State
of U.P. & Others Vs. Sukhpal Singh Bal
[2005] Insc 463 (2
September 2005)
B.P.
Singh & S.H. Kapadia
WITH CIVIL
APPEAL NOs.8875, 8881 to 8883, 8885, 8887 to 8890, 8893, 8895, 8897, 8900,
8903, 9591 AND 9592 OF 2003. KAPADIA, J.
These
civil appeals by special leave are directed against the judgment and order of
the High Court of Allahabad, declaring section 10(3) of the Uttar Pradesh Motor
Vehicles Taxation Act, 1997 (for short "the 1997 Act") as ultra vires
articles 14 and 19(1)(g) of the Constitution.
The
facts lie within a narrow compass and they are as follows:
Sukhpal
Singh is the owner of a tanker bearing registration No.MP-24C-0377. The said
tanker is covered by national permit granted by the Regional Transport
Authority, Durg. The national permit granted was for Chattisgarh, Maharashtra, Uttar Pradesh and Andhra Pradesh. Sukhpal
was granted an authorization certificate on the basis of the national permit
valid up to 14.2.2003.
On
26.2.2002, while carrying goods from Bhilai Steel Plant to Sonepat, the tanker
in question entered the State of U.P
and after unloading the goods returned from Sonepat. While doing so, the tanker
crossed the U.P. border at Masaura and when it was about 8 kms. in the State of
M.P., the vehicle was seized by the
Assistant Regional Transport Officer, Lalitpur on 4.3.2002.
On
5.3.2002, Sukhpal made an application for release of his vehicle on which the
Assistant RTO passed an order directing Sukhpal to pay Rs.5100/- as composite
tax plus ten times penalty under section 10(3) of the said 1997 Act, as amended
by U.P. Amending Act No.25 of 2001.
The
order of penalty was challenged by Sukhpal vide writ petition in the High Court
of Allahabad, in which the validity of section 10(3) was put in issue.
We
have quoted the facts in the case of Sukhpal as a representative matter in the
group of similar matters.
Smt. Shobha
Dixit, learned senior counsel appearing on behalf of the appellant-State
submitted that on account of huge evasion of tax, the legislature had to enact
section 10(3) providing for a deterrent penalty as the State of U.P. has a vast boundary and the vehicles could enter
from distant corners without payment of statutory dues at the entry point.
Learned counsel pointed out that drivers would carry demand drafts in their
pockets and they did not pay the taxes (including additional tax) till they
were apprehended and when apprehended they made an excuse of paucity of
collection centres. She contended that the aforestated defaults constituted tax
evasion and, therefore, the State Legislature incorporated section 10(3) into
existing section 10 by Amending Act No.25 of 2001 imposing ten times penalty.
Learned counsel next contended that the vehicle in question was "goods
carriage" operating under national permit granted under section 88(12) of
the Motor Vehicles Act, 1988 (for short "the M.V. Act, 1988") and,
therefore, it was liable to pay additional tax at the rate applicable to such
"goods carriage" under part 'B' of the third schedule [See: section
5(1)(b) of the 1997 Act]. Learned counsel submitted that under section 5,
additional tax has been levied on goods carriage plying under permits granted
by the authorities within UP, goods carriage operating under national permit
granted under section 88(12) of the M.V. Act, 1988 and goods carriage plying
under permits granted by authorities outside Uttar Pradesh for inter-State
route partly lying in Uttar Pradesh and, therefore, there was no discrimination
to the levy of additional tax. Learned counsel further contended that under
section 9(1)(iii) of the 1997 Act, additional tax is payable on goods carriage
under section 5(1)(a) in advance on or before the fifteenth day of January,
April, July and October in each year.
Learned
counsel urged that under section 9(3), in cases where breach occurs in payment
of additional tax within the period specified under section 9(1), a penalty of
twenty five per cent of the due amount has been prescribed for goods carriage
plying under permits granted by authorities within UP, whereas a ten times
penalty is imposed for the same offence on transport vehicles having national
permit under section 10(3) as it was found that in the former case, the
authorities within the State of UP had better control as compared to goods
carriages registered outside the State of UP plying under the national permit
under section 88(12) of the M.V. Act, 1988 and, therefore, there was no
discrimination between the two categories as alleged.
Learned
counsel further contended that under section 10 of the 1997 Act, no transport
vehicle under temporary permit granted under section 87 of the M.V. Act, 1988
or under national permit granted under section 88(12) of the M.V. Act, 1988 or
under permit by section 88(9) of the said M.V. Act, 1988 can ply in U.P.
without payment of tax at the specified rate for each of the three categories.
According to the learned counsel in the present case, we are concerned with
section 10(1)(b) of the 1997 Act, as the offending vehicle was a transport
vehicle under national permit granted under section 88(12) of the M.V. Act,
1988 by a authority in State of M.P. and, therefore, it was liable to pay
additional tax under section 5 at the rate mentioned in clause 'B' of the third
schedule to the 1997 Act.
