# THE STATE OF HIMACHAL PRADESH AND OTHERS v. GOEL BUS SERVICE KULLU ETC. ETC

- **Citation:** [2023] 5 S.C.R. 879
- **Court:** Supreme Court of India
- **Decided:** 2023-01-13
- **Case number:** Civil Appeal Nos.55345594 of 2011
- **Bench:** Sanjay Kishan Kaul, Abhay S. Oka, Vikram Nath
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-state-of-himachal-pradesh-and-others-v-goel-bus-service-kullu-etc-etc-37143
- **Pages:** 39

## Headnote

Motor Vehicles - Himachal Pradesh Motor Vehicles Taxation
Act 1972 - s.3A(3) [introduced vide Amending Act of 1999] - Validity
of - Special road tax provided under sub-section (3) of s.3A - If
manifestly unjust / glaringly unconstitutional - Regulatory or
compensatory in nature - Repugnancy, if any, with Central
enactment - Levy of lumpsum tax - Validity - Whether imposition of
additional special road tax levied on transport vehicle used without
a valid permit is not a tax but a penalty and is ultra vires the legislative
powers of the State Legislature under Entries 56 and 57 of List II
(the State List) of the Seventh Schedule to the Constitution - Held:
Tax imposed u/s.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 - Also, s.3A(3)
of the 1972 Act is within the legislative competence of the State
Legislature, and lumpsum tax could be levied - 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 - Further, nothing on record to indict the
offending provision as being manifestly unjust or glaringly
unconstitutional - Constitution of India - Arts. 246 and 254; Seventh
Schedule, List II, Entries 56 and 57 and List III, Entry 35.
Motor Vehicles - Himachal Pradesh Motor Vehicles Taxation
Act 1972 - s.3A(3) [introduced vide Amending Act of 1999] - Validity
of - Special road tax provided under sub-section (3) of s.3A - Held:
The additional special road tax chargeable u/s.3A(3) would be in
addition to any sentence or fine imposed u/s.192A of the Motor
Vehicles Act, 1988 - The provisions under s.192A are in no way
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violated or conflicted by imposing an additional special tax for
violation of use of vehicles without permit - Motor Vehicles Act,
1988 - s.192A.
Tax / Taxation - Fiscal statutes - Scope of interference -
Held: 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 - Testing the
provisions of the offending section with regard to the settled
principles of interpretation of taxing statutes, it 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.
The State of Himachal Pradesh, exercising the powers
drawn from Entries 56 and 57 of List II of the Seventh Schedule
enacted the Himachal Pradesh Motor Vehicles Taxation Act 1972.
Section 3 of the 1972 Act provided for levy and collection of taxes
on all motor vehicles which were to be used or kept for use in
the State of Himachal Pradesh. By the Amending Act of 1999,
Section 3A was introduced which carries a heading: Levy of
Special Road Tax. This special road tax was in addition to the tax
levied under Section 3. The special road tax was also levied and
charged on all transport vehicles used or kept for use in Himachal
Pradesh specified in column 2 of Schedule 3 and the rate of tax
was to be not exceeding the rates specified in column 3 of Schedule
3 of the Act. The High Court declared sub-section (3) of Section
3A as ultra vires opining that the tax imposed by Section 3A(3)

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 [2023] 5 S.C.R. 879
879
THE STATE OF HIMACHAL PRADESH AND OTHERS
v.
GOEL BUS SERVICE KULLU ETC. ETC.
(Civil Appeal No(S). 5534-5594 of 2011)
JANUARY 13, 2023
[SANJAY KISHAN KAUL, ABHAY S. OKA AND
VIKRAM NATH, JJ.]
Motor Vehicles - Himachal Pradesh Motor Vehicles Taxation
Act 1972 - s.3A(3) [introduced vide Amending Act of 1999] - Validity
of - Special road tax provided under sub-section (3) of s.3A - If
manifestly unjust / glaringly unconstitutional - Regulatory or
compensatory in nature - Repugnancy, if any, with Central
enactment - Levy of lumpsum tax - Validity - Whether imposition of
additional special road tax levied on transport vehicle used without
a valid permit is not a tax but a penalty and is ultra vires the legislative
powers of the State Legislature under Entries 56 and 57 of List II
(the State List) of the Seventh Schedule to the Constitution - Held:
Tax imposed u/s.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 - Also, s.3A(3)
of the 1972 Act is within the legislative competence of the State
Legislature, and lumpsum tax could be levied - 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 - Further, nothing on record to indict the
offending provision as being manifestly unjust or glaringly
unconstitutional - Constitution of India - Arts. 246 and 254; Seventh
Schedule, List II, Entries 56 and 57 and List III, Entry 35.
