State
of Gujarat & Ors Vs. Akhil Gujarat Pravasi V.S. Mahamandal & Ors [2004]
Insc 240 (8 April 2004)
S. Rajendra
Babu & G.P. Mathur.
With
Writ Petition (C) Nos.249 and 252 of 2002 G.P. MATHUR,J.
1.
Civil Appeal Nos.6462-6464 of 2001 have been preferred by State of Gujarat
against the judgment and order dated 17.8.2001 of a Division Bench of the High
Court, whereby Section 3A (1) and (2) of Bombay Motor Vehicles Tax Act, 1958
and also Rule 5 of Bombay Motor Vehicles Tax Rules, 1959 made vide notification
dated 6.2.2001 were struck down and a writ of mandamus was issued to the State
authorities not to recover any tax in pursuance thereto from the vehicles of
the respondents herein (writ petitioners in the High Court) which were kept but
were not being used. A further direction was issued to the respondent State to
grant refund of the tax already recovered from the respondents within three
months from the date of receipt of copy of the judgment after examining their
case regarding non-use of the vehicles. After the decision of the High Court,
the Bombay Motor Vehicles Tax Act was amended by Gujarat Act No.9 of 2002 in
order to validate the imposition and collection of tax on designated omnibuses,
which was published in the Gazette on 31.3.2002. Writ Petition Nos.249 and 252
of 2002 have been filed in this Court challenging the amendments made by the
aforesaid amending Act.
2. It
will be convenient to reproduce relevant provisions of the statute which was
subject matter of challenge before the Gujarat High Court. The Bombay Motor
Vehicles Tax Act, 1958 (hereinafter referred to as "the Act") was
made applicable to the State of Gujarat by the Gujarat Adoption of Laws (State and Concurrent Subjects) Order,
1960. The Act was amended several times and lastly on 6.2.2001 by Gujarat Act
No.2 of 2001. Section 2 of this Act gives the definitions and Sub-section (1)
defines "certificate of taxation" and it means a certificate, issued
under Section 5, indicating therein the rate at which the tax is leviable, and
the periods for which the tax has been paid, Sub-section (5) defines
"registered owner" and it means the person in whose name a motor
vehicle is registered under the Motor Vehicles Act, 1939 (or, as the case may
be, the Motor Vehicles Act, 1988) and Sub-section (7) defines "Taxation
Authority" or "Authority" and it means such officer or authority
as the State Government may by notification in the Official Gazette, appoint to
be the Taxation Authority for the whole State or for any area or areas for the
purposes of the Act, and the State Government may appoint more than one officer
or authority as Taxation Authority for the whole State or for any area. The
controversy here relates to Sections 3 and 3A of the Act and the relevant part
thereof are being reproduced below :
Section
3 (1) Subject to the other provisions of this Act, on and from the 1st day of
April, 1958, there shall be levied and collected on all motor vehicles used or
kept for use in the State, a tax at the rates fixed by the State Government, by
notification in the Office Gazette, [but not exceeding the maximum rates
specified in the [First, Second, Third, Fourth, Fifth, Sixth and Seventh
Schedules] :
Provided
.. [Omitted as not relevant] Provided further . [Omitted as not relevant] (2)
Except, during any period for which the Taxation Authority has, in the
prescribed manner, certified that a motor vehicle was not used or kept for use
in the State, the registered owner, or any person having possession or control,
of a motor vehicle of which the certificate of registration is current, shall,
for the purposes of this Act, be deemed to use or keep such vehicle for use in
the State.
(3) No
tax shall be leviable under sub-section (1) on motor vehicles on which tax is leviable
under sub-section (1) of section 3A.
Section
3A. (1) On and from the 1st day of April, 1991, there shall be levied and
collected on all omnibuses which are used or kept for use in the State
exclusively as contract carriages (hereinafter in this section and sub-section
(1A) of Section 4 referred to as "the designated omnibuses") a tax at
the rates specified in the table below :- TABLE
--------------------------------------------------------------------------------------------
Description of Designated omnibuses Annual rate of tax --------------------------------------------------------------------------------------------
1.(a)
Ordinary designated omnibuses (Rs.2,700) per passenger permitted permitted to
be carried not more to be carried. than twenty passengers.
(b)
Ordinary designated omnibuses (Rs.4,050) per passenger permitted permitted to
be carried more to be carried. than twenty passengers.
2.(a)
Luxury or tourist designated (Rs.4,050) per passenger permitted omnibuses
permitted to be to be carried. carried not more than twenty passengers.
(b)
Luxury or tourist designated (Rs.6,000) per passenger permitted omnibuses
permitted to be to be carried. carried more than twenty passengers.
Provided
that in the case of the designated omnibuses used solely for the purpose of
transporting students of educational institutions in the State in connection
with any of the activities of such educational institutions a tax shall be
levied and collected under sub-section (1) of section 3, and not under this
sub-section.
(2)
(a) The tax leviable under sub-section (1) shall be paid in advance by every
registered owner or any person having possession or control of the designated
omnibuses either annually at the annual rate specified in the Table appearing
in sub-section (1) or in monthly instalments of one-twelfth of the annual rate.
