# CASE DETAILS NHPC LTD v. STATE OF HIMACHAL PRADESH SECRETARY & ORS

- **Citation:** 2023 INSC 810
- **Court:** Supreme Court of India
- **Decided:** 2023-09-06
- **Case number:** Civil Appeal No.3948 of 2009
- **Bench:** B. V. Nagarathna, Ujjal Bhuyan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/case-details-nhpc-ltd-v-state-of-himachal-pradesh-secretary-ors-36448
- **Pages:** 54

## Headnote

Issues for consideration: (i)Whether, by enacting the Himachal
Pradesh Passengers and Goods (Amendment and Validation) Act of 1997,
the Himachal Pradesh State Legislature had validly removed the basis of
the judgment of the Division Bench of the High Court dated 27.03.1997,
whereby the Himachal Pradesh Passengers and Goods Taxation Act, 1955
had been held not to include within its scope the activity of the appellants
of providing gratis transport facilities for their employees and their children.
(ii) Whether the activity of the appellants of providing gratis transport
facilities for their employees and their children, would now be a taxable
activity under Section 3(1-A) of the Amendment and Validation Act of 1997.
Himachal Pradesh Passengers and Goods Taxation Act, 1955 -
Himachal Pradesh Passengers and Goods (Amendment and Validation)
Act of 1997 - Validity of the Amendment and Validation Act, 1997
and taxability of transport facility provided by the appellant for their
employees and children:
Held: By enacting the Amendment and Validation Act of 1997, the
Himachal Pradesh State Legislature has validly removed the basis of the
judgment of the Division Bench of the High Court dated 27.03.1997,
inter-alia, by amending the defi nition of the term 'business'; defi ning the
terms 'fare', 'freight' and 'road'; deleting the Explanation to Section 3(1);
and inserting Section 3(1A) which brought non-fare paying passengers at
par with fare-paying passengers for the purpose of levying tax under the
Act - Thus, the Amendment and Validation Act of 1997 is a valid piece of
Legislation - The activity of the appellant in providing gratis transportation
SUPREME COURT REPORTS
[2023] 12 S.C.R.
2
to its employees, and their children, would be a taxable activity under Section
3(1-A) of the Amendment and Validation Act of 1997. [Para 23(ii), (iii)]
Himachal Pradesh Passengers and Goods Taxation Act, 1955 -
Himachal Pradesh Passengers and Goods (Amendment and Validation)
Act of 1997 - The Division Bench of the High Court passed a judgment
dated 27.03.1997 and pointed out lacunae in the Act of 1955 - By way of
the Amendment and Validation Act of 1997, amendments were brought
about to the Preamble and various provisions of the Act of 1955 with
retrospective eff ect, viz. date of enforcement of the Act of 1955 - When
a competent legislature retrospectively removes the substratum or
foundation of a judgment to make it ineff ective - Valid legislative
exercise or not:
Held: A legislature cannot directly set aside a judicial decision
- However, when a competent legislature retrospectively removes the
substratum or foundation of a judgment to make the decision ineff ective, the
same is a valid legislative exercise provided it does not transgress on any
other constitutional limitation - Such a legislative device which removes
the vice in the previous legislation which has been declared unconstitutional
is not considered to be an encroachment on judicial power but an instance
of abrogation recognised under the Constitution of India - The various
decisions of the Supreme Court show that it is open to the legislature to
alter the law retrospectively, provided the alteration is made in such a
manner that it would no more be possible for the Court to arrive at the same
verdict - In other words, the very premise of the earlier judgment should be
removed, thereby resulting in a fundamental change of the circumstances
upon which it was founded - It would be permissible for the legislature to
remove a defect in an earlier legislation, as pointed out by a constitutional
court in exercise of its powers by way of judicial review - This defect can
be removed both prospectively and retrospectively by a legislative process
and previous actions can also be validated. [Paras 11 and 12]
Constitution of India - Alteration of law retrospectively -
Separation of powers between legislature, executive and the judiciary
- Power of Judicial Review - Power of Legislature - Rule o

## Text

_Characters 0–39,904 of 115,247. This is a partial read: ask again with offset=39904 for what follows._

[2023] 12 S.C.R. 1 : 2023 INSC 810
1
CASE DETAILS
NHPC LTD.
V.
STATE OF HIMACHAL PRADESH SECRETARY & ORS.
(Civil Appeal No.3948 of 2009)
SEPTEMBER 06, 2023
[B. V. NAGARATHNA AND UJJAL BHUYAN, JJ.]
HEADNOTES
Issues for consideration: (i)Whether, by enacting the Himachal
Pradesh Passengers and Goods (Amendment and Validation) Act of 1997,
the Himachal Pradesh State Legislature had validly removed the basis of
the judgment of the Division Bench of the High Court dated 27.03.1997,
whereby the Himachal Pradesh Passengers and Goods Taxation Act, 1955
had been held not to include within its scope the activity of the appellants
of providing gratis transport facilities for their employees and their children.
(ii) Whether the activity of the appellants of providing gratis transport
facilities for their employees and their children, would now be a taxable
activity under Section 3(1-A) of the Amendment and Validation Act of 1997.
