TMI Blog2022 (12) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... anchan Murali Auto, Mahindra & Mahindra Financial Services Ltd., Jyote Motors, Odisha Automobiles Dealers Association (OADA), M/s. Urbasi Bajaj, Ashirbad Automobile and another, M/s. Shree Durga Motors, M/s. S.K. Motors, Ananta Automobiles Private Ltd., M/s. Narayani Motors Pvt. Ltd., and another, M/s. Chandan Automobiles M/s. Paradeep Motors, M/s. Varsa Motors, M/s. Sanjibani Motors Pvt. Ltd., M/s. Maa Tarini Motors, M/s. Choudhary Automobiles, M/s. Sova Automobiles, M/s. Bharat Automobiles, Sundaram Finance Ltd., M/s. Bina Motors, M/s. Consortium Automobiles Pvt. Ltd., M/s. Ayush Automobiles, M/s. Shree Gayatri Motors, M/s. Shree Laxmi Enterprises, M/s. R.B. Motors, M/s. Shree Shyam Motors, M/s. Shree Bimla Motors, OSL Motors Pvt. Ltd., M/s. Mishra Auto, M/s. International Tractors, M/s. Gugnani Motors, M/s. Jaiswal Motors, M/s. Om Automobiles Versus State of Odisha and others State of Transport Authority, Orissa and others Appellant Mr. Samvit Mohanty, Advocate Mr. Jaydeep Pal, Advocate Mr. S.S. Mohanty, Advocate Mr. P.K. Dash, Advocate Mr. A.N. Das, Advocate Mr. D.K. Sahoo-1, Advocate Mr. S.S. Rao, Advocate Mr. Avijit Pal, Advocate Mr. Sidharta Ray, Advocate Mr. Nalinikanta Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce 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." 5. As far as the proviso to Section 39 of the MV Act is concerned, reference is required to be made to Rule 33 of the Central Motor Vehicles Rules, 1989 (MV Rules) which reads as under: "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 automobile or automobiles 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used upon more than one vehicle at a time or upon any vehicle other than a vehicle "bona fide in possession of the dealer or manufacturer of automobile or automobile ancillaries" in the course of his business or any type of vehicle other than the one for which the TC is issued. Rule 39 (2) requires a TC to be carried on a motor vehicle in a weatherproof circular folder and the trade registration mark is required to be exhibited in a conspicuous place in the vehicle. The contention of the Appellants has been that the same TC can be used in multiple types and multiple vehicles, subject to the condition that it cannot be used simultaneously on two vehicles. 10. The scheme of grant of a TC is a legislative acknowledgement of the fact that there is a time period between the manufacturer delivering to the dealer a certain number of vehicles meant for sale which then a dealer keeps in his possession at a given point in time, and the ultimate sale of such vehicles. When the dealer applies for a TC, he is expected to specify the number of vehicles for which he is applying for a TC. A perusal of the Form-16 appended to the MV Rules reveals that the dealer is expected to specify in column 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehicle Annual rate 1. Motor Cycles- (a) where the total number of vehicles does not exceed ten Rs.2000.00 (b) where such total number exceeds ten Rs.2000.00 Plus Rs.200.00 for each vehicle exceeding ten 2. Motor vehicles other than Motor Cycles weighing not more than 3048 kilograms unladen- (a) where the total number of vehicles does not exceed ten Rs.5,000.00 (b) where such total number exceeds ten. Rs.5000.00 Rs.500.00 for each vehicle exceeding ten 3. Motor vehicles weighing more than 3048 kilograms unladen- (a) where the total number of vehicles does not exceed ten. Rs. 10,000.00 (b) where such total number exceeds ten. Rs. 10,000.00 Rs. 1000.00 for each vehicle exceeding ten. 15. It is thus seen that Section 5 is a separate taxing provision. The liability of tax which is to be paid at an annual rate and in advance falls on the manufacturer or dealer in motor vehicles. Such vehicles have to be in possession in the course of business of such manufacturer or dealer "under the authorization of TC". The tax is therefore specific to vehicles in possession of the manufacturer or dealer by virtue of the TC granted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication for the grant/renewal of trade certificate shall be made in form-16 accompanied by appropriate fees as specified in Rule-81 by the dealer/manufacturer. Separate application shall be made for each class of vehicles as per rule 34 of CMV Rules. On receipt of application from the dealers, the grant/renewal of trade certificate is issued under Rule-35 of CMVR-1989 by the Registering Authority to the dealers/manufacturers. Accordingly under Rule-36 of OMV Rules 1993(1). The manufacturer/dealer shall furnish to the registering Authority having jurisdiction in the locality with the information in Form XIII & XIV, in respect of the vehicles received in stock & sold by him during every month by 15th of the succeeding month. (2) The manufacturer/dealer should furnish the copy of the certificate in form-21 prescribed under rule-47 of CMV Rule-1989 to the registering authority & the concerned region when the vehicle is intended to be registered. All the dealers or manufacturers are bound to submit monthly returns in form-XIII & XIV under rule-36 of OMV-1993. A certificate in form-XIV are being furnished to the registering authority that the maximum nos. of vehicles covered und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As far as the tax payable at the time of registration is concerned, Sections 3, 4-A and 4-B of the OMVT Act are relevant. Therefore, irrespective of the number of vehicles sold by the dealer in a year, tax under Section 5 of the OMVT Act was only to be demanded in respect of vehicles possessed under the TC. It was also pointed out that the assumption that the dealer had kept vehicles in his possession beyond that specified in the TC was not preceded by any enquiry and there was no show-cause notice issued to such dealer before raising the demand. 