Supreme Court upholds Section 3A (3) of HPMVT: Additional Special Road Taxes are Regulatory in Character and not Penalty

Supreme Court upholds Section 3A (3) of HPMVT: Additional Special Road Taxes are Regulatory in Character and not Penalty

The Supreme Court by its three-judges bench Justices Sanjay Kishan Kaul, Abhay S. Oka and Vikarm Nath upheld the Constitutional validity of the Section 3(A) of the Himachal Pradesh Motor Vehicles Taxation Act, 1972 (hereinafter referred to as 'Act of 192') was within the legislative competence of the State Legislature, and lumpsum tax could be levied.

While setting aside the impugned judgment and order of the Himachal Pradesh, the Apex Court observed that the tax levied under Section 3(A)(3) is regulatory in character and not a penalty.

The Himachal Pradesh High Court had observed that the State Legislature had no power to pass such legislation as the tax levied under Section 3A(3) was in the nature of penalty. The High Court was of the view that it was a penalty because the further imposition of special road tax where a transport vehicle was plied without any valid permit or in any manner not authorized by the permit to be plied.

The appeal filed by the appellant- State of Himachal Pradesh and others vs. Goel Bus Service Kullu, the Supreme Court considered three primary issues-

1) Whether it is manifestly unjust or glaringly unconstitutional?

2) Whether it is regulatory or compensatory in nature?

3) Whether there is any repugnancy with the provisions in the Central enactment?

While allowing the appeal, the Top Court made the following observation-

The Apex Court clarified that the Legislatures of the State has the power to make laws on the taxation to be imposed on motor vehicles and on the passengers and goods being transported by motor vehicles along with 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 was found in the law enacted by Legislature of the State of Himachal Pradesh.

The Apex Court held there was nothing on record to indict the offending provision as being manifestly unjust or glaringly unconstitutional.

For the second issue at hand, the Top Court was of the view that Imposition of additional special road tax was only to keep a check or discipline on the transport vehicle operators to use their vehicles in accordance with the statutory provisions and could work as a deterrent for the transport operators to not commit any breach and to follow the mandate of the law. The Court termed the additional special road tax as regulatory in nature to regulate other statutory provisions being implemented and be strictly followed.

Lastly, for the third issue the Apex Court highlighted Entry 35 of List II conferred the power on the Parliament and to the State Legislatures to make laws relating to mechanically propelled vehicles of all kinds and lays 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, the Apex Court observed that 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 and ruled that no repugnancy or conflict of the State enactment with the central enactment could be sustained.

The Supreme Court after examining all the reasons held that the validity of Section 3A(3) of 1972 Act had been wrongly held to be ultra vires by the High Court.