Himachal Pradesh Passengers and Goods Taxation Act, 1955 -
Himachal Pradesh Passengers and Goods (Amendment and Validation)
Act of 1997 - Validity of the Amendment and Validation Act, 1997
and taxability of transport facility provided by the appellant for their
employees and children:
Held: By enacting the Amendment and Validation Act of 1997, the
Himachal Pradesh State Legislature has validly removed the basis of the
judgment of the Division Bench of the High Court dated 27.03.1997,
inter-alia, by amending the defi nition of the term 'business'; defi ning the
terms 'fare', 'freight' and 'road'; deleting the Explanation to Section 3(1);
and inserting Section 3(1A) which brought non-fare paying passengers at
par with fare-paying passengers for the purpose of levying tax under the
Act - Thus, the Amendment and Validation Act of 1997 is a valid piece of
Legislation - The activity of the appellant in providing gratis transportation
SUPREME COURT REPORTS
[2023] 12 S.C.R.
2
to its employees, and their children, would be a taxable activity under Section
3(1-A) of the Amendment and Validation Act of 1997. [Para 23(ii), (iii)]
Himachal Pradesh Passengers and Goods Taxation Act, 1955 -
Himachal Pradesh Passengers and Goods (Amendment and Validation)
Act of 1997 - The Division Bench of the High Court passed a judgment
dated 27.03.1997 and pointed out lacunae in the Act of 1955 - By way of
the Amendment and Validation Act of 1997, amendments were brought
about to the Preamble and various provisions of the Act of 1955 with
retrospective eff ect, viz. date of enforcement of the Act of 1955 - When
a competent legislature retrospectively removes the substratum or
foundation of a judgment to make it ineff ective - Valid legislative
exercise or not:
Held: A legislature cannot directly set aside a judicial decision
- However, when a competent legislature retrospectively removes the
substratum or foundation of a judgment to make the decision ineff ective, the
same is a valid legislative exercise provided it does not transgress on any
other constitutional limitation - Such a legislative device which removes
the vice in the previous legislation which has been declared unconstitutional
is not considered to be an encroachment on judicial power but an instance
of abrogation recognised under the Constitution of India - The various
decisions of the Supreme Court show that it is open to the legislature to
alter the law retrospectively, provided the alteration is made in such a
manner that it would no more be possible for the Court to arrive at the same
verdict - In other words, the very premise of the earlier judgment should be
removed, thereby resulting in a fundamental change of the circumstances
upon which it was founded - It would be permissible for the legislature to
remove a defect in an earlier legislation, as pointed out by a constitutional
court in exercise of its powers by way of judicial review - This defect can
be removed both prospectively and retrospectively by a legislative process
and previous actions can also be validated. [Paras 11 and 12]
Constitution of India - Alteration of law retrospectively -
Separation of powers between legislature, executive and the judiciary
- Power of Judicial Review - Power of Legislature - Rule of Law:
Held: The role of the judiciary in galvanising constitutional machinery
characterised by institutional checks and balances, lies in recognising that
3
while due deference must be shown to the powers and actions of the other
two branches of the government, the power of judicial review may be
exercised to restrain unconstitutional and arbitrary exercise of power by the
legislature and executive organs - The power of judicial review is a part
of the basic feature of Constitution which is premised on the rule of law -
Unless a judgment has been set aside by a competent court in an appropriate
proceeding, fi nality and binding nature of a judgment are essential facets
of the rule of law informing the power of judicial review - In that context,
while it may be open to the legislature to alter the law retrospectively, so
as to remove the basis of a judgment declaring such law to be invalid, it is
essential that the alteration is made only so as to bring the law in line with
the decision of the Court - Simply setting at naught a decision of a court
without removing the defects pointed out in the said decision, would sound
the death knell for the rule of law - The rule of law would cease to have
any meaning if the legislature is at liberty to defy a judgment of a court
by simply passing a validating legislation, without removing the defects
forming the substratum of the judgment by use of a non-obstante clause as
a technique to do so. [Para 13]
Constitution of India - Legislative device of abrogation -
Retrospective amendments - Permissibility of:
Held: The device of abrogation, by way of introducing retrospective
amendments to remove the basis of a judgment, may be employed when
a legislature is under the bonafi de belief that a defect that crept into the
legislation as it initially stood, may be remedied by abrogation - An act of
abrogation is permissible only in the interests of justice, eff ectiveness and
good governance, and not to serve the oblique agenda of defying a court's
order, or stripping it of its binding nature. [Para 14]
Constitution of India - The power of abrogation is to be exercised
following principles:
Held: (i) There is no legal impediment to enacting a law to validate a
legislation which has been held by a court to be invalid, provided, such a law
removes the basis of the judgment of the court, by curing the defects of the
legislation as it stood before the amendment; (ii) The validating legislation
may be retrospective - It must have the eff ect that the judgment pointing
out the defect would not have been passed, if the altered position as sought
NHPC LTD. v. STATE OF HIMACHAL PRADESH
SECRETARY & ORS.
SUPREME COURT REPORTS
[2023] 12 S.C.R.
