeal is filed within the period
allowed by clause (ix) above, until that appeal is decided.
(xi) There shall be no order as to costs.
(xii) A copy of this judgment shall be placed in each of the connected
files.
140. All the writ petitions stand disposed of in the above terms.
Pending applications, if any, also stand disposed of.
(ASHUTOSH KUMAR),J (ARUN MONGA),J
Crt_4/D/4/RAKSHA
SCHEDULE-A
M/S HONDA CARS/MOTORCYCLE LTD
Sr.
No.
CASE TITLE AND
FINANCIAL YEAR
UNDER CHALLENGE
1. CW/13820/2017
M/S Honda cars India
ltd v/s U.O.I & Ors.
(F.Y.: 2014-15)
Under challenge is the vires of Section 39 of the
Motor Vehicles Act, Rule 33 of the Central Motor
Vehicles Rules, Section 4(1)(d) of the Rajasthan
Motor Vehicles Taxation Act, and the notification
dated 31.03.2000 issued thereunder, and
demand notices levying tax on all vehicles
manufactured and stocked at the petitioner’s
factory premises for want of trade certificates.
2. CW/13821/2017
(F.Y.: 2015-16)
--do--
3. CW/13825/2017
(F.Y.: 2015-16)
--do--
4. CW/13830/2017
(F.Y.: 2014-15)
--do--
5. CW/4676/2018
(F.Y.: 2016-17)
--do--
6. CW/4677/2018
(F.Y.: 2016-17)
--do--
7. CW/6280/2020
(F.Y.: 2019-20)
--do--
8. CW/6285/2020 --do--
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(F.Y.: 2017-18)
9. CW/6290/2020
(F.Y.: 2019-20)
--do--
10. CW/9487/2020
(F.Y.: 2019-20)
--do--
11. CW/10463/2020
(F.Y.: 2019-20)
--do--
12. CW/10481/2020
(F.Y.: 2016-17)
--do--
13. CW/4018/2021
(F.Y.: 2020-21)
--do--
14. CW/4174/2021
(F.Y.: 2020-21)
--do--
15. CW/5231/2022
(F.Y.: 2021-22)
--do--
16. CW/5238/2022
(F.Y.: 2021-22)
--do--
17. CW/5613/2023
(F.Y.: 2022-23)
--do--
18. CW/6501/2023
(F.Y.: 2022-23)
--do--
19. CW/6777/2024
(F.Y.: 2023-24)
--do--
20. CW/4151/2025
(F.Y.: 2024-25)
--do--
21. CW/8810/2025
(F.Y.: 2024-25)
--do--
22. CW/7879/2026
(F.Y.: 2025-26)
--do--
23. CW/8258/2026
(F.Y.: 2025-26)
--do--
SCHEDULE-B
HERO MOTOCORP LTD.
Sr. No. CASE TITLE &
UNDER CHALLENGE
FINANCIAL YEAR
1. CW/13828/2017
Hero Motocorp Ltd
V/s U.O.I and Ors.
(F.Y.: 2014-16)
Under challenge is the vires of Section 4(1)(d)
of the Rajasthan Motor Vehicles Taxation Act,
and the notification dated 31.03.2000 issued
thereunder, and demand notices levying tax
on all vehicles manufactured and stocked at
the petitioner’s factory premises for want of
trade certificates.
2. CW/1413/2018
(F.Y.: 2016-17)
Under challenge is the vires of Section 39 of
the Motor Vehicles Act, Rule 33 of the Central
Motor Vehicles Rules, Section 4(1)(d) of the
Rajasthan Motor Vehicles Taxation Act, and
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the notification dated 31.03.2000 issued
thereunder, and demand notices levying tax
on all vehicles manufactured and stocked at
the petitioner’s factory premises for want of
trade certificates.
3. CW/5247/2018
(F.Y.: 2017-18)
--do--
4. CW/5368/2019
(F.Y.: 2018-19)
--do--
5. CW/4360/2020
(F.Y.: 2019-20)
--do--
6. CW/3131/2021
(F.Y.: 2020-21)
--do--
7. CW/10219/2021
(F.Y.: 2021-22)
--do--
8. CW/10212/2022
(F.Y.: 2022-23)
Under challenge is the vires of Section 4(1)(d)
of the Rajasthan Motor Vehicles Taxation Act,
and the notification dated 31.03.2000 issued
thereunder, and demand notices levying tax
on all vehicles manufactured and stocked at
the petitioner’s factory premises for want of
trade certificates.
9. CW/9140/2025
(F.Y.: 2025-26)
--do--
10. CW/4771/2025
(F.Y.: 2024-25)
--do--
11. CW/11608/2026
(F.Y.: 2026-27)
--do--
12. CW/11302/2023
(F.Y.: 2023-24)
Under challenge is the vires of Section 39 of
the Motor Vehicles Act, Rule 33 of the Central
Motor Vehicles Rules, Section 4(1)(d) of the
Rajasthan Motor Vehicles Taxation Act, and
the notification dated 31.03.2000 issued
thereunder, and demand notices levying tax
on all vehicles manufactured and stocked at
the petitioner’s factory premises for want of
trade certificates.
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