(b)
The annual payment of tax or the payment of monthly instalment of tax shall be
made within such period and in such manner as may be prescribed.
(3) ..
[Omitted as not relevant] (4) .. [Omitted as not relevant] (5) (a) Where the
registered owner or any person having possession or control of a designated
omnibus who has paid tax under this section proves to the satisfaction of the
Taxation Authority that the designated omnibus in respect of which the tax has
been paid has not been used or kept for use for a continuos period of not less
than one month, he shall be entitled to the refund of an amount equal to
one-twelfth of the annual rate of tax paid in respect of such omnibus for each
complete month of the period for which the tax has been paid so however that,
except as otherwise provided in clause (b) the total amount of a refund in a
year shall not exceed
(i)
six hundred seventyfive rupees per passenger permitted to be carried, in the
case of an ordinary designated omnibus permitted to be carried not more than
twenty passengers.
(ii)
one thousand twelve rupees per passenger permitted to be carried, in the case
of an ordinary designated omnibus permitted to be carried more than twenty
passengers.
(iii)
one thousand one hundred twenty-five rupees per passenger permitted to be
carried, in the case of a luxury or tourist designated omnibus permitted to be
carried not more than twenty passengers.
(iv)
one thousand five hundred rupees per passenger permitted to be carried, in the
case of a luxury or tourist designated omnibus permitted to be carried more
than twenty passengers.
Provided
that for the purpose of determining the amount of refund under this clause,
only such of the period in which a designated omnibus has not been used or kept
for use shall be taken into account as comprises of complete months.
(b)
Where a registered owner or a person having possession or control of a
designated omnibus, who has paid tax under this section proves to the satisfaction
of the State Government or such officer not below the rank of the Director of
Transport, Gujarat State, as may, by notification in the Official Gazette, be authorised
in this behalf by the State Government that the designated omnibus in respect
of which tax has been paid, has not been used or kept for use for a continuous
period of not less than one month but exceeding three months in a year, he
shall be entitled to the refund of an amount equal to one-twelfth of the annual
rate of the tax paid in respect of such omnibus for each complete month of the
period of which the tax has been paid :
Provided
that for the purpose of determining the amount of refund under this clause only
such of the period in which a designated omnibus has not been used or kept for
use shall be taken into account as comprises of complete months.
(6) [Omitted
as not relevant] Section 4(1) provides that the tax leviable under Section 3 in
respect of a motor vehicle specified in the First Schedule shall be paid in
advance by every registered owner, or any person having possession or control,
of such motor vehicles to which sub-section (IAA) does not apply.
3. The
Bombay Motor Vehicle Rules, 1959 (hereinafter referred to as 'the Rules') were
amended by Bombay Motor Vehicles Tax (Gujarat Amendment) Rules, 2001 vide
notification dated 6.2.2001 and after amendment Rule 5 reads as under :
"(1)
A registered owner or any person who has possession or control of a motor
vehicle in respect of which tax is paid in advance, not intending to use or
keep for use such vehicle in the State and desiring to claim refund of tax on
that account shall before the commencement of the period for which the refund
of tax is to be claimed, make a declaration in form NT for any specified period
not exceeding beyond the period for which the tax is paid in advance to the
Taxation Authority in whose jurisdiction such vehicle is to be kept under
non-use along with the certificate of taxation as well as certificate of
fitness in case of transport vehicles and a fee of rupees ten.
Provided
that where a vehicle is rendered incapable of being used or kept for use on
account of an accident, mechanical defect or any other sufficient cause, which
make it impossible to give an advance declaration as aforesaid then such
declaration shall be given within a period of seven days from the date of
occurrence of such accident, mechanical defect or such other cause, either in
person or by registered post acknowledgement due;
(2) If
the Taxation Authority is satisfied that the motor vehicle, in respect of which
a declaration in Form "NT" has been made, has not been used, or kept
for use for the whole or part of the period mentioned in the declaration and it
shall certify that the motor vehicle has not been used or kept for use for the
whole or part of such period as the case may be by making an endorsement in the
certificate of taxation to that effect.
Provided
that nothing contained in this sub-rule shall effect the right of the Taxation
Authority to recover the tax and penalty due for the period of non-use so
certified if, at any time, it is found that the vehicle was actually used or
kept for use in the State during such period.
(3)
The declaration in Form 'NT' given under the proviso to sub-rule (1) shall be
accompanied by the certificate of Taxation and documentary evidence if any, or
any other proof evidencing such non-use of the vehicle and the period thereof.
Where the appropriate Taxation Authority, on considering the evidence adduced,
if any, and on making such inquiries as it deems fit, refuses to admit the
declaration of non- use or to certify the period of non-use, it shall record in
writing its reasons therefor and communicate to the applicant."