22. The above submissions were countered by the Respondent-STA by contending that even if at a given point of time the dealer does not possess vehicles in excess of those covered by the TC but if at the end of the year it was found that the dealer had sold vehicles beyond the number indicated in the TC, then also it will be liable to pay the TC tax in respect of each vehicle since he had possessed "such number of vehicles which had been sold by him". The contention of the STA was that when a vehicle was sold, a sale certificate is issued in Form-XXI and a registration made in Form-XX. The sale certificate is to be granted by the manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the end of twelve months it was found that the dealer had possession of vehicles even not exceeding the number of vehicles in possession at a given point of time as per the TC issued, then he is liable to pay the tax "at the end of twelve months, if it is found that the dealer having remained in possession of number of vehicles even not exceeding the number of vehicles in possession at a given point of time as per the trade certificate issued, then he is liable to pay the tax as demanded by the authority concerned because such vehicles were in possession in course of his business." 24. It was therefore concluded that the STA had not committed any illegality in issuing the said communication dated 29th March, 2016. Reference was made to Rule 177 of the OMV Rules and it was concluded that the Commissioner was well within his competence for issuing such instruction, which was only to give effect to Section 5 of the OMVT Act. Proceedings and pleadings in these appeals 25. In many of these appeals while issuing notice, this Court passed an interim order to the effect that the Appellants would be liable to comply with the impugned communication dated 29th March, 2016 "prospectivel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Certificate Fees (TC Fees) in terms of Rule 81 of the Central Motor Vehicles Rules, 1989, to the customers. Some dealers may have passed on the additional incidence to the customers whereas others have paid it from their own resources." 30. The said affidavit refers to an instruction dated 12th January 2022 issued by the STA to all the RTOs asking them to ensure that the dealers will clearly display on the notice board the details of the payment to be made by the purchaser for each category of vehicle and that no extra payment requires to be made other than that mentioned therein. 31. On behalf of the Appellants, this Court has heard the submissions of Mr. Samvit Mohanty, Mr. Jaydeep Pal, Mr. S.S. Mohanty, Mr. P.K. Dash, Mr. A.N. Das, Mr. D.K. Sahoo-1, Mr. S.S. Rao, Mr. Avijit Pal, Advocate, Mr. Sidharta Ray, Mr. Nalinikanta Dash, Mr. Ramesh Agarwal and Mr. Deepak Kumar Mohapatra, learned counsels for the respective Appellants and on behalf of the STA, this Court has heard the submissions of Mr. Pravakar Behera, learned Standing Counsel. Submissions on behalf of the Appellants 32. The arguments on behalf of the Appellants could be summarized as under: (i) The STA misconstrued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of his business, he has to pay tax in terms of the circular dated 29th March, 2016. 34. As regards legislative competence of the State to collect tax from manufacturers/dealers in respect of vehicles possessed under a TC, the complete answer according to Mr. Behera was provided in respect of an identical provision under the Bihar Motor Vehicles Taxation Act (BMVT Act) by the Patna High Court in M/s. Tata Engineering and Locomotive Company Limited v. State of Bihar, AIR 1999 Pat 62, which was affirmed by the Supreme Court of India with the dismissal of the Special Leave Petitions filed against the said judgment. A subsequent challenge by manufacturers of motor vehicles to demands raised against them under Section 6 of the BMVT Act was again negatived by the Jharkhand High Court, Ranchi Bench in TELCO Limited v. State of Jharkhand (2003) 1 JLJR 601 and R.K. Automobile v. State of Bihar AIR 2004 Jhar 426. The appeals filed against both the judgments were dismissed by the Supreme Court of India in Tata Motor Limited v. State of Jharkhand (2020) 15 SCC 438. In the said judgment, the Supreme Court reaffirmed the correctness of the judgment of the Patna High Court in M/s. Tata Engin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry reads as under: "57. 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." 21. The High Court, however, rejected this contention with the reason that under this entry, taxes on vehicles which are suitable for use on roads can be imposed and it was undisputed case of the parties that the vehicles manufactured by the appellants are suitable for use on roads. Therefore, the provision which stipulates the manufacturer or a dealer of a motor vehicle, in respect of the motor vehicle in his possession in the course of business as such a manufacturer or dealer shall pay tax, is within the legislative competence of Entry 57. This contention has been raised before us as well. However, we do not agree with the appellants as the reasoning given by the High Court is the correct analysis of Schedule VII List II Entry 57 to the Constitution." 37. Therefore the challenge raised by the Appellants to the constitutional validity of Section 5 of the OMVT Act and the corresponding Rules under the OMVT Rules is hereby rejected. Therefore, as far as the present case is concerned, the Court is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention to the charging section than to the basis or machinery adopted for assessment and collection of tax for the nature of tax is different from the measure of tax." 40. In the same commentary, it is unambiguously stated that (at page 826) "a taxing statute is to be strictly construed." It is further stated (at pages 827-828) as under: "In fiscal legislation a transaction cannot be taxed on any doctrine of "the substance of the matter" as distinguished from its legal signification, for a subject is not liable to tax on supposed "spirit of the law" or "by inference or by analogy." 