Rajasthan HC Quashes Hero MotoCorp’s ₹165-Crore Fee Demands, Says Valid Trade Certificates Remove Need For Temporary Registration On Dealer Shipments

Hero Motocorp, a motor-vehicle manufacturer with a plant in Rajasthan, challenged demands for temporary-registration fees relating to vehicles sent to dealers for resale.

It maintained that the vehicles were transported on trucks and that it held valid trade certificates under Rule 33 of the Central Motor Vehicles Rules, 1989 (“CMVR”)

The State initially asserted that the petitioner’s trade certificates had not been renewed, but the petitioner later filed evidence of renewal, which the State did not controvert

The petitions also raised the petitioner’s differential treatment compared with Honda, against which no temporary-registration-fee demands had been made

The petitions were heard together

Section 39 of the Motor Vehicles Act, 1988 (“the Act”) prohibits use of an unregistered vehicle, subject to its proviso for vehicles in a dealer’s possession on conditions prescribed by the Central Government; Rule 33 CMVR prescribes a trade certificate as the condition for exemption from the necessity of registration.

Section 43 provides for temporary registration, while Section 65 empowers State rule-making on specified matters, subject to the limits of the Act.

Rules 41(f) and 41(g) CMVR permit specified trade-related use of vehicles under a trade certificate, and Rule 42 restricts delivery to a purchaser without registration.

Rule 4.2(1)(a) and Rule 4.28 of the Rajasthan Rules address temporary registration and its fee.

Relying on *Tata Motors Ltd. v. State of Jharkhand*, 2020 (15) SCC 438, the Court treated temporary registration and a trade certificate as alternative routes for lawful vehicle use; it also relied on *K.T.C. Automobiles v. Commissioner of Commercial Taxes*, (2016) 4 SCC 82, on registration as a post-sale event.

The Court applied the principles in *Ahmedabad Urban Development Authority v. Sharadkumar Jayantikumar Pasawalla*, (1992) 3 SCC 285, and *Bimal Chandra Banerjee v. State of Madhya Pradesh*, (1970) 2 SCC 467, that a delegated authority requires specific statutory authority to impose a fee and must act within the limits of its enabling power

The Court read Rule 33’s exemption from the “necessity of registration” as encompassing both temporary and permanent registration while the vehicle remained in the manufacturer’s possession in the course of business.

It reasoned that Rule 41 covered the movement of vehicles to a dealer’s premises and that requiring temporary registration for that same journey would impose a duplicate requirement inconsistent with the Central scheme

Rule 42 did not alter that result because delivery to a dealer for resale was not delivery to the end-user purchaser

Accordingly, Rule 4.2(1)(a) operated where the manufacturer lacked a valid trade certificate, not where it held one

On the second issue, the petitioner’s sworn evidence and documents showing renewal were uncontroverted; the State’s own position that Honda was not liable because it held a valid trade certificate therefore applied equally to the petitioner.

The Court also found no relevant distinction between the two manufacturers

It found that the petitioner held valid trade certificates during the relevant period and was entitled to treatment at par with Honda

The writ petitions were allowed; the challenged notices and demands were quashed, any amounts recovered were ordered refunded within eight weeks of receipt of a certified copy, and the State was directed not to raise such demands for periods when the petitioner held a valid trade certificate.

Proceedings concerning tax under Section 4(1)(d) of the Rajasthan Motor Vehicles Taxation Act, 1951, were left unaffected