TMI Blog2023 (1) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... Concurrent List). Additional power is given to the Parliament under sub-Article 4 to make laws with respect to any matter for any part of the territory of India not included in a State even though such matter is enumerated in the State List. Scope of Interference in Fiscal Statutes - HELD THAT:- It is by now well settled that any tax legislation may not be easily interfered with. The Courts must show judicial restraint to interfere with tax legislation unless it is shown and proved that such taxing statute is manifestly unjust or glaringly unconstitutional. Taxing statutes cannot be placed or tested or viewed on the same principles as laws affecting civil rights such as freedom of speech, religion, etc. The test of taxing statutes would be viewed on more stringent tests and the law makers should be given greater latitude - In the case of Indian Oil Corporation Limited vs. State of Bihar and another, [ 2017 (11) TMI 747 - SUPREME COURT ] , provisions of the Bihar Tax on Entry of Goods into Local Areas for Consumption, Use or Sale therein Act 1993, was under challenge. Justice Nariman speaking for the Bench observed in paragraph 25 that when it comes to taxing statute, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law enacted by Legislature of the State of Himachal Pradesh. The offending provision is regulatory in nature and therefore within the competence of the Legislature of State of Himachal Pradesh. There is nothing on record to indict the offending provision as being manifestly unjust or glaringly unconstitutional. Imposition of such additional special road tax, is directory or mandatory? - HELD THAT:- Imposition of such additional special road tax was only to keep a check or a discipline on the transport vehicle operators to use their vehicles in accordance with the statutory provisions. This could work as a deterrent for the transport operators to not commit any breach and to follow the mandate of the law. Such additional special road tax could be termed as regulatory in nature so as to regulate other statutory provisions being implemented and strictly followed - it cannot be said that levy of such an additional special road tax would be said to be manifestly unjust or glaringly unconstitutional. It was, in effect, to ensure payment of the chargeable taxes and use of the vehicles as per the terms of the permit. Repugnancy, if any, with Central enactment - HELD THAT:- Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rger Bench of three Judges in terms of order dated 27.02.1998 in Civil Appeal No. 10457/1995 and other connected cases [reported in (1998) 9 SCC 676] but which appeals later on repealed by Rajasthan Act, 1951, which is on similar lines with the provision involved in the present appeals. Hence, we deem it appropriate to refer these appeals to a larger Bench of three Judges for an authoritative pronouncement on the questions involved. Registry is directed to place the matters before Hon ble the Chief Justice of India for constituting the appropriate Bench for hearing these appeal(s). 2. The above referred order dated 27.02.1998 passed in Civil Appeal No. 10457 of 1995 and connected matters reported in State of Rajasthan Vs. Khalsa Travels, (1998) 9 SCC 676 is reproduced below: 1. These appeals filed by the State of Rajasthan raise questions relating to the constitutional validity of Section 4-B(3) of the Rajasthan Motor Vehicles Taxation Act, 1951 (hereinafter referred to as the Act ) and Rule 4-CC of the Rajasthan Motor Vehicles Taxation Rules, 1951 (hereinafter referred to as the Rules ) which make provision of levy of special road tax on a transport vehicle w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repealed and since Rule 4 CC was made to give effect to the provisions contained in Section 4 (B) (3) the said rule also has ceased to apply. In view of the aforesaid amendment that has been made by the Rajasthan Finance Act, 1977 the question raised by the appellant in these appeals is no longer a live issue and, therefore, it is not necessary to go into the same. The appeals are accordingly dismissed and the question is left open. No order as to costs. FACTS : 4. The respondent and several other similarly situate public transport operators challenged the validity of Section 3-A, Section 3-C, Section 4-A, Section 5-A along with Schedule-III under Section 3-A introduced vide the Himachal Pradesh Motor Vehicles Taxation (Amendment) Act, 1999 In short HPMVT(A) Act 1999 to be held ultra vires the Constitution of India and further the notifications dated 18.12.1999, 23.12.1999, 31.12.1999, 06.01.2000, 12.02.2000 and 01.04.2000 be quashed and set aside. The relief as claimed in one of the petitions bearing C.W.P. No.32 of 2000 (Goel Bus Service Vs. State of Himachal Pradesh and others) is reproduced below: (i) That the impugned Annexure-PA, PB, PC, PD, PE, dated 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 based upon negotiations held on 31.12.1999 relating to SRT is against the statutory provisions of the Act as stated above. Therefore, it is struck down being contrary to law. All the petitions are disposed of in the aforesaid terms. No orders as to costs. All the Misc. applications in the writ petitions are also disposed of. 6. The State of Himachal Pradesh is in appeal against the aforesaid judgment of the High Court. 