Rajasthan HC Upholds Tax on Vehicle Makers’ Factory Stock Without Requiring Proof They Used State Roads

The petitioners, including Honda and Hero MotoCorp, challenged demands under Section 4(1)(d) of the Rajasthan Motor Vehicles Taxation Act, 1951, and the notification dated 31 March 2000.

The demands related to vehicles manufactured and held at their Rajasthan factories before despatch; the petitioners contended that most vehicles left the State on trailers and did not use Rajasthan roads.

Following a factory inspection in 2016, the authorities assessed tax on the petitioner’s vehicles for 2014–15 and issued a demand; further petitions followed as assessments were made for subsequent years.

The batch challenged, among other provisions, Section 4(1)(d), the notification, the proviso to Section 39 of the Motor Vehicles Act, 1988, and Rule 33 of the Central Motor Vehicles Rules, 1989.

Entry 57 of List II authorises State taxation of vehicles “suitable for use on roads”; actual road use is not, by itself, a constitutional prerequisite.

Under Section 4(1)(d) of the Rajasthan Motor Vehicles Taxation Act, read with its opening words and Explanation (2), the taxable event is a dealer’s or manufacturer’s possession of vehicles in the course of business, while the number of vehicles is determined by the statutory and notification-based measures.

Section 39 of the Motor Vehicles Act prohibits driving an unregistered vehicle in a public place or “any other place”; Rule 33 provides a conditional registration exemption for vehicles covered by a trade certificate.

The Court relied on *Tata Motors Ltd. v. State of Jharkhand* concerning a similar manufacturer/dealer tax; *Akhil Gujarat Pravasi V.S. Mahamandal* and related authorities on the distinction between a vehicle’s suitability for road use and actual use; and *Jindal Stainless Ltd. v. State of Haryana*, which rejected the compensatory-tax doctrine as a constitutional limitation under Part XIII.

It distinguished *Tarachand Logistic Solutions Ltd. v. State of Andhra Pradesh* because that statute expressly confined the charge to use or keeping for use in a public place, and *Ultratech Cement Ltd. v. State of Gujarat* because the vehicles there were special equipment adapted only for enclosed premises.

The Court read Section 4(1)(d) together with the common opening words of Section 4(1). It held that clause (d) taxes possession in the course of business, not individual journeys, and noted that the statutory mechanism assesses tax in advance by reference to declared or previously sold vehicles, making proof of later road use incompatible with the scheme.

Because the vehicles were physically held in Rajasthan and were adapted for road use, their intended destination outside the State did not remove them from the charge.

The Court further held that Section 39 extends to movement within factory premises; a trade certificate is practically required when an unregistered vehicle is moved, although no certificate is needed for a vehicle that remains wholly stationary.

It rejected the constitutional challenges, finding that the levy was on possession rather than manufacture, that *Jindal Stainless* displaced the asserted compensatory-tax limitation, and that the cited road-use cases concerned materially different statutory language or vehicles.

It also found no impermissible double taxation or discrimination.

The writ petitions were dismissed insofar as they challenged the provisions or sought to bar demands based on manufacture and stocking; however, petitioners were permitted to file or revive appeals against individual assessments on specified grounds, including hearing defects, the basis for calculating vehicle numbers, and interest, surcharge or penalty.

Such appeals filed within eight weeks were to be entertained without limitation objection, and existing 50% deposits were sufficient for the statutory deposit requirement. Recovery of the balance was stayed pending decision of an appeal filed within the allowed period; there was no order as to costs.