Motor Vehicles - Himachal Pradesh Motor Vehicles Taxation
Act 1972 - s.3A(3) [introduced vide Amending Act of 1999] - Validity
of - Special road tax provided under sub-section (3) of s.3A - Held:
The additional special road tax chargeable u/s.3A(3) would be in
addition to any sentence or fine imposed u/s.192A of the Motor
Vehicles Act, 1988 - The provisions under s.192A are in no way
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violated or conflicted by imposing an additional special tax for
violation of use of vehicles without permit - Motor Vehicles Act,
1988 - s.192A.
Tax / Taxation - Fiscal statutes - Scope of interference -
Held: 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 - Testing the
provisions of the offending section with regard to the settled
principles of interpretation of taxing statutes, it 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.
The State of Himachal Pradesh, exercising the powers
drawn from Entries 56 and 57 of List II of the Seventh Schedule
enacted the Himachal Pradesh Motor Vehicles Taxation Act 1972.
Section 3 of the 1972 Act provided for levy and collection of taxes
on all motor vehicles which were to be used or kept for use in
the State of Himachal Pradesh. By the Amending Act of 1999,
Section 3A was introduced which carries a heading: Levy of
Special Road Tax. This special road tax was in addition to the tax
levied under Section 3. The special road tax was also levied and
charged on all transport vehicles used or kept for use in Himachal
Pradesh specified in column 2 of Schedule 3 and the rate of tax
was to be not exceeding the rates specified in column 3 of Schedule
3 of the Act. The High Court declared sub-section (3) of Section
3A as ultra vires opining 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 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. The High Court
opined that imposition of such an additional special road tax for a
default or a wrong committed with respect to a transport vehicle
would amount to a penalty and not a tax.
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THE STATE OF HIMACHAL PRADESH v. GOEL BUS SERVICE
KULLU ETC. ETC.
Allowing the appeals, the Court
HELD : 1.
A: SCOPE OF INTERFERENCE IN FISCAL STATUTES:
1. It is by now well settled that 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][904-H; 905-A]
SPECIAL ROAD TAX
IS REGULATORY OR
COMPENSATORY IN NATURE
2.1. The appellant State being a hilly State, the roads and
bridges are its lifeline. The State has to allocate sizeable part of
its budget for the construction, development, repair, upkeep and
maintenance of roads and bridges. It was with this object in the
background that the offending provisions were brought in by way
of amendments in 1999 and 2001 which are described as special
road tax. This Court in a number of cases dealing with similar
provisions has upheld the same. It has withheld that tax charged
for non-fulfilment of any obligation would also be compensatory
and regulatory in nature. Distinction was carved out between a
penalty imposed for breach of statutory duty and penalty imposed
being a subject matter of a complaint that would require
adjudication. The view expressed consistently is that it would be
compensatory or regulatory where it is imposed for breach of a
statutory duty. [Para 31][906-F-H; 907-A]
2.2. From the very object and reasons of the Amending Act
1999, it is apparent that the special road tax was introduced as a
compensatory measure. What is to be seen is whether the tax
imposed will have identifiable object and a nexus between the
subject and the object of the levy. The power has been given to
the States to make its own legislations by imposing tax on motor
vehicles as also the goods being transported in order to
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compensate itself for the services, benefits and facilities provided
by it. [Paras 34, 35][908-E, H; 909-A]
2.3. The argument by the amicus is that the offending
provision contained in Section 3A(3) being repugnant to the
central legislation, will have to give way and cannot be sustained.
His submission is that the power to impose penalty is given in
Section 192A of the Motor Vehicles Act, 1988. According to him,
Entry 57 of List II being subject to the provisions of Entry 35 of
List III under which the 1988 Act has been enacted, Section 192A
provides for penalty being imposed on vehicles being used
without permit or in contravention of the provisions of subsection (1) of Section 66 (providing for necessity for permits).
According to him once the central Act contains a penal provision
for such a violation of imprisonment as also fine, the State could
not have imposed a tax for the same violation. This submission
can be sustained only if any repugnancy or any conflict can be
established between the State law and the Central law. The
provisions under Section 192A are in no way violated or conflicted
by imposing an additional special tax for violation of use of vehicles
without permit. It can be said to be in addition to the penalty
provided in Section 192A of the 1988 Act. This Court, in the
case of Sukhpal Singh Bal has already upheld that such imposition
of tax for violation of statutory provisions, is to be treated as a
regulatory measure and only to work as a deterrent of the vehicle
owners' violating the law. Such a tax would be regulatory in nature
and would only check violations of the statutory provisions. In
the case of Sharma Transport Rep. by D.P. Sharma, a similar issue
was considered and this Court was of the view that under Entry
35 of List III the permission is to lay down the principles on
which the tax may be levied whereas the State had a right to levy
such tax. [Para 38][911-H; 912-A-F]
3.1. Section 3 of the Himachal Pradesh Motor Vehicles
Taxation Act 1972 provided for levy of taxes on all motor vehicles
kept or used in the State of Himachal Pradesh as per the
schedules appended to the said Act. Insertion of Section 3A
provided for levy of special road tax. The special road tax as
provided under sub-sections (1), (2) and (4) of Section 3A have
been upheld by the High Court. It is only the levy of special road
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tax under sub-section (3) which has been struck down. Testing
the provisions of the offending section with regard to the settled
principles of interpretation of taxing statutes, it 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. [Para 41[914-A-C]
Manifestly unjust or glaringly unconstitutional:
3.2. 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.
