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Life Time Tax on Vehicles Should be levied on Invoice Price: Hyderabad HC [Read Order]

Life Time Tax - Taxscan

The Hyderabad High Court has given tax relief to automobile lovers. The High Court in its recent judgement has held that the Life Time Tax charged on a vehicle should be levied on the actual cost of the vehicle i.e. the invoice price and not on the ex-showroom price.

In the instant case, an advocate had bought a Volvo XC 60 D5 model car. He had to pay Rs. 51,000 in excess towards life tax for registering his vehicle. He paid the amount under protest. In a writ petition filed before the High Court, the Counsel for the petitioner argued that a Circular Memo issued by the Road Transport Authority (RTA) stated life tax is to be collected from a vehicle produced for registration upon the sale based on the net invoice price of the vehicle. The Sale invoice issued to the petitioner by the Dealer after giving a discount of Rs.3 Lacs was Rs.52,90,000. The Ex-Showroom price of the vehicle was Rs.55,90,000.

The Counsel further argued that the RTA had illegally levied life tax on the ex-showroom price. He submitted that the demand of excess amount of Rs. 51,000/- paid by petitioner was under coercion/economic duress since the petitioner had to get the vehicle registered within 15 days of reserving the number for otherwise the reserved number would be cancelled under Rule 81(6) of the A.P. Motor Vehicle Rules, 1989. He contended that the action of respondents in insisting that the petitioner to pay life tax on ex-showroom price and not on the net invoice price as indicated in Circular Memo issued by the RTA is illegal and arbitrary and violates Articles 14 and 300-A of the Constitution of India, and that the petitioner is entitled to seek refund of the same.

The Counsel for the Revenue argued that the discount offered by the dealer to the petitioner was not mentioned in the invoice and that the petitioner paid lesser amount of tax on the discounted invoice price and he ought to have paid life tax on the ex-showroom price. He submitted that the very sale by giving discounts by a dealer is unethical and immoral and is a fraud on the State exchequer; and the State cannot be deprived of any amount payable to it as life tax merely because the Dealer had sold the vehicle in question to a party at lesser price than one shown in the ex-showroom price list by giving a discount. According to him, this amounts to under-invoicing and is not to be permitted.

The Bench comprising of Justice M.S. Ramachandra Rao observed that the life tax on vehicles is levied under the A.P. Motor Vehicles Taxation Act, 1963 and that Section 3 of the Act states that the State Government, by a notification, directs that a tax to be levied on every motor vehicle used or kept for use, in a public place in the State. The Judge also noted that the Sixth Schedule to the Act which provides rates of taxation of new vehicles clearly state that the life tax is to be calculated on the cost of the vehicle. He observed that there was no law prohibiting a dealer from giving discounts to their customers and that such practice cannot be said to be unethical or immoral.

Allowing the Writ Petition, the Court directed the respondents to refund the excess amount collected from the petitioner within 4 weeks from the date of the order.

To Read the full text of the Order CLICK HERE
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