4. A
perusal of the Act would show that Section 3 is the general charging Section
which provides for levy of tax on all motor vehicles used or kept for use in
the State and the rate of tax for different categories of vehicles is given in
the schedule appended to the Act. However, Section 3A is a special provision
with regard to the "designated omnibuses" and prescribes the annual
rate of tax for ordinary, luxury or tourist designated omnibuses having regard
to their passenger carrying capacity which are used or kept for use in the
State. The challenge here is to Section 3A and, therefore, we will confine to
the said provision. Sub-section (2)(a) of Section 3A enjoins that the tax shall
be paid in advance by every registered owner or any person having possession or
control of the designated omnibuses either annually or in monthly instalments.
Sub-section (5)(a) of Section 3A provides for refund of the tax already paid in
advance where the registered owner or any person having possession or control
of a designated omnibus satisfies the Taxation Authority that the vehicle had
not been used or kept for use for a continuous period of not less than one
month. Sub- section (5)(b) contains a similar provision of refund where the
vehicle has not been used or kept for use for continuous period of not less
than one month but exceeding three months in a year. But here the power of
refund has been conferred upon the State Government or such officer not below
the rank of the Director of Transport, as may, by notification in the official
gazette, be authorised in this behalf by the State Government. Rule 5 shows
that for claiming refund of the advance tax already paid a declaration in Form
NT has to be made to the Taxation Authority before the commencement of the
period for which the refund of tax is to be claimed in case it is intended not
to use or keep any such vehicle in the State. However, where the vehicle
becomes incapable of being used or kept for use on account of any accident,
mechanical defect or any other sufficient cause, which makes it impossible to
give advance declaration, then such declaration has to be given within a period
of seven days from the date of occurrence of such accident or mechanical defect
or other cause.
5. The
writ petitions were filed in the High Court on the ground, inter alia, that
Section 3A of the Act is violative of Articles 14, 19(1)(g), 21 and 300 A of
the Constitution as designated omnibuses which are in fact contract carriages
are discriminated against from other vehicles like stage carriages, ordinary
vehicles and goods vehicles and a very high rate of tax was imposed upon them
without there being any reasonable classification and thus the impugned
provision was wholly arbitrary and discriminatory. It was submitted that if the
vehicle is "not used" or "kept for use" or "passengers
are not carried to the full capacity" no tax could be levied and
consequently the provisions of Section 3A had been enacted without any
legislative competence having regard to the fact that the Act had been made
with reference to Entry 56 and 57 of List II of Seventh Schedule of the
Constitution. In this connection it was also submitted that the provision was
bad inasmuch as the amount of annual rate of tax was fixed not as per the
capacity of the vehicle or the distance actually covered or number of days of
actual use but on a fixed rate basis. Whether the vehicle covered only one
kilometer or thousand kilometers, the same amount of tax had to be paid.
Another
submission made was that tax had to be paid for the whole month even though the
actual use of the vehicle may have been for a much shorter period. Lastly, it
was submitted that the provision for depositing tax in advance and thereafter
claiming a refund was wholly illusory and in fact the authorities had not made
any such refund even though applications in that regard were pending for a long
period. The High Court has held that the impugned tax was a composite tax and
not on passengers alone; the demand of advance tax on passengers for one month
was beyond the legislative competence as Entries 56 and 57 of List II of Seventh
Schedule of the Constitution do not authorise levy of advance tax; similarly
the demand of advance tax on vehicles which are not put on road or which are
kept away from use was also beyond the legislative competence and the provision
for payment of advance tax and Rule 5 were without any authority of law. The
High Court further held that the mere fact that there was a provision for
refund of the advance tax paid, could not save the enactment as the levy of
advance tax itself was without any authority of law. On these findings, the
writ petitions were allowed and Section 3A (1) and (2) of the Act and Rule 5 of
the Rules as inserted vide notification dated 6.2.2001 and also a subsequent
circular dated 8.2.2001 were struck down.
6.
Learned counsel for the writ petitioners (here as well as before the High Court
operators of vehicles) have submitted that the tax is essentially a tax on
passengers since rate of tax is fixed having regard to the number of passengers
permitted to be carried and on a plain reading of the Statute it is clear that
the enactment has been made with reference to Entry 56 List II of Seventh
Schedule of the Constitution whereunder tax can be levied on passengers
actually carried. But under this Entry, no tax can be levied unless a passenger
actually travels in the vehicle and since the tax is levied on the basis of
seating capacity, it is beyond the legislative competence of the State
legislature. It is submitted that the plea of the State before the High Court
was that it is a composite tax i.e. a tax on passengers and a tax on motor
vehicles which is also evident from the speech given by the Hon'ble Minister in
the legislature and also from the counter affidavit filed before the High
Court. Therefore, in such a case, the requirement of both the Entries 56 and 57
have to be satisfied. The impugned tax does not satisfy the requirements of
Entry 57 because even if the vehicle is not intended to be used or kept for
use, the entire tax has to be paid. Learned counsel has further submitted that
the provision for refund of the tax is wholly illusory as the refund is allowed
only if the vehicle is not used for the entire period of one month and the use
of the vehicle even for a single day creates a liability for payment of tax for
the whole month. Learned counsel has also assailed the provision of Rule 5
which lays down the criteria for determining as to whether a vehicle has not
been used or has not been kept for use.
7.