4
to be brought in by the validating statute existed before the court at the
time of rendering its judgment; (iii) Retrospective amendment should be
reasonable and not arbitrary and must not be violative of any Constitutional
limitations; (iv) Setting at naught a decision of a court without removing
the defect pointed out in the said decision is opposed to the rule of law and
the scheme of separation of powers under the Constitution of India; (v)
Abrogation is not a device to circumvent an unfavourable judicial decision
- If enacted solely with the intention to defy a judicial pronouncement, an
Amendment and Validation Act of 1997 may be declared as ultra-vires.
[Para 15]
Himachal Pradesh Passengers and Goods Taxation Act, 1955 -
Himachal Pradesh Passengers and Goods (Amendment and Validation)
Act of 1997 - Import of the Act of 1955 Act as amended by the
Amendment and Validation act of 1997:
Held: The Preamble which provides that it has been enacted to
provide for levying a tax on passengers and goods carried by road in motor
vehicles - Such a tax falls within the legislative fi eld governed by Entry
56 of List II of the Seventh Schedule of the Constitution - Simply for the
reason that notices have been issued to the owners or assessment orders
have been passed against the owners of the vehicles, it cannot be said that
the tax is levied on the motor vehicles - If the persons carried happen to
be employees of the owners of the buses, such employees should pay the
tax - When the employer, i.e., the owner of the vehicle, does not collect
the tax from such employees, he should himself pay it, in discharge of
the employer's statutory duty as an agent of the State to collect tax on the
basis of the amended provision - Whether to collect the tax payable from
the passengers (the employees and their children) or discharge the liability
itself is the prerogative of the appellants. [Para 22]
LIST OF CITATIONS AND OTHER REFERENCES
Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, A.I.R
1970 SC 192 : [1970] 1 SCR 388; State of Tamil Nadu v. Arooran Sugars
Ltd., (1997) 1 SCC 326 : [1996] 8 Suppl. SCR 193 - followed.
Indian Aluminium Company Co. v. State of Kerala, A.I.R 1996 SC
1431: [1996] 2 SCR 23; Bakhtawar Trust v. M.D. Narayan, (2003) 5 SCC
5
298 : [2003] 1 Suppl. SCR 1; Madras Bar Association v. Union of India,
(2022) 12 SCC 455; Dr. Jaya Thakur v. Union of India, 2023 SCC OnLine
SC 813 - relied on.
A.S. Karthikeyan v. State of Kerala, (1974) 1 SCC 258 : [1974] 2 SCR
321; M/s Tata Engineering and Locomotive Co. v. The Sales Tax Offi cer,
Poona A.I.R. 1979 SC 343 : [1979] 2 SCR 357; J. K. Jute Mills Co. Ltd.
v. State of Uttar Pradesh, A.I.R. 1961 SC 1534 : [1962] SCR 1; State of
Tamil Nadu v. Board of Trustees of the Port of Madras, (1999) 4 SCC 630
: [1999] 2 SCR 195; Commissioner of Sales Tax v. Sai Publication Fund,
(2002) 4 SCC 57 : [2002] 2 SCR 743; National Agricultural Cooperative
Marketing Federation of India Ltd. v. Union of India, (2003) 5 SCC 23:
[2003] 3 SCR 1; M/s West Ramnad Electric Distribution Co. v. State of
Madras, A.I.R. 1962 SC 1753 : [1963] SCR 747; Rai Ramkrishna v. State
of Bihar, A.I.R. 1963 SC 1667 : [1964] SCR 897; Lohia Machines Ltd. v.
Union of India, (1985) 2 SCC 197 : [1985] 2 SCR 686; State of Himachal
Pradesh v. Yash Pal Garg, (2003) 9 SCC 92 : [2003] 3 SCR 1056; Baharul
Islam v. Indian Medical Association, 2023 SCC OnLine SC 79; M/s. Tirath
Ram Rajendra Nath, Lucknow v. State of Uttar Pradesh, A.I.R. 1973 SC
405; Hindustan Gum and Chemicals Ltd. v. State of Haryana, (1985) 4
SCC 124 : [1985] 2 Suppl. SCR 630; Cheviti Venkanna Yadav v. State of
Telangana, (2017) 1 SCC 283 : [2016] 7 SCR 689 - referred to.
OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3948 of 2009.
From the Judgment and Order dated 11.12.2008 of the High Court of
Himachal Pradesh at Shimla in CWP No.725 of 1998.
With
Civil Appeal Nos. 4738-4743 and 6931 of 2009.
Appearances:
S.B. Upadhyay, Sr. Adv., Piyush Sharma, Anuj Sharma, Abhishek
Goyal, Shivesh Shrivastava, Yashraj Singh Deora, Priyesh Mohan Srivastava,
Abhishek Singh, M/s. Mitter & Mitter Co., Advs. for the Appellant.
NHPC LTD. v. STATE OF HIMACHAL PRADESH
SECRETARY & ORS.
SUPREME COURT REPORTS
[2023] 12 S.C.R.
6
Anup Kumar Rattan, AG, Rupinder Singh Thakur, Addl. AG, Puneet
Rajta, Karan Kapur, Abhishek Gautam, Vivek Kumar, Baldev Singh, Ms.