Learned
counsel submitted that since the offending vehicle was found plying in the
State of U.P. without payment of additional tax,
it became liable to ten times penalty. Learned counsel further pointed out that
section 12 of the 1997 Act provides for refund and in cases where refund is
refused, the aggrieved person is entitled to move the appellate authority and,
therefore, determination and adjudication is also provided for in the Act.
Learned counsel, therefore, urged that the High Court had erred in striking
down section 10(3) of the 1997 Act as oppressive, coercive and unreasonable
and, therefore, violative of articles 14 and 19(1)(g) of the Constitution.
On
behalf of the respondent, it was urged that there was paucity of collection centres
in UP and in most cases these centres were located 50 to 60 kms. from the entry
point and consequently, the drivers were required to carry demand drafts/cash
to pay composite tax in these centres and in the process if apprehended, they
are fined under section 10(3) of the Act. It was further submitted that the
imposition of ten times penalty in any event was harsh, unreasonable,
unconscionable and confiscatory in nature. In this connection, it was urged
that on the composite tax of Rs.5100/-, ten times penalty would come to
Rs.51000/-, which was unreasonable and, therefore, violative of article 19(1)(g)
of the Constitution.
It was
urged that penalty up to ten times could have been imposed so that in genuine
cases, the respondents could be made liable for lesser penalty in cases of
mistakes in non- payment of tax. However, in the present case, under section
10(3), ten times penalty at a fixed rate on composite tax was harsh, arbitrary
and unreasonable as no opportunity is provided to the alleged offending vehicle
to explain its case and to get the penalty reduced. It was urged that in
imposition of ten times penalty, there was no adjudication and determination of
the quantum. It was urged that to impose ten times penalty without
determination violated the rights of the respondent under articles 14 and 19(1)(g)
of the Constitution. It was next contended that the imposition of ten times
penalty was discriminatory and irrational as for the same offence in respect of
vehicles failing under section 9(3), penalty does not exceed twenty five per
cent of the due amount, whereas transport vehicle plying in UP under national
permit on default is liable to ten times penalty and, therefore, the said levy
was unreasonable, irrational and discriminatory and consequently, violative of
article 14 of the Constitution. It was further urged that vehicles registered
in UP had to pay Rs.550/- as composite tax and ten times penalty for such
vehicles came to Rs.5500/- whereas transport vehicles plying under national
permit have to pay composite tax of Rs.5100/- and on default, they are liable
to penalty of Rs.51000/-, which according to the respondent was unreasonable,
discriminatory and violative of their rights under article 14 of the
Constitution.
Before
dealing with the aforestated contentions, we may analyse the provisions of the
U.P. Motor Vehicles Taxation Act, 1997. The Act was enacted to provide for
imposition of tax in the State on motor vehicles. The Act was also enacted to
provide for imposition of additional tax on motor vehicles engaged in the
transport of passengers and goods for hire.
Section
2(a) defines "additional tax" to mean a tax imposed under section 5
or section 6 in addition to the tax imposed under section 4. Section 2(d)
defines "goods carriage" to mean any motor vehicle constructed or
adapted wholly or partly for use for the carriage of goods, or any motor
vehicle not so constructed or adapted when actually used for the carriage of
goods, and includes a trailer. Section 2(h) defines "owner" in
respect of a motor vehicle to mean the person whose name is entered in the
certificate of registration issued in respect of such vehicle. Section 2(n)
defines "transport vehicle" to mean a goods carriage or a public
service vehicle. Section 4 imposes tax on motor vehicles other than transport
vehicles used in any public place in U.P. Section 4(1) inter alia states that
no motor vehicle, other than a transport vehicle, shall be used unless a
one-time tax at the rate applicable and as specified in part 'B' of the first
schedule is paid. Section 4(2), inter alia, states that no transport vehicle
shall be used in any public place in U.P.
unless
a tax at the rate prescribed in part 'D' of the first schedule has been paid.