41. It has further been observed (at p. 829) by quoting the decision in Ormond Investment Co. v. Betts (1928) AC 143 as under: "The proper course in construing revenue Acts is to give a fair and reasonable construction to their language without leaning to one side or the other but keeping in mind that no tax can be imposed without words clearly showing an intention to lay the burden and that equitable construction of the words is not permissible. Considerations of hardship, injustice or anomalies do not play any useful role in construing taxing statutes unless there be some real ambiguity. It h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess". 45. Therefore, while reading a charging Section like Section 5 of the OMVT Act, applying the rules of strict construction, care has to be taken to ensure that the scope of liability is not enhanced by misinterpreting the charging section itself. 46. The learned Single Judge accepted the plea of the STA that Section 5 of the OMVT Act enables collection of tax thereunder on every vehicle which is "possessed and registered during entire year by the dealer". In order to determine what these total number of vehicles "possessed and registered during the entire year" might be, the impugned communication instructed the RTO to find out the total number of vehicles "received in stock and sold" by such dealer. The yardstick applied was the "registration of vehicles made by the dealers". 47. An important shift that has occurred by virtue of the letter dated 29th March, 2016 is that the basis of levying the TC tax, viz., the 'taxable event', has itself been altered. While the provision talks of tax being levied in respect of the vehicles possessed by the dealer "under the TC" held by such dealer, the impugned instruction changes it to the tax having to be paid, not limited to the vehic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of vehicles in his possession in the course of his business" omitted the important words following this expression viz., "under the authorization of trade certificate granted under the Motor Vehicle Rules". This disjointed reading of Section 5 of the OMVT Act has resulted in the learned Single Judge accepting the interpretation placed by the STA, which in the opinion of this Court is erroneous. 51. The impugned instruction appears to have been triggered by what the Commissioner perceived to be an under-collection of motor vehicle revenue. If that was the perceived problem, then the solution was not to issue an instruction, but perhaps to amend the statute. The Commissioner appears to have adopted a shortcut and by exercising the powers under Rule 177 of the OMV Rules simply issued an 'instruction' which then became binding on all the RTOs. 52. The learned Single Judge appears to have relied on Rule 177 of the OMV Rules itself to uphold the validity of instruction. What was perhaps not noticed was that Rule 177 is merely an enabling provision as far as the binding effect of instructions issued by the Transport Commissioner to the RTOs is concerned. It does not empower th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change can possibly be brought about, particularly in a taxing statute, only by amending the law itself and not otherwise. It is even doubtful if such a change can be brought by merely amending the OMVT Rules as that would change or expand as the case may be the 'taxable event' as well as the 'machinery provision' of the taxing statute which again would be impermissible in law. The amendment would have to be to the statute itself. 56. For all of the aforementioned reasons, this Court is unable to subscribe to the view of the learned Single Judge that the interpretation placed on Section 5 of the OMVT Act through the impugned instruction is correct and in consonance with the legislative intent behind Section 5 of the OMVT Act and the scope and ambit of that provision. In other words, this Court is of the considered view that the instruction dated 29th March, 2016 is ultra vires Section 5 of the OMVT Act and therefore cannot be sustained in law. Accordingly, this Court quashes the impugned instruction dated 29th March, 2016. 57. The next issue to be considered is the validity of the demand notices issued by STA to each of the Appellants on the basis of the impugned instructions dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excess TC tax and TC fees collected by virtue of the impugned instruction issued by the STA to the RTOs. However, what is clear is that the collection hereafter of TC tax and TC fees on the basis of the impugned instructions dated 29th March, 2016 will have to cease forthwith. 59. To summarize the conclusions in this judgment; (i) Section 5 of the OMVT Act is a charging Section and in a taxing statute, it has to be strictly construed. (ii) The challenge to the constitutional validity of Section 5 of the OMVT Act is rejected. (iii) The taxable event under Section 5 of the OMVT Act is the possession of vehicles by the dealer under the TC certificate issued under the MV Rules. (iv) Section 5 is both the charging Section as well as the 'machinery provision'. It indicates that TC tax will become payable in respect of the vehicles possessed by the dealer under the TC certificate and also specifies what is the tax payable if the number of vehicles found in possession under the TC certificate exceeds that number. It also clearly specifies that the tax is to be collected at an annual rate and in advance. (v) The impugned instruction dated 29th March, 2016 changes the very bas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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