7. We have heard Sri Abhinav Mukerji, learned counsel for the appellant-State of Himachal Pradesh and Sri Siddharth Bhatnagar, learned Senior Counsel appointed as Amicus Curiae to assist the Court on behalf of the respondent-operators. SUMMARY OF SUBMISSIONS : 8. Submissions advanced on behalf of appellants are summarized as under: The constitutional Courts must restrain from interfering in the matters of economic/tax legislation until and unless the offending provision is manifestly unjust or glaringly unconstitutional. Laws relating to economic activities should be viewed with greater latitude and more play should be given to the Government in comparison to other laws relating to civil rights. Reliance was placed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) 7 SCC 615 (Para 11 to 19). (iv) B.A. Jayaram and Ors. vs. Union of India (UOI) and Ors. (1984) 1 SCC 168 (Para 9-11). (v) Bolani Ores Ltd. vs. State of Orissa (1974) 2 SCC 777 (Para 15 29) (vi) Sharma Transport Rep. by D.P. Sharma vs. Government of Andhra Pradesh and Ors. (2002) 2 SCC 188 (Para, 1,8 and 11)). (vii) State of Maharashtra and Ors. vs. Madhukar Balkrishna Badiya and Ors. (1988) 4 SCC 290 (Para 6 10). (viii) Rajeev Suri vs. Delhi Development Authority and Ors. (2021 SCC Online SC 7 (Para 220 to 226). (ix) Janhit Manch and Anr. vs. The State of Maharashtra and Ors. (2019) 2 SCC 505 (Para 13). The High Court, though upheld the power of the State legislature to enact provisions for levy of special road tax under Sections 3-A(1)(2)(4), but at the same time erred in holding the provisions under Section 3-A(3) to be ultra vires being unconstitutional. The appeals be allowed, the judgment of the High Court impugned be set aside and the writ petitions be dismissed. 9. On the other hand, Shri Siddharth Bhatnagar, learned Amicus Curiae made the following submissions: The offences and penalties in respect of usin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State would have exclusive power to make laws (List II also referred to as the State List) and also the subjects where the Parliament as also the Legislature of States would have power to make laws covered by List III (referred to as the Concurrent List). Additional power is given to the Parliament under sub-Article 4 to make laws with respect to any matter for any part of the territory of India not included in a State even though such matter is enumerated in the State List. Article 246 is reproduced hereunder: (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List ). (2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List ). (3) Subject to clauses (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs carried by road or on inland waterways. 57. 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. The above subjects fall within the domain of Legislature of the State to make laws. 14. Under List III (the Concurrent List), Entry 35 spells out the subject as mechanically propelled vehicles and also the principles on which taxes on such vehicles can be levied. Under this entry both the Parliament and the Legislatures of State could frame laws. The said Entry 35 of List III is reproduced hereunder: 35. Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied. 15. The first enactment relating to motor vehicles in India was the Indian Motor Vehicles Act, 1914. It was replaced by the second enactment which came in 1939 as Motor Vehicles Act, 1939. After the coming of the Constitution in 1950, a new Motor Vehicles Act was enacted by the Parliament in 1988, the Motor Vehicles Act, 1988. The Parliament enacted the 1988 Act drawing its source from Entry 35 of the List III (the Concurrent List). The subject covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay use the vehicle, for the drawing of any trailer or semi-trailer not owned by him, subject to such conditions as may be prescribed: 1[Provided that the holder of a permit of any articulated vehicle may use the prime-mover of that articulated vehicle for any other semi-trailor.] 17. Chapter XIII of the 1988 Act lays down the provisions for Offences, Penalties and Procedure. Section 192A introduced in 1994 provides that any motor vehicle being driven in contravention of the provisions of sub-section (1) of Section 66 or in contravention of any condition of permit relating to the road on which or the area in which or the purpose for which the vehicle may be used would be a punishable offence which will result into imprisonment for a term which may extend to six months and fine of Rs.10,000/- for the first offence and for subsequent offences the imprisonment could extend to one year but would not be less than six months or with fine of Rs.10,000/- or with both. 18. Sub-section (2) thereof provides for an exception where a motor vehicle may be used in an emergency for carrying persons suffering from sickness or injury or for supply of food or materials or medical supplies to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its budget was spent on construction, maintenance and development of roads and bridges. Objects and reasons as reflected in the Bill No. 10 of 1999, is reproduced here under: Developed roads and bridges constitute arteries of a healthy economy. Himachal Pradesh being a hill State, the importance of roads, their construction and maintenance can hardly be over emphasized as a vital trading facility. Each year, the government has to incur considerable part of its budget on construction, maintenance and development of roads and bridges in the State. Since it is essential to finance these activities, it is considered necessary to levy road tax on transport vehicles used or kept for use on public roads in Himachal Pradesh. 20. In the original Act of 1972 HPMVT Act 1972 , Section 3 provided for levy and collection of taxes on all motor vehicles which were to be used or kept for use in the State of Himachal Pradesh. Section 3 reads as follows: SECTION-3** LEVY OF TAX. *(1) Subject to the other provisions of this Act, on and from the commencement of the Himachal Pradesh Motor Vehicles Taxation (Amendment) Act, 2004, there shall be levied, charged and paid to the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rupees, or (d) in the case of motor vehicles having original price more than ten lacs rupees, the floor price shall not be less than four lac rupees, or (e) in the case of two wheelers, the floor price shall not be less than five thousand rupees. 