[Para 42][914-D-F]
Regulatory or Compensatory:
3.3. The objects and reasons for bringing in the 1999
Amendment was clearly compensatory in nature. The object was
to augment funds and finance for construction, maintenance,
repair and upkeep of the roads in the State of Himachal Pradesh
which has a totally hilly terrain. The offending section only
provided that if any vehicle used without a valid permit or in any
manner not authorised by the permit, further special road tax
would be levied, charged and paid to the state government in
addition to the tax payable under sub-section (1) at such rates as
may be specified by the state government by notification.
However, the restriction was that the same would not exceed
the rates specified in column 3 of Schedule 3 of the Act. [Para
43][914-G-H; 915-A]
3.4. 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
THE STATE OF HIMACHAL PRADESH v. GOEL BUS SERVICE
KULLU ETC. ETC.
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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. This Court in the case of Sukhpal Singh Bal
relating to challenge to Section 10(3) of the U.P. Motor Vehicles
Taxation Act, 1997 where a similar provision was incorporated
and even though termed as penalty, was held to be regulatory
and compensatory in nature. The High Court had struck down
the said provision but this Court held that such penalty imposed
under Section 10(3) to protect public revenue and as a deterrent
for tax evasion. In view of the above, it cannot be said that levy of
such an additional special road tax would be said to be manifestly
unjust or glaringly unconstitutional. It was, in effect, to ensure
payment of the chargeable taxes and use of the vehicles as per
the terms of the permit. [Paras 44, 45][915-B-D]
Repugnancy, if any, with Central enactment:
3.5. Entry 35 of List III 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. [Para 46][915-E-G]
3.6. The argument with respect to the 1988 Act containing
Section 192A wherein violation of Section 66(1) would constitute
a criminal offence punishable with sentence and also fine, as such
the offending section being repugnant to the said provision, cannot
be sustained. Under Section 192A a punishment of imprisonment
along with fine is provided whereas under the offending section,
an additional special road tax is being charged for such a violation
of using vehicle without permit or in contravention of the terms
of the permit. The offending section was incorporated with a view
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to augment more revenue in order to construct and maintain the
roads of the state which uses a large chunk of its finances being
a state having a completely hilly terrain. The additional special
road tax chargeable under Section 3A(3) would be in addition to
any sentence or fine imposed under Section 192A. 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. The same is the 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. As such there is no repugnancy or
any conflict caused by the offending provision with the central
enactment. [Para 47[915-H; 916-A-D]
3.7. The validity of Section 3A(3) has been wrongly held to
be ultra vires by the High Court. The tax imposed under Section
3A(3) is regulatory in character and is not a penalty. [Para 48][916E]
Lumpsum taxation:
3.8. The High Court had also quashed the notifications
issued by the State for levy of the taxes under Section 3A(3)
holding that lumpsum taxes could not be levied on general
assessment and it had to be levied as per actual default. Levy of
lumpsum tax has been upheld by a three Judge Bench of this
Court in the case of M. Krishnappan. There is no reason to take
a different view. [Para 49][916-F]
3.9. Section 3A(3) of the 1972 Act is within the legislative
competence of the State Legislature, and lumpsum tax could be
levied. [Para 50][916-H]
R.K. Garg etc. v. Union of India and others (1981) 4
SCC 675 : [1982] 1 SCR 947; Bhavesh D. Parish and
others v. Union of India and another (2000) 5 SCC
471 : [2000] 1 Suppl. SCR 291; Indian Oil Corporation
Limited v. State of Bihar and another (2018) 1 SCC
242 : [2017] 13 SCR 477; State of Uttar Pradesh and
Ors. v. Sukhpal Singh Bal (2005) 7 SCC 615 : [2005] 2
Suppl. SCR 1135; B.A. Jayaram and Ors. v. Union of
India (UOI) and Ors. (1984) 1 SCC 168 : [1983] 3
SCR 624; Bolani Ores Ltd. v. State of Orissa (1974) 2
THE STATE OF HIMACHAL PRADESH v. GOEL BUS SERVICE
KULLU ETC. ETC.
