Karnataka HC declares law levying life time tax on vehicles registered outside State as Unconstitutional and ultra vires [Read Judgment]

Disposing of a bunch of Writ Petitions, Karnataka High Court on Thursday quashed the Karnataka Motor Vehicles Taxation [Amendment] Act, 2014 as unconstitutional and ultra vires. The Amendment Act levied a lifetime tax on motor vehicles registered outside the State of Karnataka, in case they have been in the State for a period exceeding thirty days.

Representing one of the petitioners, Advocate Aditya Sondhi had emphasized that the levy of life time tax is directly linked to the registration of a vehicle, and that registration is the basis of taxation. He had contended that the State Government lacks the legislative competence and authority to pass the amendment, as it seeks to legislate on the principles of taxation, which are contained in Entry 35 of List III and is already covered by the MV Act. The State Act has been enacted under Entry 57 of List II. While Entry 35 of List III lists principles of taxation on mechanically propelled vehicles as a concurrent subject, Entry 57 of List II authorizes taxation by the State on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars, subject to the provisions of entry 35 of List III. It was also submitted that the amendment be struck down for the lack of Presidential assent, as contemplated under Article 254(2) of the Constitution of India.

The Petitioners had further contended that the amendment was an attempt to nullify the effect of an earlier judgment of the High Court in the case of Mahesh C. Gandhi v. DC for Transport, Belgaum, 2005 (5) KarLJ 362. The Court in Gandhi’s case had linked the levy of lifetime tax to the registration of vehicles and observed, “If under the law, a vehicle which is already registered in some other State is brought into this State and there is no obligation or compulsion under the law on the part of the owner of such vehicle to get the vehicle registered in the State of Karnataka, then the question of levy of lifetime tax on such a vehicle under Part A5 of the Schedule to the Act does not arise.”

Furthermore, the amendment was claimed to be violative of Article 14 of the Constitution of India, since it stipulates an arbitrary period of thirty days after which lifetime tax is to be paid. It was further submitted to be violative of Article 19(1) (d) and Article 301 of the Constitution of India, as it has the effect of inhibiting the free movement of persons throughout the territory of India. While Article 304(b) allows the State to impose reasonable restrictions of the freedom of trade, commerce or intercourse, the same cannot be done without a bill or amendment being sanctioned by the President.

The Court agreed with the contentions put forth by the petitioners and observed that a lifetime tax that is levied at the point of registration of a vehicle cannot be levied on a vehicle that is already registered, merely on a presumption that a vehicle registered outside the State of Karnataka has remained in the State of Karnataka for a period exceeding thirty days. Justice Anand Byrareddy considered it unnecessary to examine any other grounds on which the amendment was challenged and declared the amendment as unconstitutional and ultra vires.

Read the Judgment here.