Radhika Gautam, Kartikeya Rastogi, Ms. Inderdeep Kaur Raina, Abhinav
Mukerji, Advs. for the Respondents.
JUDGMENT / ORDER OF THE SUPREME COURT
JUDGMENT
NAGARATHNA, J.
These appeals have been fi led assailing the fi nal Orders of the High
Court of Himachal Pradesh dated 11 December, 2008 and 06 May, 2009,
whereby the vires of the Himachal Pradesh Passengers and Goods Taxation
Act, 1955 (hereinafter referred to as the "Act of 1955" for the sake of
brevity) as amended from time to time, particularly by the Himachal Pradesh
Passengers and Goods (Amendment and Validation), Act, 1997 (hereinafter
referred to as the "Amendment and Validation Act of 1997" for the sake
of brevity) has been upheld and the writ petitions fi led by the appellants
herein, i.e., Civil Writ Petition Nos. 725 of 1998, 422 of 1998, 401 of 2001,
464-467 of 2001 and 79 of 2007, have been dismissed.
Bird's eye view of the controversy:
2. The controversy in these cases revolves around the question whether,
by enacting the Amendment and Validation Act of 1997, the Himachal
Pradesh State Legislature has validly removed the basis of the judgment
of the Division Bench of the High Court dated 27 March, 1997. In the said
judgment, the Act of 1955 had been held not to include within its scope,
the activity of the appellants in providing gratis transport facilities for their
employees and their children, as the charging provision contained therein,
namely, Section 3 (1) and the Explanation thereto were couched in very
ambiguous terms.
2.1. These appeals also call for consideration of ancillary arguments
in the matter such as legislative competence of the Himachal Pradesh
Legislative Assembly to enact the Act of 1955 and the Amendment and
Validation Act of 1997, which are stated to be enacted on the strength of
Article 246, read with Entry 56 of List II of the Seventh Schedule of the
Constitution of India.
7
2.2 Further, these appeals also call for interpretation of certain provisions
of the Act of 1955, as amended by the Amendment and Validation Act of 1997,
so as to determine whether the activity of the appellants, would be a taxable
activity under Section 3(1-A) of the Amendment and Validation Act of 1997.
Brief facts of the case:
3. Since the controversy involved in these appeals is identical, the
appeals are being disposed of by way of this common judgment. For the
sake of convenience, the facts of the lead matter, i.e., Civil Appeal No. 3498
of 2009 shall be narrated as under:
3.1. The facts in a nutshell are that the Act of 1955 was enacted by
the Himachal Pradesh Legislative Assembly with a view to levy tax on
passengers and goods carried by road in certain motor vehicles in the State
of Himachal Pradesh. The said Act received Presidential assent on 25
November, 1955.
3.2. The appellant, NHPC Ltd. is engaged in the generation of
electricity and has various projects in the State of Himachal Pradesh. Many
project sites are situated at diff erent locations in the interiors of Himachal
Pradesh. These work sites are not properly serviced by any public transport
system or regular taxis. The residential colonies of the staff employed at the
various project sites are located at far of distances from the project sites.
Therefore, as a welfare measure, the appellant, NHPC Ltd. provides transport
facilities to its employees in order to enable them to reach their respective
work sites from their residential colonies and for their children to travel to
and from their schools, comfortably. It is to be clarifi ed at this juncture that
the transport facilities were being provided free of cost, for the exclusive
use of the employees of the appellant and their children and members of
the public were not permitted to use the said transport facilities. The buses
utilized for such purpose were owned and operated by the appellant-NHPC
Ltd.
3.3. The Assessing Authority under the Act of 1955, Respondent No.
3 herein, assessed the liability of the appellant-NHPC Ltd. to pay passenger
tax under the Act for the years 1984-1985 to 1986-1987 and 1987-1988
to 1990-1991 in respect of the activity of providing transport facilities to
its employees and their children. Assessment Orders were passed on 01
NHPC LTD. v. STATE OF HIMACHAL PRADESH
SECRETARY & ORS.[B. V. NAGARATHNA]
SUPREME COURT REPORTS
[2023] 12 S.C.R.
8
8
October, 1992 stipulating the liability of the appellant, NHPC Ltd. to pay
passenger tax under the Act of 1955, on the premise that its employees and
their children were passengers under the Act and therefore, the appellant was
liable to pay passenger tax for providing them with transport facilities as
described hereinabove. It is to be stated at this juncture that the Assessment
Orders were passed on the assumption that every bus of the appellant, NHPC
Ltd. was plying on every day of the relevant years; a passenger travelled
on every seat of every bus; and every employee travelled the full distance
shown in the logbook.
3.4. The appellant filed Revision Application before the
Commissioner, Excise and Taxation, Himachal Pradesh, Respondent
No. 2 herein, challenging the Assessment Orders dated 01 October,
1992. The same was dismissed on the ground that a revision application
would not be maintainable and it would be appropriate to instead, file
an appeal.
3.5. In the said background, the appellant, NHPC Ltd. fi led Writ
Petition No.1733 of 1995 before the High Court, challenging the vires of the
Act of 1955, and the assessments made in accordance with the provisions
thereof. The pertinent contentions raised by the appellant in the said Writ
Petition may be encapsulated as under:
i.