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SCC 777 : [1975] 2 SCR 138; Sharma Transport Rep.
by D.P. Sharma v. Government of Andhra Pradesh and
Ors. (2002) 2 SCC 188 : [2001] 5 Suppl. SCR 390 and
State of Tamil Nadu v. M. Krishnappan and Anr. (2005)
4 SCC 53 : [2005] 2 SCR 1112 - relied on.
State of Rajasthan v. Khalsa Travels (1998) 9 SCC 676;
Commr. Of Agricultural Income Tax v. Netley 'B' Estate
(2015) 11 SCC 462 : [2015] 3 SCR 630; Ashok Leyland
Ltd. v. State of T.N. (2004) 3 SCC 1 : [2004] 1 SCR
306; Ranjit Singh v. Taxation Officer, Rampur and etc
2002 SCC Online All 75; State of Himachal Pradesh
and Ors. v. Yash Pal Garg (Dead) by LRs and Ors. (2003)
9 SCC 92 : [2003] 3 SCR 1056; State of Maharashtra
and Ors. v. Madhukar Balkrishna Badiya and Ors.
(1988) 4 SCC 290: [1988] 2 Suppl. SCR 482; Rajeev
Suri v. Delhi Development Authority and Ors. 2021 SCC
Online SC 7; Janhit Manch and Anr. v. The State of
Maharashtra and Ors. (2019) 2 SCC 505: [2018] 14
SCR 860; State of West Bengal v. Kesoram Industries
Ltd. & Others (2004) 10 SCC 201 : [2004] 1 SCR 564;
M.P. AIR Permit Owners Association and Another v. State
of Madhya Pradesh (2004) 1 SCC 320 : [2003] 6 Suppl.
SCR 331 and Hardev Motor Transport v. State of M.P.
and Others (2006) 8 SCC 613 : [2006] 7 Suppl. SCR
766 - referred to.
Aas Mohammad v. State of Rajasthan 2020 2 RLW 1567
(Raj) - referred to.
Morey vs. Doud 354 US 457 - referred to.
Case Law Reference
(1998) 9 SCC 676
referred to
Para 2
[1982] 1 SCR 947
relied on
Para 8
[2000] 1 Suppl. SCR 291
relied on
Para 8
[2017] 13 SCR 477
relied on
Para 8
[2005] 2 SCR 1112
relied on
Para 8
[2015] 3 SCR 630
referred to
Para 8
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[2004] 1 SCR 306
referred to
Para 8
[2003] 3 SCR 1056
referred to
Para 8
[2005] 2 Suppl. SCR 1135
relied on
Para 8
[1983] 3 SCR 624
relied on
Para 8
[1975] 2 SCR 138
relied on
Para 8
[2001] 5 Suppl. SCR 390
relied on
Para 8
[1988] 2 Suppl. SCR 482
referred to
Para 8
[2018] 14 SCR 860
referred to
Para 8
[2004] 1 SCR 564
referred to
Para 9
[2003] 6 Suppl. SCR 331
referred to
Para 9
[2006] 7 Suppl. SCR 766
referred to
Para 9
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.55345594 of 2011.
From the Judgment and Order dated 06.07.2007 of the High Court
of Himachal Pradesh at Shimla in C.W.P. Nos.32, 135, 196, 197, 198,
199, 200, 201, 202, 203, 204, 205, 206, 207, 208, 209, 215, 216, 217, 218,
219, 235, 240, 241, 242, 243, 244, 245, 246, 247, 249, 25, 250, 253, 254,
255, 256, 268, 269, 270, 272, 273, 274, 275, 290, 291, 292, 318, 33, 34, 35,
355, 56, 57, 619, 789, 91, 92, 93, 954 of 2000 and C.W.P. No.93 of 2001.
Buddy A. Ranganadhan, Amicus Curiae
Abhinav Mukerji, Mrs. Bihu Sharma, Ms. Pratishtha Vij, Akshay
C. Shrivastava, Advs. for the Appellants.
Siddharth Bhatnagar, Sr. Adv., Ms. Pracheta Kar, Aditya Sidhra,
Nadeem Afroz, Advs. for the Respondents.
The Judgment of the Court was delivered by
VIKRAM NATH, J.
1. The above set of appeals were referred to larger Bench of
three Judges in terms of the order dated 05.03.2020 which reads as
follows:
THE STATE OF HIMACHAL PRADESH v. GOEL BUS SERVICE
KULLU ETC. ETC.