Countering the submission made by learned counsel for the writ petitioners, Shri
Kirit N. Raval, learned Solicitor General appearing for the State of Gujarat,
has submitted that the owner of designated omnibus has to first apply for a
certificate of registration under the provisions of Motor Vehicles Act and such
a certificate gives rise to a presumption that the vehicle in question is meant
for use on roads in the State. The taxable event occurs when the vehicle in
question is ready for use and the liability to pay tax immediately arises when
the vehicle becomes usable. Once the certificate of registration has been given
and the taxable event occurs, it is perfectly open to levy advance tax on motor
vehicles and the High Court was in error in holding that advance tax cannot be
levied. This is irrespective of the fact whether the tax in question is levied
under Entry 56 or 57. Learned counsel has further submitted that if income tax
can be levied on income and there are provisions in the Income Tax Act for levy
of advance tax even when the income in question has not been earned, with a
machinery for refund, there is no reason why even under Entry 56 or 57, the tax
cannot be levied when the presumption of the vehicle being made for use of
passengers arises and taxable event has taken place. Learned Solicitor General
has also submitted that the contention that the contract carriages have been
levied a higher tax ignores the accepted position that contract carriages are a
class by themselves and a higher tax on such category of vehicles has been
specifically held to be permissible. The mere fact that the tax falls heavily
on one category is wholly irrelevant and the possibility of better
classification for imposition of tax in question is no ground for striking down
the levy.
8. The
relevant entries with reference to which the impugned enactment has been made
are Entries 56 and 57 of List II of Seventh Schedule of the Constitution which
read as under :
Entry
56 Taxes on goods and passengers carried by road or on inland waterways.
Entry
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.
Entry
35 of List III Mechanically propelled vehicles including the principles on
which taxes on such vehicles are to be levied.
9.
Before examining the contentions raised at the Bar it is necessary to bear in
mind certain fundamental principles which are too well settled. The necessity
for the same arises on account of the fact that they have been lost sight of in
the contentions raised on behalf of the operators of designated omnibuses both
here and also in the High Court.
10. In
interpreting the scope of various entries in the legislative lists in Seventh
Schedule, widest possible amplitude must be given to the words used and each
general word must be held to extend to ancillary or subsidiary matters which
can fairly be said to be comprehended in it. The entries should, thus be given
a broad and comprehensive interpretation. In order to see whether a particular
legislative provision falls within the jurisdiction of the legislature which
has passed it, the Court must consider what constitutes in pith and substance
the true subject matter of the legislation and whether such subject matter is
covered by the topics enumerated in the legislative list pertaining to that
legislature.
11.
The enactment under question is a taxing statute. The indicia of tax was
explained by a bench of seven judges in Commission, Hindu Religious Endowments,
Madras v. Shri Laxmindra Thirtha Swamiar of Shri Shirur Mutt AIR 1954 SC 284
which has since been consistently followed and it is as under. A tax is a
compulsory exaction of money by public authority for public purposes
enforceable by law and is not payment "for services rendered". This
definition brings out the essential characteristics of a tax as distinguished
from other forms of imposition which, in a general sense, are included within
it. The essence of taxation is compulsion that is to say, it is imposed under
statutory power without the tax-payers consent and the payment is enforced by
law. The second characteristic of tax is that it is an imposition made for
public purpose without reference to any special benefit to be conferred on the
payer of the tax. This is expressed by saying that the levy of tax is for the
purposes of general revenue, which when collected forms part of the public
revenues of the State. As the object of a tax is not to confer any special
benefit upon any particular individual there is no element of 'quid pro quo'
between the tax payer and the public authority. Another feature of taxation is
that as it is a part of the common burden, the quantum of imposition upon the
tax-payer depends generally upon his capacity to pay.
12. A
fee is generally defined to be a charge for a special service rendered to
individuals by some governmental agency. But the traditional view that there
must be actual quid pro quo has undergone a sea change with the passage of
time. Corelationship between the levy and the services rendered/expected is one
of general character and not of mathematical exactitude. All that is necessary
is that there should be a "reasonable relationship" between the levy
of the fee and the services rendered. It is increasingly realized that the
element of quid pro quo in the strict sense is not a sine qua non for a fee.
(See Sreenivas General Traders v. State of A.P.
AIR 1983 SC 1246, Municipal Corporation of Delhi v. Moh. Yasin AIR 1983 SC 617 and B.S.E. Brokers' Forum v. Securities
and Exchange Board of India 2001 (3) SCC 482)
13.
Entry 56 authorises a tax, the incidence of which is on goods and passengers
carried by road or on inland waterways. Even though the amount of the tax may
be measured by the fares or by the distance travelled, the Entry does not
specify who should be the assessee and, therefore, it is open to enact a law to
recover the tax from the owners or operators of the vehicles. The tax imposed
under this Entry is of regulatory and compensatory character. The tax under
Entry 57 is leviable by the State legislature on all vehicles "suitable
for use on roads" which are kept in the State. The tax is compensatory in
nature and, therefore, must have some nexus with the vehicles using the public
roads of the State. The words "suitable for use" signify the kind of
vehicles meaning thereby that the vehicles should be such type which are
normally capable of running on the road. The entry does not indicate in any
manner that tax would be leviable only for the period when the vehicle is
actually using the road and not otherwise and, therefore, it has no corelation
with the actual period of use.