21. By the Amending Act of 1999, Section 3A was introduced which carries a heading: Levy of Special Road Tax. This special road tax was in addition to the tax levied under Section 3. The special road tax was also levied and charged on all transport vehicles used or kept for use in Himachal Pradesh specified in column 2 of Schedule 3 and the rate of tax was to be not exceeding the rates specified in column 3 of Schedule 3 of the Act. Section 3A is reproduced hereunder: 3-A. Levy of special road tax.- (1) In addition to the tax levied under section 3, on and from the commencement of the Himachal Pradesh Motor Vehicles Taxation (Amendment) Act, 1999, there shall be levied, charged and paid to the State Government, a special road tax on all transport vehicles specified in column (2) of Schedule-III, used or kept for use, in Himachal Pradesh, and, at such rates as may be specified by the State Government, by notification, but not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to Entry 35 of List III, if there is an existing law made by the Parliament laying down the principles on which taxes on mechanically propelled vehicles should be levied, then any State Legislation enacted under this entry must conform to these principles as laid down in the existing laws or the earlier law made by the Parliament. If the provisions of the State Laws are repugnant to those principles, the Law made by the State Legislature must fail to the extent of repugnancy, unless reserved for the consideration of and assented to by the President. The tax under this entry is leviable by the State Legislature or all vehicles suitable for use on roads, which are kept in the State, but such tax must have some nexus with the vehicles using the public roads of the State because it is compensatory in nature, even though registered under the Motor Vehicles Act. Contra the State Legislature is not competent to levy, under the present entry, an impost which is not in substance a regulatory or compensatory tax for the transport of the vehicle along the road, but a fine , for example using a vehicle without a valid permit or for issuing it in a manner not authorized by the permit, is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of constitutionality of the statute and that the burden is on the person who attacks it, to establish that there has been clear transgression of the constitutional principles. In paragraph 8, it was laid down that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion, etc. The views of Justice Frankfurter in the case of Morey vs. Doud, 354 US 457 was relied upon. The same is reproduced hereunder: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error, the bewildering conflict of the experts, and the number of times the judges have been overruled by events - self-limitation can be seen to be the path to judicial wisdom and institutional prestige and stability. 27. In case of Bhavesh D. Parish and others vs. Union of India and another, (2000) 5 SCC 471, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hheld that tax charged for non-fulfilment of any obligation would also be compensatory and regulatory in nature. Distinction was carved out between a penalty imposed for breach of statutory duty and penalty imposed being a subject matter of a complaint that would require adjudication. The view expressed consistently is that it would be compensatory or regulatory where it is imposed for breach of a statutory duty. 32. In the case of the State of U.P and others vs. Sukhpal Singh Bal, (2005) 7 SCC 615, Justice Kapadia speaking for the Bench held that section 10(3) of U.P. Motor Vehicles Taxation Act, 1997, which provided for charging of such tax or additional tax along with penalty where transport vehicles were found plying in Uttar Pradesh without payment of tax or additional tax under the said Act to be valid as being regulatory and compensatory. 33. The High Court had struck down the said provision. This Court allowed the appeal of the State. After referring to the judgments in the case of Bhavesh D. Parish and R.K. Garg, this Court went on to hold that section 10(3) was enacted to protect public revenue and as a deterrent for tax evasion. Deterrence was the main theme and ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t plenary. In the said judgment, it has been held that imposition of higher burden of tax on vehicles based on intelligible reasoning and differentia will not make the impugned levy discriminatory, arbitrary or unreasonable so as to violate article 14 of the Constitution. 34. From the very object and reasons of the Amending Act 1999, it is apparent that the special road tax was introduced as a compensatory measure. The object and reasons as spelled out in the original bill at the cost of repetition is reproduced below: Developed roads and bridges constitute arteries of a healthy economy. Himachal Pradesh being a hill State, the importance of roads, their construction and maintenance can hardly be over emphasised as a vital trading facility. Each year, the government has to incur considerable part of its budget on construction, maintenance and development of roads and bridges in the State. Since it is essential to finance these activities, it is considered necessary to levy road tax on transport vehicles used or kept for use on public roads in Himachal Pradesh. 