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"Considering the fact that the issue raised in these appeals
was referred to a larger Bench of three Judges in terms of
order dated 27.02.1998 in Civil Appeal No. 10457/1995
and other connected cases [reported in (1998) 9 SCC 676]
but which appeals later on repealed by Rajasthan Act, 1951,
which is on similar lines with the provision involved in the present
appeals.
Hence, we deem it appropriate to refer these appeals to a
larger Bench of three Judges for an authoritative
pronouncement on the questions involved.
Registry is directed to place the matters before Hon'ble the
Chief Justice of India for constituting the appropriate Bench
for hearing these appeal(s)."
2. The above referred order dated 27.02.1998 passed in Civil
Appeal No. 10457 of 1995 and connected matters reported in State
of Rajasthan Vs. Khalsa Travels, (1998) 9 SCC 676 is reproduced
below:
"1. These appeals filed by the State of Rajasthan raise questions
relating to the constitutional validity of Section 4-B(3) of the
Rajasthan Motor Vehicles Taxation Act, 1951 (hereinafter
referred to as "the Act") and Rule 4-CC of the Rajasthan Motor
Vehicles Taxation Rules, 1951 (hereinafter referred to as "the
Rules") which make provision of levy of special road tax on a
transport vehicle which is used without a valid permit or in any
manner not authorized by the permit. By the impugned
judgments the High Court has held that Section 4-B(3) is ultra
vires the rule- making powers conferred on the State
Government under the Act.
2. According to the High Court the imposition, though described
as a tax, is, in substance, a fine for an alleged offence of plying
the vehicle without a valid permit or in contravention of the
conditions of permit and such a penalty cannot be treated as a
part of regulatory or compensatory tax. On that view, The High
Court has declared that Section 4-B(3) of the Act is ultra vires
the powers conferred on the State Legislature under Entry 56
of List II of the Seventh Schedule to the Constitution of India.
The question that falls for consideration in these appeals
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is whether the imposition under Section 4-B(3) is not a
tax but a penalty and is ultra vires the legislative powers
of the State Legislature under Entry 56 and Entry 57 of
List II.
3. Having regard to the importance of the question, we consider
it appropriate that these matters are considered by a Bench of
three Judges. The matter may, therefore, be placed before the
Hon'ble Chief Justice for necessary directions."
A careful perusal of the above orders confines the question
for consideration to be whether the imposition of additional special
road tax levied on transport vehicle used without a valid permit is not
a tax but a penalty and is ultra vires the legislative powers of the
State Legislature under Entries 56 and 57 of List II (the State List)
of the Seventh Schedule to the Constitution.
3. Civil Appeal No.10457 of 1995 was dismissed vide order
dated 15.04.1998 for the reason that similar provisions enacted in
the State of Rajasthan were repealed by the Rajasthan Finance Act,
1977 and, as such, the question raised was held to be no longer a live
issue. The said appeals along with connected appeals were
accordingly dismissed, however, the question was left open. The said
order dated 15.04.1998 is reproduced hereunder: -
"These appeals involve the question regarding the validity of
Section 4 (B) (3) of the Rajasthan Motor Vehicles Act, 1951
and Rule 4 CC of the Rajasthan Motor Vehicles Taxation Rules.
While the matters were pending in this Court the State
legislature has enacted Rajasthan Finance Act, 1977 whereby
Section 4 (B) (3) has been repealed and since Rule 4 CC was
made to give effect to the provisions contained in Section 4
(B) (3) the said rule also has ceased to apply. In view of the
aforesaid amendment that has been made by the Rajasthan
Finance Act, 1977 the question raised by the appellant in these
appeals is no longer a live issue and, therefore, it is not
necessary to go into the same. The appeals are accordingly
dismissed and the question is left open. No order as to costs."
FACTS:
4. The respondent and several other similarly situate public
transport operators challenged the validity of Section 3-A, Section 3THE STATE OF HIMACHAL PRADESH v. GOEL BUS SERVICE
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C, Section 4-A, Section 5-A along with Schedule-III under Section
3-A introduced vide the Himachal Pradesh Motor Vehicles Taxation
(Amendment) Act, 19991 to be held ultra vires the Constitution of
India and further the notifications dated 18.12.1999, 23.12.1999,
31.12.1999, 06.01.2000, 12.02.2000 and 01.04.2000 be quashed and
set aside. The relief as claimed in one of the petitions bearing C.W.P.
No.32 of 2000 (Goel Bus Service Vs. State of Himachal Pradesh
and others) is reproduced below:
"(i) That the impugned Annexure-PA, PB, PC, PD, PE, dated
18th December, 1999, 23rd December, 1999, 6th January, 2000,
12.2.2000 and 31st December, 1999 may kindly be quashed
and set aside;
(ii) That Section 3-A, 3-C, 4-A, 5-A along with Schedule-III
under Section 3-A may be struck down being ultra vires the
Constitution of India.