That under the Act of 1955, no tax can be levied on the appellant
as its employees and their children were being carried in the
appellant's buses, without any fare or consideration. That
passenger tax as contemplated under the Act of 1955 was to be
levied only on fare-paying passengers against tickets issued by
the owner of the motor vehicles, who is engaged in the business
of carrying passengers for hire and reward.
ii.
That no rate or fare had been specifi ed by the competent authority
under the Motor Vehicles Act, 1939 (hereinafter referred to as
"MV Act" for short) for the routes on which the appellant's buses
plied, nor had any contractual rate been agreed upon between the
appellants and its employees. Therefore, the charging provision,
i.e., Section 3 (1) of the Act of 1955 and the Explanation thereto
would not be attracted.
9
iii. That in passing the Assessment Orders dated 01 October, 1992,
erroneous and baseless assumptions had been made to the eff ect
that every bus of the appellant, NHPC Ltd. was plying on every
day of the relevant year; a passenger travelled on every seat of
every bus; every employee travelled the full distance shown in
the logbook; and every passenger was paying a fare of Rs. 1.15
per kilometer.
iv. That even if the assessee was liable to pay tax under the Act of
1955, they would not be liable to pay surcharge under Section
3A of the Act as the said provision would not be applicable
to the appellants. Further, Section 3A of the Act of 1955 was
unconstitutional and suff ered from excessive delegation of powers
to the State Government to prescribe the rate of surcharge leviable,
without laying down any guideline on the basis of which surcharge
was to be prescribed.
3.6. By the Judgment and Order dated 27 March, 1997, the Division
Bench of the High Court allowed Civil Writ Petition No.1733 of 1995 fi led
by the appellant and directed the Respondents to refund the tax collected
under the provisions of the Act of 1955. The pertinent fi ndings of the Division
Bench of the High Court are culled out hereinunder:
i.
That the scheme of the Act of 1955 was to levy a tax on passengers
of certain motor vehicles only. Intention of the legislature could
be gathered from the various defi nitions contained in Section 2
of the Act, and the same was to make the Act applicable only to
persons who carried on the business of transport. The defi nition
of 'owner' would fortify such fi nding, as 'owner' was defi ned to
mean a person holding a permit under the Motor Vehicles Act.
ii.
That the liability of the assessee was to be determined for the years
1984-1985 to 1986-1987 and 1987-1988 to 1990-1991. Prior to 31
May, 1988, 'motor vehicle' was defi ned to mean "a public service
vehicle or public carrier, or private carrier or a trailer attached to
any such vehicle." Further, the defi nition of 'passenger' excluded
from its scope the driver, conductor and employee of the owner
of the motor vehicle. Therefore, the appellant's buses would not
be covered under the defi nition of 'motor vehicle', as defi ned
NHPC LTD. v. STATE OF HIMACHAL PRADESH
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS
[2023] 12 S.C.R.
10
at the relevant point of time. That on applying the defi nition of
the expressions, 'motor vehicle' and 'passenger' to the charging
provision, the appellant would not be liable for tax under the Act
of 1955.
iii. That as regards the period between 31 May, 1988 and 30
September, 1990, the scope of the definition was expanded
only to include any vehicle used in contravention of
the provisions of the Motor Vehicles Act for carriage of
passengers or goods or both, for hire and reward. Since the
appellant's buses were not used for carriage of passengers
for hire or reward, appellant would not be liable to discharge
tax under the Act.
iv. That from 01 October, 1990, the defi nition of 'motor vehicle'
was enlarged to include any 'transport vehicle,' which, as defi ned
under the Motor Vehicles Act, 1988 (hereinafter, "MV Act, 1988"
for the sake of convenience) means "a public service vehicle, a
goods carriage, an educational institution bus or a private service
vehicle." That although the said defi nition of 'motor vehicle'
would cover the buses of the appellant, the Explanation to Section
3 (1) of the Act of 1955 would not permit such an application.
v.
That the Explanation to Section 3 (1) of the Act of 1955 introduced
a legal fi ction requiring assessments to be made on the assumption
that even passengers who did not actually pay a fare, were being
carried at the normal rate chargeable on the concerned route. That
there was no defi nition of 'route' for the purposes of the Act and
the defi nition of 'route' under the MV Act could not be referred
to as the routes on which the appellant's buses plied were not
'routes' in the sense defi ned under the MV Act. Hence, 'route'
could not be equated to any 'road' so as to hold the appellantassessee liable to pay tax under the Act of 1955. That for charging
tax, by invoking the Explanation to Section 3(1), routes were
required to be prescribed, but since no routes had been prescribed,
the Explanation could not come to the rescue of the respondent
Authorities.
11
vi. Further, in the absence of any prescription as to what the 'normal
rate' would be, the Respondent Authorities could not have levied
tax on the appellant based on artifi cial assumptions. That there
was no basis to warrant the Authorities from taking into account
the fare payable in the adjoining areas, in calculating the 'normal
rate.'
vii. That the charging provision could not be given eff ect to unless
the terms 'route' and 'normal rate' had been expressly and
unambiguously defi ned.