Naturally
the State has to maintain the roads and to keep them in proper condition for
all those who own vehicles suitable for use on roads. This is irrespective of
the fact whether they use it or not or use it occasionally or for short
duration only. It being a tax and not a fee (as understood in the conservative
sense) the actual use of the public roads of the State cannot be insisted upon
for incurring the liability.
14.
The main ground of challenge of the writ petitioners is that Section 3A
mandates payment of tax in advance even though the vehicle may not at all be
used. It may be noticed that Section 3A of the Act lays down that there shall
be levied and collected on all omnibuses which are used or kept for use in the
State exclusively as contract carriages a tax at the rates specified in the
table. The incidence of tax is, therefore, on omnibuses which are "used or
kept for use in the State". A similar controversy was examined in Travancore
Tea Co. v. State of Kerala AIR 1980 SC 1547.
Here
the company alleged that the vehicles were purchased by it solely and
exclusively for use in the tea estates and intended to be used only for
agricultural purposes and were not used nor kept for use in the State, as
contemplated by Section 3 of Kerala Motor Vehicles Taxation Act. It was further
alleged by the company that for the purpose of plantation it was maintaining
the roads, fit for vehicular traffic, in the eight estates covering a length of
131 miles. Paragraphs 4, 5 and 6 of the Reports which are relevant are being
reproduced below :
"4.
The question that falls for decision is whether on the assumption that the
motor vehicles are used or kept for use within the estate, and not intended to
be used on public roads of the State; the tax is leviable? In order to
appreciate the question raised, it is necessary to refer to the relevant entry
in the Constitution, the provisions of the Act and the Motor Vehicles Act and
the decision relating to the question rendered by this Court. Entry 57 in List
II of the Constitution relates to 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. This entry enables the State Government to
levy a tax on all vehicles whether mechanically propelled or not, suitable for
use on roads. There is no dispute that the vehicles are mechanically propelled
and suitable for use on roads.
5.
Section 3 of the impugned Act (Kerala Motor Vehicles Taxation Act (Act 24 of
1963) provides that a tax "shall be levied on all motor vehicles used or
kept for use in the State." The levy is within the competence of the State
legislature as entry 57 in List II authorises levy on vehicles suitable for use
on roads. It has been laid down by this Court in Bolani Ores Ltd. v. State of Orissa
(1975) 2 SCR 138 at p,155; (AIR 1975 SC 17) that under Entry 57 of List II, the
power of taxation cannot exceed compensatory nature which must have some nexus
with the vehicles using the roads i.e. public roads. If the vehicles do not use
the roads, notwithstanding that they are registered under the Act, they cannot
be taxed.
6. If
the words 'used or kept for use in the State' are construed as used or kept for
use on the public roads of the State, the Act would be in conformity with the
powers conferred on the State legislature under Entry 57 of List II. If the
vehicles are suitable for use on public roads they are liable to be taxed. In
order to levy a tax on vehicles used or kept for use on public roads of the
State and at the same time to avoid evasion of tax the legislature has
prescribed the procedure." (emphasis supplied) After laying down the above
principle of law the question whether estate roads are public roads was left
for investigation and decision by R.T.O.
15.
The validity of payment of advance tax was examined in State of Karnataka v. K.
Gopalakrishna Shenoy AIR 1987 SC 1911, with reference to Mysore Motor Vehicles
Tax Act, Section 3(1) whereof provided for levy of tax on all motor vehicles
suitable for use on roads, kept in the State of Mysore. The explanation
appended to Sub-section (1) of Section 3 laid down that a motor vehicle of
which certificate of registration is current shall, for the purpose of the Act,
be deemed to be a vehicle suitable for use on roads. Section 4 provided that
the tax under Section 3 shall be paid in advance by the registered owner or
person having possession or control of the motor vehicle. Section 7 provided
for refund of tax if it was proved to the satisfaction of the prescribed
authority that the vehicle had not been used during the whole of the period for
which tax had been paid or a continuous part thereof not being less than one
calendar month, a refund shall be made of such portion of the tax and subject
to such conditions as may be prescribed. In paras 6 and 7 of the Reports, it
was held as under :
"6On
a reading of Sections 3 and 4 it may be seen that they make the registered
owner or person having possession or control of a motor vehicle kept in the
State absolutely liable to pay tax in advance at the rates specified in part A
of the Schedule thereto for a quarter, half-year or year at his choice. The
Motor Vehicle Taxation Acts in all the States of the Indian Union follow a
uniform pattern. Entry 57 of List II of Schedule VII of the Constitution is the
Legislative Entry conferring power on the States to levy the tax. It has been
observed by this Court in Automobile Transport Ltd. v. State of Rajasthan
(1963) 1 SCR 491: (AIR 1962 SC 1406) that the tax on motor vehicles is a
compensatory tax levied for the use of the roads and it is not a tax on
ownership or possession of motor vehicles. The object of the Act is achieved by
charging to tax all motor vehicles suitable for use on roads kept in the State,
the registered owner or person having possession or control being held liable
to pay the tax in advance and then providing for grant of refund for non-user
subject to prescribed conditions.
