Levy Of Additional Special Road Taxes Not A Penalty, But Regulatory : Supreme Court Upholds Section 3A(3) HPMVT Act

The Supreme Court upheld the constitutional validity of levy of additional special road tax under Section 3A(3) of Himachal Pradesh Motor Vehicles Taxation Act, 1972.

Reversing the judgment of the Himachal Pradesh High Court, the three judges bench of the Apex Court observed that the tax imposed under Section 3A(3) is regulatory in character and is not a penalty.

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, the bench of Justices Sanjay Kishan Kaul, Abhay S. Oka and Vikram Nath said. 

Section 3A(3) HPMVT Act

Section 3A of the HPMVT Act deals with levy of special road tax. The sub-clause (3) read as follows: Where a transport vehicle is plied without a valid permit or in any manner not authorised by the permit to be plied, there shall be levied, charged and paid to the State Government further special road tax in addition to the tax payable under sub-section (1), on such vehicles at the rates as may be specified by the State Government, by notification, but not exceeding the rates specified in column (3) of Schedule-III of this Act.

Impugned Judgment by HP HC

The Himachal Pradesh High Court held that the tax imposed by Section 3A(3) was in the nature of penalty and for which the State Legislature had no power to make such laws. According to the High Court it was penalty because a further special road tax was leviable where a transport vehicle was plied without any valid permit or in any manner not authorized by the permit to be plied.

In appeal filed by the State, the Apex Court bench considered (1) Whether Section 3A(3) is manifestly unjust or glaringly unconstitutional; (2) Whether it is regulatory or compensatory in nature; and (3) Whether there is any repugnancy with the provisions in the Central enactment. Allowing the appeal, the court made the following observations

States have the power to lay down principles on which taxes on vehicles are to be levied.

The Legislatures of the State have not only the power to make laws on the taxation to be imposed on motor vehicles as also the passengers and goods being transported by motor vehicles but also the power to lay down principles on which taxes on vehicles are to be levied. In the absence of any principles having been laid down by the Parliament, no fault could be found in the 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.

Such additional special road tax could be termed as regulatory in nature

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.

No repugnancy of any kind

Entry 35 of List II conferred the power on the Parliament as also the State Legislatures to make laws relating to mechanically propelled vehicles of all kinds and also to lay down the principles on which taxes on such vehicles are to be levied. The central enactment i.e. the law made by the Parliament has not laid down any principles for levy of taxes. The State Legislatures had the power to levy taxes not only under Entries 56 and 57 of List II but also to lay down the principles under Entry 35 of List III. Therefore, no repugnancy of any kind could be alleged or pleaded or proved in the absence of there being any central law laying down principles of levy of tax. In view of the above, no repugnancy or conflict of the State enactment with the central enactment could be sustained.

Case details

State of Himachal Pradesh vs Goel Bus Service Kullu | 2023 LiveLaw (SC) 27 | CA 5534-5594 of 2011 | 13 Jan 2023 | Justices Sanjay Kishan Kaul, Abhay S. Oka Vikram Nath 

For parties: Mr. Sidharth Bhatnagar, Sr. Adv. (A.C.) Ms. Pracheta Kar, Adv. Mr. Aditya Sidhra, Adv. Mr. Nadeem Afrol, Adv. Mr. Buddy A. Ranganadhan, Adv. (A.C.) Mr. Abhinav Mukerji, A.A.G. Mrs. Bihu Sharma, Adv. Ms. Pratishtha Vij, Adv. Mr. Akshay C. Shrivatava, Adv. Mr. Abhinav Mukerji, AOR

Headnotes

Himachal Pradesh Motor Vehicles Taxation Act, 1972 ; Section 3A (3) - Levy of Additional Special Road Tax - Constitutional Validity upheld -The tax imposed under Section 3A(3) is regulatory in character and is not a penalty - No repugnancy or conflict of the State enactment with the central enactment - Provision is regulatory in nature and therefore within the competence of the Legislature of State of Himachal Pradesh - 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. (Para 42-48)

Constitution of India, 1950 ; Entry 35 of List III of Seventh Schedule - The power on the Parliament as also the State Legislatures to make laws relating to mechanically propelled vehicles of all kinds and also to lay down the principles on which taxes on such vehicles are to be levied -The central enactment i.e. the law made by the Parliament has not laid down any principles for levy of taxes. The State Legislatures has the power to levy taxes not only under Entries 56 and 57 of List II but also to lay down the principles under Entry 35 of List III.  (Para 46)

Taxing Statutes - Validity is to be ascertained on the following three aspects: (1) Whether it is manifestly unjust or glaringly unconstitutional; (2) Whether it is regulatory or compensatory in nature; and (3) Whether there is any repugnancy with the provisions in the Central enactment - 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. (Para 25, 41)

Taxation - Lumpsum Taxation - . Levy of lumpsum tax has been upheld in State of Tamil Nadu vs. M. Krishnappan (2005) 4 SCC 53 - No reason to take a different view. (Para 49)

Punishment - 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. (Para 47)

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