(iii) Any other relied as may be deemed just and proper keeping
in view the facts and circumstances of the case may also be
granted in favour of the petitioner."
5. The above provisions, validity of which was sought to be
declared as ultra vires, were introduced vide HPMVT(A) Act 1999
as also vide HPMVT(A) Act 2001. Consequent to insertion of the
said provisions, State of Himachal Pradesh issued several notifications
referred to above, which were also assailed in a large number of writ
petitions. The High Court, vide impugned judgment dated 06.07.2007,
upheld the validity of all the Sections except Section 3A (3) under
challenge as not offending either Part III or any other provision of
the Constitution of India. With respect to Section 3-A (3) it was held
that in substance it imposes a penalty and as such could not be treated
as regulatory or compensatory tax and was, therefore, beyond the
legislative competence of the State Legislature. It, further quashed
the two notifications dated 06.01.2000 and 01.04.2000 being not in
consonance with the scheme of the Constitution. It also struck down
the decision dated 01.01.2000 based upon negotiations held on
31.12.1999 relating to special Toll Tax, as they were held to be against
statutory provisions of the Act. The operative portion of the impugned
judgment reads as follows:
1 In short "HPMVT(A) Act 1999"
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"On account of the above reasoning and the findings, we are
of the view that Sections 3-A (1), (2), (4) and Section 3-C do
not offend either the fundamental rights or any other provision
of the Constitution of India, therefore, these are held not ultra
vires of the Constitution. Since Section 3-A (3) in substance
imposes a fine as held above, therefore, such a nature of
penalty can neither be treated as regulatory nor compensatory
tax and is out of the legislature competence of the State and
the subordinate legislation, that is the notifications dated
6.01.2000 and 1.04.2000 are based upon lump sum charges of
the levy thus are not in consonance with the scheme of the
Constitution, therefore, these are held to be ultra vires. Further,
the decision dated 1.1.2000 based upon negotiations held on
31.12.1999 relating to SRT is against the statutory provisions
of the Act as stated above. Therefore, it is struck down being
contrary to law.
All the petitions are disposed of in the aforesaid terms. No
orders as to costs.
All the Misc. applications in the writ petitions are also disposed
of."
6. The State of Himachal Pradesh is in appeal against the
aforesaid judgment of the High Court.
7. We have heard Sri Abhinav Mukerji, learned counsel for the
appellant-State of Himachal Pradesh and Sri Siddharth Bhatnagar,
learned Senior Counsel appointed as Amicus Curiae to assist the
Court on behalf of the respondent-operators.
SUMMARY OF SUBMISSIONS:
8. Submissions advanced on behalf of appellants are
summarized as under:
•
The constitutional Courts must restrain from interfering
in the matters of economic/tax legislation until and unless
the offending provision is manifestly unjust or glaringly
unconstitutional.
•
Laws relating to economic activities should be viewed
with greater latitude and more play should be given to
THE STATE OF HIMACHAL PRADESH v. GOEL BUS SERVICE
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the Government in comparison to other laws relating to
civil rights.
•
Reliance was placed upon the following judgments in
support of the above submissions:
"(i) R.K. Garg etc. vs. Union of India & Others
reported in (1981) 4 SCC 675 (Para 7, 8, 16 &
2018).
(ii) Bhavesh D. Parish & Others vs. Union of India
& Another reported in (2000) 5 SCC 471 Para 26)).
(iii) Indian Oil Corporation vs. State of Bihar
reported in (2018) 1 SCC 242 (Para 25-28)."
•
Lump sum tax could be levied as it would be
compensatory in nature.
•
The wisdom of the State legislature should be read in
the broadest possible terms and merely because the levy
is payable in lump sum or on one time basis would not
make it invalid or unconstitutional. Such levy could be
for administrative reasons and the manner & mode of
collection, cannot be the conclusive test to decide the
nature of levy.
•
Quashing of the notifications dated 06.01.2000 and
01.04.2000 were also bad in law as imposition of lump
sum tax is by now well recognized by the Courts.
•
Reliance was placed upon the following judgments, in
support of the above submissions:
(i) State of T.N. vs. M. Krishnappan and Anr.
(2005) 4 SCC 53 (Para 18-23).
(ii) Commr. Of Agricultural Income Tax vs. Netley
'B' Estate (2015) 11 SCC 462 (Para 20-22).
(iii) Ashok Leyland Ltd. vs. State of T.N. (2004) 3
SCC 1 (Para 65 to 71).
