Rajasthan HC Upholds Tax On Manufacturers’ Vehicles Stocked In Rajasthan, Even If They Never Use State Roads

The petitioners manufactured motor vehicles at factories in Rajasthan and held finished, unregistered vehicles at their premises pending despatch.

Following an inspection, the State assessed tax under Section 4(1)(d) of the Rajasthan Motor Vehicles Taxation Act, 1951, read with the notification dated 31 March 2000, on vehicles in the manufacturers’ possession.

The petitioners challenged the assessments and the vires of the relevant provisions, contending, among other things, that the vehicles did not use Rajasthan roads and that no trade certificate was required for stationary factory stock.

The matters were heard together; the Court took the facts and procedural history of one petition as representative.

Entry 57 of List II empowers States to tax vehicles “suitable for use on roads”; actual road use is not, by itself, an ingredient of the taxing power.

Section 4(1)(d) of the Rajasthan Motor Vehicles Taxation Act, 1951 charges dealers and manufacturers in respect of vehicles in their possession in the course of business, while the opening words of Section 4(1) require the vehicles to be used or kept for use in the State; the statutory explanations govern the measure of the levy.

Section 39 of the Motor Vehicles Act, 1988 prohibits driving an unregistered vehicle in a public place “or in any other place”; Rule 33 provides a conditional exemption from registration for qualifying vehicles where a trade certificate is obtained.

The Court applied *Tata Motors Ltd. v. State of Jharkhand* to the manufacturer-possession charge; *Akhil Gujarat Pravasi V.S. Mahamandal* and *State of Orissa v. Bijaya C. Tripathy* to the distinction between actual use and availability for use; and *Jindal Stainless Ltd. v. State of Haryana* for the rule that compensatory character is not an independent constitutional requirement and that only discriminatory taxes are barred by Article 304(a).

It distinguished *Tarachand Logistic Solutions Ltd. v. State of Andhra Pradesh* on the basis that the Andhra Pradesh charging provision expressly referred to a “public place,” and *Ultratech Cement Ltd. v. State of Gujarat* because the vehicles there were specialised equipment adapted only for enclosed premises.

The Court read Section 4(1)(d) as imposing a charge on a trader’s possession of vehicles in the course of business, not on a vehicle’s journey; unlike neighbouring clauses, clause (d) does not require road use, and the advance-payment and estimation provisions are inconsistent with a requirement to prove the use of each vehicle.

It held that vehicles physically kept in Rajasthan and adapted for road use are “kept for use in the State,” even if later despatched elsewhere.

Because Section 39 extends to driving in “any other place,” movement within factory premises falls within its prohibition; a trade certificate supplies the conditional registration exemption for vehicles that are moved, though no certificate is required for a vehicle that is truly never moved.

The challenge to Rule 33 failed, but the Court found it unnecessary to decide finally whether the Rule extends beyond the proviso to Section 39.

The levy was held to tax possession rather than manufacture, and *Jindal Stainless* foreclosed the claim that a compensatory nexus or actual road use was constitutionally necessary. The Court also found no relevant discrimination or invalid double taxation.

The writ petitions were dismissed insofar as they challenged the levy or sought to bar demands on manufactured and stocked vehicles. However, petitioners were permitted to file or revive statutory appeals within eight weeks, without a limitation objection or further deposit where 50% had already been deposited, on specified grounds concerning hearing, the computation of vehicle numbers, interest, surcharge and penalty. Recovery of the balance was stayed pending timely appeals; there was no order as to costs.