3.7. A Special Leave Petition fi led by the Respondents before this
Court, assailing the judgment of the High Court dated 27 March, 1997 was
dismissed by an Order dated 28 July, 1997.
3.8. In that background, on 13 August, 1997, the Himachal Pradesh
Passengers and Goods (Amendment & Validation) Ordinance was
promulgated. The Himachal Pradesh Legislative Assembly passed the
Amendment and Validation Act of 1997 on 27 September, 1997 with a view
to remove the basis of the judgment of the Division Bench of the High Court
dated 27 March, 1997. By virtue of the Amendment and Validation Act of
1997, defi nitions of the terms 'business', 'fare', 'freight' and 'passenger'
were amended. Further, defi nitions of terms such as 'Private Service
Vehicle', 'road', 'Transport Vehicle', came to be introduced. Explanation
(1) to Section 3 (1) of the Act of 1955, which was the charging provision in
the said Act, was omitted and Sub-section (1A) was inserted in Section 3,
which was to serve as a charging provision. The nuances of the amendments
introduced by the Amendment and Validation Act of 1997 shall be adverted
to at a later stage.
3.9. Accordingly, the Authorities constituted under the Act, issued
notices to the appellant for recovery of tax under the provisions of the
Amendment and Validation Act of 1997, in respect of the appellant's activity
of providing transport facilities to its employees and their children.
3.10. The appellant challenged the vires of the Amendment and
Validation Act of 1997 and the assessments made thereunder, as also of the
Act of 1955 by fi ling Civil Writ Petition No. 725 of 1998 before the High
Court. The primary grounds of challenge were as under:
NHPC LTD. v. STATE OF HIMACHAL PRADESH
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS
[2023] 12 S.C.R.
12
i.
That the Act of 1955 as well as the Amendment and Validation
Act of 1997 are unconstitutional inasmuch as they seek to levy
tax on vehicles, which is contrary to Entry 56, List II of Seventh
Schedule of the Constitution of India.
ii.
That the defi nitions of 'passenger', 'business', 'fare' and 'road'
are artifi cial and unnatural, as also contrary to the purpose and
object of the Act and hence, ultra-vires.
iii. That employees of the appellant and their children would not
be covered by the defi nition of "passenger", as appearing in the
Amendment and Validation Act of 1997, inasmuch as they are
carried free of charge.
3.11. By the impugned judgment dated 11 December, 2008, the High
Court of Himachal Pradesh dismissed Civil Writ Petition No. 725 of 1998
fi led by the appellant and upheld the vires of the Act of 1955 as amended
from time to time, particularly by the Amendment and Validation Act of
1997. The pertinent fi ndings of the Division Bench of the High Court may
be epitomized as under:
i.
The Court did not fi nd favour with the contention of the Petitioner
that the impugned legislations had the eff ect of taxing the vehicles,
carrying passengers or goods and, hence, the State Legislature
does not have the competence to enact it. It was held that from
a reading of the Preamble of the Act and also various provisions
thereof, it was clear that the Act seeks to impose tax, not on motor
vehicles, but on the passengers and goods carried therein. That
the import of the Act could be gathered from the Preamble which
provides that it has been enacted to provide for levying a tax on
passengers and goods carried by road in motor vehicles. That
simply for the reason that notices have been issued to the owners
or assessment orders have been passed against the owners of the
vehicles, it could not be said that the tax is levied on the motor
vehicles.
13
ii.
That the Preamble of the Act of 1955 provided that the same
was an Act to provide for levying tax on passengers and goods
carried by road in 'certain' motor vehicles. The word 'certain' is
omitted by the Amendment and Validation Act of 1997. That this
change in no way suggests that the scope of the Act was amended
to include taxation on vehicles, instead of on the passengers and
goods carried therein.
iii. That the defect in the Explanation to Section 3(1) of the Act of
1955, which was noted by the Division Bench of the High Court
in passing the judgment dated 27 March, 1997, had also been
removed by omitting the said Explanation and inserting Section
3(1A) in the Amendment and Validation Act of 1997, which
seeks to bring non-fare paying passengers at par with fare paying
passengers. Further, the Competent Authority as well as Schedule
I to the Amendment and Validation Act of 1997 prescribe the
fare and freight for diff erent categories of motor vehicles and for
diff erent roads and the higher of the two would apply.
iv. That Section 3(1A) of the Amendment and Validation Act of 1997,
when read with the amended defi nition of the term 'business'
would leave no scope for doubt that all kinds of passengers and
goods carried in private service vehicles are subject to taxation,
under the Act, irrespective of whether such passengers or goods
were being carried for hire or reward. Therefore, the Amendment
and Validation Act of 1997, covers non-fare paying passengers
(such as the appellant's employees and their children) as also
goods and material belonging to the appellant themselves.
Aggrieved by the aforesaid judgment of the High Court, which has
been followed by the High Court in its subsequent Order dated 21 July, 2009
in CWP 79 of 2007, the present appeals have been fi led.