(iv) Aas Mohammad vs. State of Rajasthan (2020
2 RLW 1567 (Raj) (Para 22 to 26).
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•
The tax imposed under Section 3(A)3 of the 1972 Act is
regulatory and compensatory in nature. The appellantState being a hilly State with difficult terrains, in order to
maintain roads and bridges which are the life-line of hilly
terrains, a sizeable part of the budget is spent on the
construction, development, repair, upkeep and
maintenance of roads and bridges.
•
Reference was made to the counter affidavit filed by
the State before the High Court and also referred to in
the impugned judgment, enumerating special
circumstances for imposition and upholding of a
compensatory or a regulatory tax as valid. In this
connection, reliance has been placed upon the following
judgments:
(i) Ranjit Singh vs. Taxation Officer, Rampur and
etc (2002 SCC Online All 75 (Para 14,15, 22 and
23)
(ii) In State of Himachal Pradesh and Ors. Vs.
Yash Pal Garg (Dead) by LRs and Ors. (2003) 9
SCC 92 (Para 11-13,20 and 23)
(iii) State of Uttar Pradesh and Ors. vs. Sukhpal
Singh Bal (2005) 7 SCC 615 (Para 11 to 19).
(iv) B.A. Jayaram and Ors. vs. Union of India
(UOI) and Ors. (1984) 1 SCC 168 (Para 9-11).
(v) Bolani Ores Ltd. vs. State of Orissa (1974) 2
SCC 777 (Para 15 & 29)
(vi) Sharma Transport Rep. by D.P. Sharma vs.
Government of Andhra Pradesh and Ors. (2002)
2 SCC 188 (Para, 1,8 and 11)).
(vii) State of Maharashtra and Ors. vs. Madhukar
Balkrishna Badiya and Ors. (1988) 4 SCC 290
(Para 6 & 10).
(viii) Rajeev Suri vs. Delhi Development Authority
and Ors. (2021 SCC Online SC 7 (Para 220 to
226).
THE STATE OF HIMACHAL PRADESH v. GOEL BUS SERVICE
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(ix) Janhit Manch and Anr. vs. The State of
Maharashtra and Ors. (2019) 2 SCC 505 (Para
13).
•
The High Court, though upheld the power of the State
legislature to enact provisions for levy of special road
tax under Sections 3-A(1)(2)(4), but at the same time
erred in holding the provisions under Section 3-A(3) to
be ultra vires being unconstitutional.
•
The appeals be allowed, the judgment of the High Court
impugned be set aside and the writ petitions be dismissed.
9. On the other hand, Shri Siddharth Bhatnagar, learned Amicus
Curiae made the following submissions:
•
The offences and penalties in respect of using vehicles
without permit is covered under Chapter XIII of the
Motor Vehicles Act, 1988 and in particular Section 192A thereof.
•
The Motor Vehicles Act, 19882 being a Central Act is
relatable to Entry 35 of List III of the Seventh Schedule
to the Constitution.
•
The penalty for use of vehicle without permit is already
provided in Section 192-A of the 1988 Act. The 1988
Act provides a complete mechanism in respect of laws
relating to motor vehicles including its violations,
consequences and penalties thereon. The said provision
specifically deals with the act of a transport vehicle being
used without a permit.
•
The Himachal Pradesh Motor Vehicle Taxation Act
relates to Entry 57 of the List II of the Seventh Schedule
of the Constitution. It is subject to two limitations (i) that
the vehicle be suitable for use on roads and (ii) any law
made under this entry would be subject to any law made
under Entry 35 of list III.
•
Any enactment by the State which encroaches on or
overlaps with the provisions of the 1988 Act would be
invalid to that extent.
2 the 1988 Act
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•
Reliance is placed upon the judgment of the Supreme
Court in State of West Bengal Vs. Kesoram
Industries Ltd. & Others, (2004) 10 SCC 201.
•
The tax sought to be levied under Section 3A (3) is in
the nature of penalty which cannot be done in view of
the provisions contained in the 1988 Act. Reliance was
placed upon the following two decisions of the Supreme
Court:
(i) M.P. AIR Permit Owners Association and
Another Vs. State of Madhya Pradesh, (2004) 1
SCC 320,
(ii) Hardev Motor Transport Vs. State of M.P. and
Others, (2006) 8 SCC 613.
•
The impugned judgment does not suffer from any
infirmity in holding that the special tax sought to be levied
under Section 3A (3) is a penalty. The appeals are, thus,
liable to be dismissed.
Relevant Constitutional & Legal provisions:
10. Before proceeding to deal with the submissions advanced,
a brief reference to statutory and constitutional provisions may be
noted.