7.
What falls for consideration now is whether the owner or person having the
possession or control of a motor vehicle is not bound to pay the tax under
Section 3(1) of the Act because the vehicle was in a state of repair and was
not put to use on the road and furthermore the Certificate of Fitness of the
vehicle had not been kept current even though the Certificate of Registration
was kept current. One factor which has to be borne in mind in interpreting
Section 3(1) and its Explanation is the meaning to be given to the words "suitable
for use on roads", occurring in them as otherwise a misconception would
arise. These very words occur in Entry 57 in the State List which reads as
under:- "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".
The
words "suitable for use on roads" in the said Entry have been
construed by Hidayatullah, J. as he then was, in Automobile Transport (AIR 1962
SC 1406) case as under :
"The
words 'suitable for use on roads' describe the kinds of vehicle and not their
condition. They exclude from the Entry, farm machinery, aeroplanes, railways
etc. which though mechanically propelled are not suitable for use on roads. The
inclusion of trams using tracks which may be on roads or off them, makes the
distinction still more apparent." It, therefore, follows that the same
meaning should be given to those words occurring in Section 3(1) and the
Explanation also.
The
resultant position that emerges is that Section 3(1) confers a right upon the
State to levy a tax on all motor vehicles which are suitably designed for use
on roads at prescribed rates without reference to the road worthy condition of
the vehicle or otherwise. Section 4 enjoins every registered owner or person
having possession or control of the motor vehicle to pay the tax in advance.
The Explanation to Section 3(1) contains a deeming provision and its effect is
that as long as the Certificate of Registration of a motor vehicle is current,
it must be deemed to be a vehicle suitable for use on roads. The inevitable
consequence of the Explanation would be that the owner or a person having
control or possession of a motor vehicle is statutorily obliged to pay the tax
in advance for the motor vehicle as long as the Certificate of Registration is
current irrespective of the condition of the vehicle for use on the roads and
irrespective of whether the vehicle had a Certificate of Fitness with current
validity or not. The Act, however, takes care to see that the owner of a motor
vehicle or a person having possession or control of it is not penalised by
payment of tax in advance for a vehicle which had not been actually used during
the whole of a period or part of a period for which tax had been paid by him. "
After considering the provision for refund of the tax as contained in Section 7
of the Act, it was held as under in para 8 of the Report :
"8.
The principle underlying the Taxation Act is that every motor vehicle issued
Certificate of Registration is to be deemed a potential user of the roads all
through the time the Certificate of Registration is current and therefore
liable to pay tax under Section 3(1) read with Section 4. If, however, the
vehicle had not made use of the roads because it could not be put on the roads
due to repairs, even though the Certificate of Registration was current, the
owner or person concerned has to seek for and obtain refund of the tax paid in
advance after satisfying the Authorities about the truth of his claim. It is not
for the Transport Authorities to justify the demand for tax by proving that the
vehicle is in a fit condition and can be put to use on the roads or that it had
plied on the roads without payment of tax. It would be absolutely impossible
for the State to keep monitoring all the vehicles and prove that each and every
registered vehicle is in a fit condition and would be making use of the roads
and is therefore liable to pay the tax.
For
that reason, the State has made the payment of tax compulsory on every
registered vehicle and that too in advance and has at the same time provided
for the grant of refund of tax whenever the person paying the tax has not made
use of the roads by plying the vehicle and substantiates his claim by proper
proof. Any view to the contrary would defeat the purpose and intent of the
Taxation Act and would also afford scope and opportunity for some of the
persons liable to pay the tax to ply the vehicle unlawfully without payment of
tax and later on justify their non-payment by setting up a plea that the
vehicle was in repair for a continuous period of over a month or the whole of a
quarter, half-year or year as they choose to claim."
16. In
Chief General Manager, Jagannath Area v. State of Orissa 1996 (10) SCC 676, the
question for consideration was whether the dumpers belonging to the appellant
which were being used within the mining areas were taxable under Orissa Motor
Vehicles Taxation Act, Section 3 whereof laid down that a tax shall be levied
on every motor vehicle used or kept for use within the State at the rates
specified in the Schedule. Two contentions were raised before this Court and
the second contention was that the tax on vehicles being compensatory in
nature, levy of such tax can be sustained only on the ground that the vehicles
used the roads for which the tax is levied and if the vehicle in question did
not use the roads and yet tax is levied on the same, the said levy is liable to
be struck down. Repelling the argument that in absence of actual use of the
road, the tax would not be leviable, this Court held as under in para 11 of the
Reports :
"11.
The tax imposed on the motor vehicles is basically a tax for the use of the
roads within the State. It is no doubt a compensatory tax which facilitates
trade, commerce and intercourse within the State by providing roads and
maintaining roads in a good state of repairs. As has been held by this Court in
Automobile Transport Ltd. v. State of Rajasthan & Ors. (1963) 1 SCR 491, it
would not be right to say that the tax is not compensatory because the precise
or specific amount collected is not actually used in providing any facilities.