Submissions:
4. We have heard Sri S.B. Upadhyay, learned Senior Counsel along
with instructing counsel for the appellant(s) in Civil Appeal No. 3948 of
2009; Sri Yashraj Singh Deora, learned counsel for the appellant(s) in Civil
Appeal Nos. 4738-4743 of 2009 and Civil Appela No. 6931 of 2009 and Sri
NHPC LTD. v. STATE OF HIMACHAL PRADESH
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS
[2023] 12 S.C.R.
14
Anup Kumar Rattan, learned Advocate General for the State of Himachal
Pradesh along with instructing counsel. We have perused the material on
record.
4.1. Learned Senior Counsel Sri Upadhyay, appearing on behalf of the
appellant(s) in Civil Appeal No. 3948 of 2009 submitted as under:
i.
That the impugned judgment of the High Court of Himachal
Pradesh has not properly appreciated the import of the
Amendments made to the Act of 1955 by way of the Amendment
and Validation Act of 1997 inasmuch as the High Court has upheld
the said Act of 1997, by losing sight of the fact that the said Act
does not remove the basis of the judgment passed by the High
Court earlier, by which, the Explanation to Section 3 (1) of the
Act of 1955 was deleted and the further amendments were made
by inclusion of Section 3 (1A) and certain other provisions. That
the High Court has proceeded on a misplaced interpretation of
the Act of 1955, as amended by the Amendment and Validation
Act of 1997 to hold that the latter Act, seeks to impose tax on
passengers and not motor vehicles and that the said Act covers
non-fare paying passengers as well which it cannot do so.
ii.
Elaborating the aforesaid contention, learned senior counsel
submitted that the Amendments made to the Act of 1955 do not
take into consideration the fact that the buses and other motor
vehicles of the appellants herein which are used to ferry their
employees to work sites and children of their employees to
schools are free of charge and without collecting any fare from
the passengers. They travel gratis and therefore, in that sense, are
not passengers at all. Nevertheless, the incidence of tax are on the
appellants who are the owners of the buses and other vehicle who
have been levied the tax despite the fact that they are not collecting
any tax or any fare from their "passengers" who are none other
than their employees and children of their employees. Therefore,
the Act itself does not apply to the appellants and hence, they are
not liable to pay any tax under the Act.
iii. It was further submitted that the High Court has failed to
understand the import of the amendments made to the Act of
15
1955 as the said amendments in no way can mulct any liability
to pay tax on the appellants herein. That the true import of the
Act of 1955, as amended by the Amendment and Validation Act
of 1997 is to levy and collect tax on motor vehicles, transgressing
Article 246, read with Entry 56 of List II of the Seventh Schedule
of the Constitution of India. The said legislative Entry pertains
to "taxes on goods and passengers carried by road and inland
water ways." The said Entry therefore authorises the State
Legislatures to levy, inter-alia, passenger tax. That the incidence
of a passenger tax levied on the strength of Entry 56 of List II of
the Seventh Schedule, must be on the passengers and not on the
vehicles in which passengers are carried or on the owners of such
vehicles. That it is open to the Legislature to provide a convenient
machinery or method for collection of such tax. Therefore, the
tax can be recovered from the owner or operator of the vehicle,
only when, such owner or operator can pass on the burden of the
tax to the passengers but not otherwise. In this regard, reliance
was placed on A.S. Karthikeyan vs. State of Kerala, (1974) 1
SCC 258 with a view to bring out the diff erences between a tax
on the income of the operators vis-à-vis passenger tax. That in
the present case the incidence of the tax is on the appellants
who are the owners of the buses, and not on the passengers. The
appellants' role in the present case cannot be to collect the tax
from the passengers and deposit the same with the Respondent
Authorities as no fare is collected from the passengers, but to still
discharge the tax liability out of their own coff ers.
iv. That fundamentally, 'passenger' means a person who travels
by paying a fare to the owner or operator of the vehicle, vide
M/s Tata Engineering and Locomotive Co. vs. The Sales Tax
Offi cer, Poona, A.I.R. 1979 SC 343. Therefore, a non-fare
paying employee of the operator, or a school-going child of
such employee, is not a passenger within the meaning of the
constitutional entry.
v.
That the Amendment and Validation Act of 1997 had introduced
sub-clauses (ii) and (iii) to Section 2 (aa) of the Act which defi nes
NHPC LTD. v. STATE OF HIMACHAL PRADESH
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS
[2023] 12 S.C.R.
16
'business'. That the said sub-clauses are brought within the scope
of the term 'business':

a) any trade, commerce, or manufacture, or any adventure or
concern in the nature of trade, commerce, or manufacture,
whether or not such trade, commerce, manufacture, adventure
or concern is carried on with a motive to make gain of profi t
and whether or not any gain or profi t actually accrues from
such trade, commerce, manufacture, adventure or concern vide
Section 2 (aa) (ii); and,

b) any transaction in connection with or incidental or ancillary
to such trade, commerce, manufacture, adventure or concern
vide Section 2 (aa) (iii).