35. What is to be seen is whether the tax imposed will have identifiable object and a nexus between the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure to impose a levy and to exempt from the levy. True again, Entry 57 of the State List is subject to Entry 35 of the Concurrent List and, as explained by us at the outset, it is therefore open to the Parliament to lay down the principles on which taxes may be levied on mechanically propelled vehicles. But the Parliament while enacting Section 63(7) of the Motor Vehicles Act refrained from indicating any such principles, either expressly or by necessary implication. The State's power to tax and to exempt was left uninhibited. It may be that a State legislation, plenary or subordinate, which exempts non-home-State tourist vehicles from tax would be advancing the object of Section 63(7) of the Motor Vehicles Act and accelerating inter-State trade, commerce and intercourse. But merely by Parliament legislating Section 63(7), the State Legislatures are not obliged to fall in line and to so arrange their tax laws as to advance the object of Section 63(7), be it ever so desirable. The State is obliged neither to grant an exemption nor to perpetuate an exemption once granted. There is no question of impairing the freedom under Article 301 by refusing to exempt or by withdrawing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng power under Entry 57 List I of the Seventh Schedule read with Article 301 of the Constitution depends upon the regulatory and compensatory nature of the taxes. It is not the purpose of the Taxation Act to levy taxes on vehicles which do not use the roads or in any way form part of flow of traffic on the roads which is required to be regulated. The regulations under the Motor Vehicles Act for registration and prohibition of certain categories of vehicles being driven by persons who have no driving licence, even though those vehicles are not plying on the roads, are designed to ensure the safety of passengers and goods etc. etc. and for that purpose it is enacted to keep control and check on the vehicles. Legislative power under Entry 35 of List III (Concurrent List) does not bar such a provision. But Entry 57 of List Il is subject to the limitations referred to above, namely, that the power of taxation thereunder cannot exceed the compensatory nature which must have some nexus with the vehicles using the roads viz. public roads. 38. The argument by Mr.Bhatnagar, learned amicus that the offending provision contained in Section 3A(3) being repugnant to the central legislation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply in that State and the executive power of the Union shall extend to the giving of such directions to a State as may appear to the Government of India to be necessary for that purpose. This article has application only when any law has been made by Parliament and the executive power of the State is made subservient to it by requiring it to ensure compliance with such laws. Where it appears to the Government of India that it is so necessary to do, directions can be issued. Article 257 provides that the executive power of every State shall be so exercised as not to impede or prejudice the exercise of the executive power of the Union. Where the Government of India feels it so necessary to do so, it can issue a direction. At the cost of repetition it may be noted that there is no law specifying the principles of taxation on the subject-matter of controversy so as to bring in application of either Article 256 or Article 257 of the Constitution. 11. Power to levy taxes on vehicles, whether mechanically propelled or not vests solely in the State Legislature, though it may be open to Parliament to lay down the principles on which the taxes may be levied on mechanically pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore within the competence of the Legislature of State of Himachal Pradesh. There is nothing on record to indict the offending provision as being manifestly unjust or glaringly unconstitutional. Regulatory or Compensatory: 43. The objects and reasons for bringing in the 1999 Amendment was clearly compensatory in nature. The object was to augment funds and finance for construction, maintenance, repair and upkeep of the roads in the State of Himachal Pradesh which has a totally hilly terrain. The offending section only provided that if any vehicle used without a valid permit or in any manner not authorised by the permit, further special road tax would be levied, charged and paid to the state government in addition to the tax payable under sub-section (1) at such rates as may be specified by the state government by notification. However, the restriction was that the same would not exceed the rates specified in column 3 of Schedule 3 of the Act. 44. Imposition of such additional special road tax was only to keep a check or a discipline on the transport vehicle operators to use their vehicles in accordance with the statutory provisions. This could work as a deterrent for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g section was incorporated with a view to augment more revenue in order to construct and maintain the roads of the state which uses a large chunk of its finances being a state having a completely hilly terrain. The additional special road tax chargeable under Section 3A(3) would be in addition to any sentence or fine imposed under Section 192A. Punishment for offence is with an object to create deterrence and curtailing such offences as it creates a fear in the mind of offender likely to commit the offence. The same is the object of the additional special road tax to make it work as a deterrent from the transport operators in plying vehicles without permit and in contravention of the terms of the permit. As such there is no repugnancy or any conflict caused by the offending provision with the central enactment. 48. For all the reasons recorded above, the validity of Section 3A(3), in our opinion, has been wrongly held to be ultra vires by the High Court. The tax imposed under Section 3A(3) is regulatory in character and is not a penalty. Lumpsum taxation : 49. The High Court had also quashed the notifications issued by the State for levy of the taxes under Section 3A( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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