If a statute fixes a charge for a convenience or service provided by the State
or an agency of the State, and imposes it upon those who choose to avail
themselves of the service or convenience, or who can use the services provided
for, the imposition assumes the character of remuneration or consideration
charged in respect of an advantage sought or received or advantage which can be
received. The mere fact that any particular individual though can take
advantage of the convenience of the services provided by the State but for some
reason or the other chooses not to enjoy the services provided cannot escape
the taxing liability on that score nor can the provision imposing the tax
become invalid on that score. .."
17.
This view has been reiterated in several decisions of this Court. In State of Kerala
v. Arvind Ramakant Modawdakar 1999 (7) SCC 400, the Court ruled that it is a
settled position in law that the actual user of the road by the vehicles which
are covered by the requisite permits is not always a relevant factor since the
taxable event under Section 3(1) of Kerala Motor Vehicles Taxation Act occurs
when the vehicle is used or is kept for use in the State and once the vehicle
becomes liable for payment of tax, the extent and quantity of use by the
vehicle is not a decisive factor for the purpose of levy of tax. In Mahakoshal
Tourist v. State of M.P. 2002 (7) SCC 245 the challenge made with regard to the
absence of a machinery for assessment of tax for the vehicles plying in the
State of Madhya Pradesh on the basis of All India Tourist permit and denying
them refund of tax for the period they were not used or kept for use in the
said State was considered. In view of the language used in Section 3 of the
relevant Act which provided for levy of tax on every motor vehicle "used
or kept for use in the State" at the rate specified in the schedule, it
was held that the expression "used" or "kept for use"
means, either the actual use of the vehicle on the roads of the State of Madhya
Pradesh or keeping the vehicle (which is in condition and capable of being
used) available for use in the State, if so desired. It was further held that
while plying outside the State in connection with the contract, a vehicle will,
nonetheless be within the import of "kept for use in the State" and
it is immaterial for the purpose of Section 3 whether a vehicle is actually
being used or is kept for use in the State.
18. The
language used in Section 3A - all omnibuses which are used or kept for use in
the State exclusively as contract carriages - is in conformity with Entry 57 of
List II. The consistent view taken by this Court is that if a vehicle is
"used" or is "kept for use" in the State, it becomes liable
for payment of tax and the actual use or quantum of use is not material. The
fact that the statute provides for refund of the tax, if the authority is
satisfied that the vehicle has not been used, does not mean that the
legislature can only make a provision for levy of tax which is limited for the
period of actual use or that no tax can be levied during the period the vehicle
is not put to use in the State. The provision for the refund has been made only
for the advantage of the operator so that he may be relieved of the burden of
tax when he is not getting any income from the vehicle on account of its
non-use but it has no relevance to the competence or authority of the State to
enact a law providing for imposition of a tax on vehicles which are used or are
kept for use in the State.
19.
Learned counsel for the writ petitioners has laid great emphasis upon Bolani
Ores Ltd. v. State of Orissa AIR 1975 SC 17 where having regard to Bihar and Orissa
Motor Vehicles Taxation Act an observation was made that "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 the flow of traffic on the roads which is
required to be regulated". Another observation in the same judgment "but
Entry 57 of List II is subject to the limitation 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. If the vehicles do not use the roads,
notwithstanding that they are registered under the Motor Vehicles Act, they
cannot be taxed" has also been heavily relied upon for contending that tax
can be levied only for the period when the vehicle is actually using the road
and consequently Section 3A of the Act is invalid. In fact, the High Court has
also taken support from the aforesaid observation for holding that for the
period, the designated omnibuses are not using the roads and are merely
standing, no tax is leviable. It is trite that any observation made during the
course of reasoning in a judgment should not be read divorced from the context
in which they were used. Bolani Ores Ltd. had filed a suit seeking a
declaration that certain machineries like Shovels, Caterpillars, Bulldozers,
Rockers, Dumpers and Tractors, etc.
which
were used in mining operation in the area leased out to them were not liable
for registration under Section 22 of the Motor Vehicles Act and cannot be taxed
under Section 6 of the Bihar Taxation Act. The observation aforesaid was made
in the context of the machinery which was used for mining operation within the
leased area which obviously did not form part of the flow of traffic on the
roads. The Court was not called upon to answer the question posed here, namely,
whether a normal motor vehicle cannot be taxed for the period during which it
is kept for use but is actually not operating. The Court did not hold as a
proposition of law that for the period a vehicle is not used on the roads, it
cannot be taxed.
20.