Section 5 deals with levy of additional tax on goods carriages. It states,
inter alia, that no goods carriage shall be operated in any public place in
U.P., unless there has been paid, in addition to the tax payable under section
4, an additional tax at the rate applicable to goods carriage specified in the
third schedule. The third schedule is again in two parts. In the case of goods
carriage plying under permits granted by the State authorities, the tax payable
is different from the goods carriage operated under national permits granted
under section 88(12) of the 1988 Act. In the latter case, additional tax is payable
at the rate prescribed by part 'B' of the third schedule. Therefore, sections
5(1)(a) and 5(1)(b) show a dichotomy in the matter of levy of additional tax
between goods carriages plying under permits granted by authorities within the
State of U.P. and goods carriages plying under national permits. Section 9
deals with payment of tax and penalties. Under section 9(1)(ii), the tax
payable under section 4(2) is payable in advance for each quarter at the time
of registration of the vehicle. Under section 9(1)(iii), the additional tax
payable under section 5(1)(a) is required to be paid in advance on or before
the 15th day of January, April, July and October in each year. Under section
9(3), it is stated, that, where the tax or additional tax in respect of a motor
vehicle is not paid within the period specified in sub-section (1), a penalty
at the rate not exceeding twenty five per cent of the due amount, shall be
payable, for which the owner and the operator shall be jointly and severally
liable. Section 10 deals with transport vehicles which ply in U.P. It begins
with the non obstante clause. It states that notwithstanding anything contained
in section 9, no transport vehicle shall ply in the State under a temporary
permit granted under the 1988 Act unless the vehicle has paid a tax under
section 4 calculated at the appropriate rate specified in the first schedule,
as also additional tax under section 5 calculated at the appropriate rate
specified in the sixth schedule. Under section 10(1)(b), no transport vehicle
shall ply in U.P. under a national permit granted under section 88(12) of the
M.V. Act, 1988 by an authority having jurisdiction outside U.P. unless the
vehicle has paid additional tax under section 5 at the rate specified in clause
'B' of the third schedule.
The
main question in these civil appeals is whether section 10(3) inserted by
Amending Act No.25 of 2001 imposing ten times penalty is void for infringement
of respondent's rights under articles 14 and 19(1)(g) of the Constitution as
held by the impugned judgment. Therefore, we are concerned with the validity of
the said section which reads as follows:
"10.
Vehicles not to be used in Uttar Pradesh without payment of tax.
(3) If
such transport vehicle is found plying in Uttar Pradesh without payment of the
tax or additional tax payable under this Act such tax or additional tax along
with a penalty, equivalent to ten times of the due tax or additional tax shall
be payable." In the case of State of Madras v. V. G. Row reported in AIR
1952 SC 196 at p. 200, this Court observed as follows:- "It is important
in this context to bear in mind that the test of reasonableness, wherever
prescribed, should be applied to each individual statute impugned, and no
abstract standard, or general pattern of reasonableness can be laid down as
applicable to all cases. The nature of the right alleged to have been
infringed, the underlying purpose of the restrictions imposed, the extent and
urgency of the evil sought to be remedied thereby, the disproportion of the imposition,
the prevailing conditions at the time, should all enter into the judicial
verdict." In the case of Bhavesh D. Parish & Others v. Union of India
& Another reported in (2000) 5 SCC 471, this Court laid down that while
considering the scope of economic legislation as well as tax legislation, the
courts must bear in mind that unless the provision is manifestly unjust or
glaringly unconstitutional, the courts must show judicial restraint in
interfering with its applicability. Merely because a statute comes up for
examination and some arguable point is raised, the legislative will should not
be put under a cloud. It is now well-settled that there is always a presumption
in favour of the constitutional validity of any legislation unless the same is
set aside for breach of the provisions of the Constitution. The system of
checks and balances has to be utilized in a balanced manner with the primary
objective of accelerating economic growth rather than suspending its growth by
doubting its constitutional efficacy at the threshold itself.
In the
case of R.K. Garg etc. v. Union of India & Others reported in (1981) 4 SCC
675, this Court held that every legislation, particularly in economic matters,
is essentially empiric and it is based on experimentation. There may be
possibilities of abuse but on that account alone it cannot be struck down as
invalid. These can be set right by the legislature by passing amendments. The
Court must, therefore, adjudge the constitutionality of such legislation by the
generality of its provisions. Laws relating to economic activities should be
viewed with greater latitude than laws touching civil rights such as freedom of
speech, religion etc. Moreover, there is a presumption in favour of the
constitutionality of a statute and the burden is upon him who attacks it to
show that there has been a clear transgression of the constitutional
principles. The legislature understands and correctly appreciates the needs of
its own people, its laws are directed to problems made manifest by experience
and its discrimination are based on adequate grounds. There may be cases where
the legislation can be condemned as arbitrary or irrational, hence, violative
of article
14.
But the test in every case would be whether the provisions of the Act are arbitrary
and irrational having regard to all the facts and circumstances of the case.
Immorality, by itself, cannot be a constitutional challenge as morality is
essentially a subjective value. The terms "reasonable, just and fair"
derive their significance from the existing social conditions.
In the
light of the above judgments as applicable to the provisions of the said 1997
Act, we are of the view that the High Court had erred in striking down section
10(3) as ultra vires articles 14 and 19(1)(g) of the Constitution.
"Penalty" is a slippery word and it has to be understood in the
context in which it is used in a given statute. A penalty may be the
subject-matter of a breach of statutory duty or it may be the subject-matter of
a complaint. In ordinary parlance, the proceedings may cover penalties for
avoidance of civil liabilities which do not constitute offences against the
State.