 That notwithstanding the fact that the scope of the term
'business' has been widened, sub-clauses (ii) and (iii) to
Section 2 (aa) are to be read in harmony with sub-clause (i)
thereof, which provides that 'business' includes the business
of carrying passengers and goods by motor vehicles. That
if 'business' is held to mean just any trade, commerce,
manufacture, adventure or concern, sub-clause (i) of Section
2 (aa), which specifi es the nature of business, would become
redundant.
vi. That if sub-clauses (ii) and (iii) to Section 2 (aa) are interpreted
to include even businesses other than the business of carrying
passengers, the said sub-clauses would be violative of Article
14 of the Constitution on two counts. First, a person or entity
who/which does not carry the business of carrying passengers
and goods by motor vehicles, would be treated at par with a
person or entity who/which carries on such business. Second,
a person or entity who/which does not carry on a business with
a profi t motive, would be treated at par with a person or entity
who/which carries on a business with a profi t motive. In both
the circumstances, unequals would be treated equally and this
is opposed to the Constitutional mandate of equality under the
law.
17
vii. That the defi nitions of 'business', 'passenger', 'road', 'fare' and
'freight' under the Amendment and Validation Act of 1997 are
artifi cial and insertion/substitution of such defi nitions is an illegal
attempt to bring the Amendment and Validation Act of 1997
within the scope of Entry 56 of List II of the Seventh Schedule
to the Constitution.
viii. Reliance was placed on J.K. Jute Mills Co. Ltd. vs. State of Uttar
Pradesh, A.I.R. 1961 SC 1534 to contend that when a statute has
been enacted by a State Legislature, outside the permissible fi eld
of legislation, merely using artifi cial terminology so as to bring the
legislation within the scope of a particular legislative Entry would
not save the same from being declared to be unconstitutional.
ix. That the Amendment and Validation Act of 1997 did not remove
the basis of the judgment of the Division Bench of the High Court
dated 27 March, 1997, by curing the defects and plugging the
lacunae in the Act of 1955. Rather, it has been enacted with the
oblique motive of destroying the fi nality, force and eff ect of the
said judgment of the High Court, which has been affi rmed by this
Court.
 4.2. Sri Yashraj Singh Deora, learned counsel for the appellants in
Civil Appeal Nos. 4738-4743 of 2009 and Civil Appeal No. 6931 of 2009
adopted the submissions of learned Senior Counsel Sri Upadhyay and further
contended as under:
i.
That in order to be covered under the defi nition of 'business'
provided under the Amendment and Validation Act of 1997,
the trade, commerce, manufacture of the assessee, or the
transactions connected therewith or incidental thereto must have
some connection with the business of carrying passengers and
goods by road. When the term 'business' is construed in such a
manner, the main activities of the respective appellants, would
not amount to carrying on business, as the same do not relate to
the activity of carrying passengers and goods by road. That in a
case where the main activity does not amount to 'business', then
the connected, incidental or ancillary activities would also not
amount to 'business' unless an independent intention to conduct
NHPC LTD. v. STATE OF HIMACHAL PRADESH
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS
[2023] 12 S.C.R.
18
business in these connected, incidental or ancillary activities
is established by the revenue, vide State of Tamil Nadu vs.
Board of Trustees of the Port of Madras, (1999) 4 SCC 630;
Commissioner of Sales Tax vs. Sai Publication Fund, (2002) 4
SCC 57. That in the present case, there is no material to establish
that the ancillary activity of providing transport facilities to their
employees and their children is conducted with an independent
intention to conduct business through such activity. Therefore,
in the present case, neither the main activity of the appellants,
nor the ancillary activity of providing transport facilities to their
employees and their children, would amount to 'business' as
defi ned under the Amendment and Validation Act of 1997.
ii.
Referring to the various amendments brought about by the
Amendment and Validation Act of 1997 and contrasting them with
the unamended provisions, it was contended that the said Act has
not removed the basis of the judgment of the Division Bench of the
High Court dated 27 March, 1997, nor has it cured the defects in
the Act of 1955. That such an enactment is simply contradictory to
the decision of the High Court, without addressing the underlying
reasoning of the Court.
iii. That the retrospective eff ect of forty-two years, given to the
Amendment and Validation Act of 1997 is totally unreasonable
and arbitrary. That particularly in relation to taxation statutes,
retrospectivity cannot be excessive or harsh, vide National
Agricultural Cooperative Marketing Federation of India Ltd.
vs. Union of India, (2003) 5 SCC 23. That on this ground alone,
the Amendment and Validation Act of 1997 may be struck down
as being unconstitutional.
With the aforesaid submissions, learned Senior Counsel and learned
counsel for the appellants prayed that the impugned judgments be set aside
and the Act of 1955, as amended by the Amendment and Validation Act of
1997, be struck down as being arbitrary, illegal and unconstitutional.
5. Per contra, Sri Anup Kumar Rattan, learned Advocate General
for the State of Himachal Pradesh supported the impugned judgment and
submitted that the High Court had proceeded to pass the impugned orders
19
on a sound appreciation of the facts of the matter and the applicable law and
the same would not call for any interference by this Court. It was further
contended as under:
i.
That the Amendment and Validation Act of 1997 has validly
addressed the defi ciencies in various provisions of the Act of
1955 and has therefore removed the basis of the judgment of
the Division Bench of the High Court dated 27 March, 1997
in accordance with law.