11. Article 246 of the Constitution lays down the subject matters
of the laws to be made by the Parliament and by the Legislatures of
States. According to it, three lists of the Seventh Schedule would be
determining the subjects over which the Parliament may have
exclusive power to make laws (List I also referred to as the Union
List), subjects over which the State would have exclusive power to
make laws (List II also referred to as the State List) and also the
subjects where the Parliament as also the Legislature of States would
have power to make laws covered by List III (referred to as the
Concurrent List). Additional power is given to the Parliament under
sub- Article 4 to make laws with respect to any matter for any part
of the territory of India not included in a State even though such
matter is enumerated in the State List. Article 246 is reproduced
hereunder:
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"(1) Notwithstanding anything in clauses (2) and (3), Parliament
has exclusive power to make laws with respect to any of the
matters enumerated in List I in the Seventh Schedule (in this
Constitution referred to as the "Union List").
(2) Notwithstanding anything in clause (3), Parliament, and,
subject to clause (1), the Legislature of any State also, have
power to make laws with respect to any of the matters
enumerated in List III in the Seventh Schedule (in this
Constitution referred to as the "Concurrent List").
(3) Subject to clauses (1) and (2), the Legislature of any State
has exclusive power to make laws for such State or any part
thereof with respect to any of the matters enumerated in List
II in the Seventh Schedule (in this Constitution referred to as
the "State List").
(4) Parliament has power to make laws with respect to any
matter for any part of the territory of India not included in a
State notwithstanding that such matter is a matter enumerated
in the State List."
12. Article 254 of the Constitution of India provides for the
effect in case of inconsistency between laws made by the Parliament
and the laws made by the Legislature of States. The same is
reproduced hereunder:
"(1) If any provision of a law made by the Legislature of a
State is repugnant to any provision of a law made by Parliament
which Parliament is competent to enact, or to any provision of
an existing law with respect to one of the matters enumerated
in the Concurrent List, then, subject to the provisions of clause
( 2 ), the law made by Parliament, whether passed before or
after the law made by the Legislature of such State, or, as the
case may be, the existing law, shall prevail and the law made
by the Legislature of the State shall, to the extent of the
repugnancy, be void
(2) Where a law made by the Legislature of a State with respect
to one of the matters enumerated in the concurrent List contains
any provision repugnant to the provisions of an earlier law made
by Parliament or an existing law with respect to that matter,
then, the law so made by the Legislature of such State shall, if
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it has been reserved for the consideration of the President and
has received his assent, prevail in that State: Provided that
nothing in this clause shall prevent Parliament from enacting
at any time any law with respect to the same matter including
a law adding to, amending, varying or repealing the law so
made by the Legislature of the State."
13. As already noted above, the Seventh Schedule flowing out
from Article 246 has three lists, which gives power to the Parliament
and the State Legislatures to make laws on the subjects enumerated
therein. It would be relevant to mention that List I (the Union List)
does not cover any subject relating to motor vehicles or taxation relating
to it. List II (the State List) has two entries viz. 56 and 57 which
refer to subjects relating to taxes on goods and passengers and taxes
on vehicles. Both the above entries of List II are reproduced below:
"56. Taxes on goods and passengers carried by road or on
inland waterways.
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."
The above subjects fall within the domain of Legislature of the
State to make laws.
14. Under List III (the Concurrent List), Entry 35 spells out
the subject as mechanically propelled vehicles and also the principles
on which taxes on such vehicles can be levied. Under this entry both
the Parliament and the Legislatures of State could frame laws. The
said Entry 35 of List III is reproduced hereunder:
"35. Mechanically propelled vehicles including the principles
on which taxes on such vehicles are to be levied."
15. The first enactment relating to motor vehicles in India was
the Indian Motor Vehicles Act, 1914. It was replaced by the second
enactment which came in 1939 as Motor Vehicles Act, 1939. After
the coming of the Constitution in 1950, a new Motor Vehicles Act
was enacted by the Parliament in 1988, the Motor Vehicles Act, 1988.
The Parliament enacted the 1988 Act drawing its source from Entry
35 of the List III (the Concurrent List). The subject covered by the
above entry is mechanically propelled vehicles including the principles
on which taxes on such vehicles are to be levied. The Parliament as
also the Legislature of States were thus competent to make laws
THE STATE OF HIMACHAL PRADESH v. GOEL BUS SERVICE
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regarding the mechanically propelled vehicles including the principles
on which taxes could be levied on such vehicles. Thus, the Concurrent
List, insofar as taxes concerned, is limited to the principles on which
taxes are to be levied. But the power to frame laws relating to
imposition of tax exclusively vests with the State Legislatures under
Entries 56 and 57 of List II. Entry 56 covers the subject of laying
down law on imposition of taxes on goods and passengers being
carried by road or on inland waterways.