This
distinction is responsible for any enactment intended to protect public
revenue. Thus, all penalties do not flow from an offence as is commonly
understood but all offences lead to a penalty. Whereas the former is a penalty
which flows from a disregard of statutory provisions, the latter is entailed
where there is mens rea and is made the subject-matter of adjudication. In our
view, penalty under section 10(3) of the Act is compensatory. It is levied for
breach of a statutory duty for non-payment of tax under the Act. Section 10(3)
is enacted to protect public revenue. It is enacted as a deterrent for tax
evasion. If the statutory dues of the State are paid, there is no question of
imposition of heavy penalty. Everything which is incidental to the main purpose
of a power is contained within the power itself. The power to impose penalty is
for the purpose of vindicating the main power which is conferred by the statute
in question. Deterrence is the main theme of object behind that imposition of
penalty under section 10(3).
In the
case of State of Tamil Nadu v. M Krishnappan & Another reported in (2005) 4
SCC 53, this Court has held that entry 57 of list II of the seventh schedule to
the Constitution provides a field to the State legislature to impose tax in
respect of every aspect of a vehicle. The State has to find funds for making
new roads and for maintenance of existing roads. The Motor Vehicles Act is
regulatory and compensatory in nature in the sense that it is imposed to meet
the increasing costs of maintenance and upkeep and to that extent it is not
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.
Lastly,
we may point out that under section 12, the drivers/operators are entitled to
claim refund of tax. Similarly, under section 18, any person aggrieved by the
order of the Tax Officer under section 12 is entitled to move the appellate
authority within 30 days. Learned counsel for the State stated before us and we
record her statement that cases of this type would come under section 18.
Learned counsel for the State also pointed out that in appropriate cases where
the transport vehicle carries perishable goods, the vehicle is released on the
driver depositing the relevant documents with the Tax Officer so that payment
could be made within a stipulated period.
Although
section 18 refer to appellate authority, in our view, on an examination of the
scheme of the Act, we find from the provisions of section 18 that the authority
deciding appeals against orders passed by Tax Officer under section 12 is
really exercising initial jurisdiction and that under the Act, there are
sufficient safeguards and conditions which are not onerous and which provide a
forum for the aggrieved party to get redressal and, therefore, the High Court
had erred in striking down section 10(3) of the Act.
In the
case of Rahimbhai Karimbhai Nagriwala v. B.B. Patel & Others reported in
(1974) 97 ITR 660, penalty under section 271(1)(c) of the IT Act, as it stood
at the relevant time, was levied on the assessee at Rs.13,854/-, equal to 100
per cent of the alleged concealed income. The assessee challenged the
constitutional validity of section 271(1)(c) on the ground that the provision
was violative of article 14 of the Constitution inasmuch there was no
classification at all though there was a difference between various types of
tax evasions. It was urged that such a severe penalty of concealment of income
was confiscatory in nature. It was urged that under section 271(1)(a)(i) of IT
Act, the penalty for not filing a return was correlated to the amount of the
tax evaded as against the correlation of penalty to concealed income under the
impugned provisions of section 271(1)(c)(iii) was totally arbitrary because so
far as concealed income was concerned, the penalty for concealed income
proceeded on a different footing from penalty for omission to file a return in
time. It was also contended that the impugned penalty was disproportionate as
there was no nexus between penalty imposed and the tax evaded and under the
circumstances, it was urged that section 271(1)(c)(iii) was violative of
articles 14 and 19(1)(g) of the Constitution. This challenge was rejected by
the Gujarat High Court observing that everything which is incidental to the
main purpose of a power is contained within the power itself so that it extends
to matters which are necessary for the reasonable fulfilment of the legislative
power over the subject matter and, therefore, the power to impose penalty is
for the purpose of vindicating the main power, which is conferred by the Act.
The object of the legislature in levying such penalty is to provide deterrent
against tax evasion and to put a stop to a practice which the legislature
considers to be against the public interest.
It has
been further observed that while article 14 forbids class legislation, it does
not forbid reasonable classification for the purposes of legislation. The
Supreme Court has permitted a very wide latitude in classification for
taxation. The object of the legislature in enacting the impugned provision is
not to provide for confiscation but to provide a penalty for concealment of
income and that too by providing a deterrent penalty.
In our
view, the judgment of the Gujarat High Court in the case of Rahimbhai Karimbhai
Nagriwala (supra), is squarely applicable to the present case. Deterrence is
the main theme or object behind the imposition of penalty and, therefore, it is
not possible to say that in the instant case the provision of section 10(3)
infringes articles 14 and 19(1)(g) of the Constitution, as held in the impugned
judgment.
Accordingly,
the appeals filed by the State succeed and are hereby allowed, the impugned
judgment and order of the High Court is set aside, with no order as to costs.
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