The principle laid down in State of Mysore v. Sundaram Motors Pvt. Ltd. AIR
1980 SC 148 reliance on which has been placed by the High Court has also no
application here. Section 3 of Mysore Motor Vehicles Taxation Act provided that
a tax shall be levied on all motor vehicles suitable for use on roads, kept in
the State of Mysore. M/s Sundaram Motors were dealers in motor vehicles which
were manufactured in Bombay and some of these vehicles passed through the
territory of State of Mysore on way to their destination in another State
(Tamil Nadu) and during the course of the journey, the vehicles halted for rest
and food, etc. of the drivers. It was held that the short break taken during
the course of journey could not fasten liability for tax as the words
"kept" employed in Section 3 had an altogether different connotation,
which has an element of stationariness. The principle laid down in this case
can hardly have any application here. Similarly, the writ petitioners can
derive no assistance from State of Gujarat v. Kaushikbhai K. Patel AIR 2000 SC
2175, wherein the words "for reasons beyond the control of such owner or
person" previously occurring in Section 3A(5)(b) were held to be beyond
the legislative competence of the State. In this case the High Court had held
that once the statute provided for refund of tax on account of non-use of the
vehicle, the legislature could not have imposed a further condition to the
effect "for reasons beyond the control of such owner or person" and
the said expression was held to be beyond the legislative competence. The
appeal preferred by the State of Gujarat was dismissed by this Court and the
view taken by the High Court was affirmed.
We
would like to point out that the judgment does not show that the attention of
the Bench was invited to any of the decisions which we have referred to above,
wherein it has been held that actual user of the road is not material and mere
keeping of the vehicle which is capable of being used is enough to attract
liability of tax.
21.
Learned counsel for the writ petitioners has submitted that the purpose for
which the Act was enacted was to augment the financial resources of the State
to meet the huge expenditure on account of natural calamities etc. as has been
mentioned in the Statement of Objects and Reasons. Therefore the Act is not a
compensatory enactment which may have been passed for collecting revenue for
the purpose of maintenance of roads and consequently the same is invalid. In
our opinion, the contention raised has no substance.
In G.K.
Krishnan v. State of Tamil Nadu AIR 1975 SC 583 this Court has clearly ruled
that if the State Legislature was competent to pass the Act, the question of
motive with which the tax was imposed is immaterial and there can be no plea of
a colourable exercise of power to tax if the Government had the power to impose
the tax. It was further held that if the Government had an authority to impose
a tax, the fact that it gave a wrong reason for exercising the power would not
derogate from the validity of the tax.
22.
Learned counsel for the writ petitioners has also submitted that only contract
carriages which are designated as omnibuses and luxury or tourist designated
omnibuses have been subjected to a very heavy tax under Section 3A of the Act,
whilst all other vehicles are taxed under Section 3 of the Act and whereunder
the quantum of tax is much lower as would be evident from First to Seventh
Schedule of the Act. The submission is that these vehicles have been
discriminated against in the matter of taxation and there is no lawful
justification for meeting out such differential treatment to them. We are
unable to accept the submission made. A similar contention was negatived in
G.K. Krishnan v. State of Tamil Nadu AIR 1975 SC 583 on the ground that the
classification of vehicles as Stage carriage and contract carriage for the
purpose of imposing a higher tax on the latter is presumed to be reasonable
having regard to the fact that it was based on local conditions of which the
Government was fully cognizant and the differentiation thus made has reasonable
relation to the purpose of the Act. A similar contention made in Malwa Bus
Service v. State of Punjab AIR 1983 SC 634 was repelled and it was held as under
:
"..There
is no dispute that even a fiscal legislation is subject to Article 14 of the
Constitution. But it is well settled that a legislature in order to tax some
need not tax all. It can adopt a reasonable classification of persons and
things in imposing tax liabilities. A law of taxation cannot be termed as being
discriminatory because different rates of taxation are prescribed in respect of
different items, provided it is possible to hold that the said items belong to
distinct and separate groups and that there is a reasonable nexus between the
classification and the object to be achieved by the imposition of different
rates of taxation. The mere fact that a tax falls more heavily on certain goods
or persons may not result in its invalidity" It was further held that the
Courts lean more readily in favour of upholding the constitutionality of taxing
law in view of the complexities involved in the social and economic life of the
community. Unless the fiscal law in question is manifestly discriminatory, the
Court should refrain from striking it down on the ground of discrimination.
This being the position of law, it is not possible to accept the contention of
the writ petitioners that the tax imposed upon the designated omnibuses is
discriminatory.
23.
Nothing new has been pointed out to challenge Gujarat Act No.9 of 2002 by which
the Bombay Motor Vehicles Taxation Act, as adopted in the State of Gujarat with
up to date amendments, was further amended after the decision of the High Court
which was rendered on 17th August, 2001. In fact, the main argument of the
learned counsel for the writ petitioners is that the said amending Act merely
rearranged the Sections and suffered from the same infirmity as the previous
Act. Since we are of the opinion that the view taken by the High Court is not
correct and Section 3A and Rule 5 of the Rules, as incorporated vide
notification dated 6.2.2001 are intra vires and are perfectly valid, the
challenge made to Gujarat Act No.9 of 2002 has no substance and must fail.
24. In
the result, Civil Appeal Nos.6462-6464 of 2001 filed by the State of Gujarat
are allowed and the impugned judgment and order dated 17.8.2001 of the High
Court is set aside. Writ Petition Nos.249 and 252 of 2002 filed in this Court
are dismissed. No costs.
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