The Supreme Court recently upheld the constitutional validity of special road tax levied under Section 3A(3) of the Himachal Pradesh Motor Vehicles Taxation Act of 1972 (Act) [State of Himachal Pradesh and Others v. Goel Bus Service Kullu Etc].
A three-Judge Bench of Justices Sanjay Kishan Kaul, Abhay S Oka and Vikram Nath was of the view that the tax levied under Section 3A(3) of the 1972 Act was introduced as a compensatory measure and has a regulatory character and it cannot be categorized as 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. This could work as a deterrent for the transport operators to not commit any breach and to follow the mandate of the law,” the Court observed.
The Court was hearing an appeal assailing the decision of the Himachal Pradesh High Court which had held that tax imposed by Section 3A(3) of 1972 Act was in the nature of a penalty and the State legislature had no power to impose such a penalty.
Section 3A of the 1972 Act provides for levy of special road tax.
Furthermore, sub-section (3) of Section 3A 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.
To test the vires of the provision, the Supreme Court decided to consider the same on the following aspects:
– Whether it is manifestly unjust or glaringly unconstitutional;
– Whether it is regulatory or compensatory in nature; and
– Whether there is any repugnancy with the provisions in the Central enactment.
The Court answered the first aspect in negative, noting that the State not only has the power to make laws on the taxation to be imposed on motor vehicles but also has the power to lay down principles on which taxes on vehicles are to be levied.
It was further observed by the Court that the provision is well within the competence of the legislature of Himachal Pradesh and there exist nothing as manifestly unjust or glaringly unconstitutional.
While answering the second aspect, the Court noted that the imposition of special road tax by the provision is completely regulatory in nature and such imposition of 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,” the Court observed while refusing to declare this tax as a penalty.
The third question was answered in the negative with the Court noting that Entry 35 of List III confers 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 Court further observed that since there is no central enactment laying down principles for levy of taxes, it was open for the State to lay down the principles under Entry 35 of List III.
While holding that the provision is not hit by repugnancy, the Court said:
“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.”
In view of the above, the Court upheld the validity of Section 3A(3) of the and set aside the decision of the Himachal Pradesh High Court.
