The Supreme Court of India held that additional special road taxes are regulatory and compensatory in nature and upheld the constitutional validity of the levy of the same under Section 3A(3) of Himachal Pradesh Motor Vehicles Tax, 1972.
Goel Bus Service Kullu etc., the respondent and several other similarly situated public transport operators challenged the validity of Section 3-A, Section 3-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.
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.
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. Further quashed the two notifications dated 06.01.2000 and 01.04.2000 being not aligned with the scheme of the Constitution.
It was observed that 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. There is nothing on record to indict the offending provision as being manifestly unjust or glaringly unconstitutional. From the object and reasons of the Amending Act 1999, it was evident that the special road tax was introduced as a compensatory measure.
A two-member bench consisting of Justices Sanjay Kishan Kaul, Abhay S. Oka and Vikram Nathobserved that the imposition of such additional special road tax was only to keep a check or discipline on the transport vehicle operators to use their vehicles by the statutory provisions.
Further viewed that “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 or conflict of the State enactment with the central enactment could be sustained.”
While allowing the appeal, the Court held that “the tax imposed under Section 3A(3) of the Himachal Pradesh Motor Vehicle Act is regulatory in character and is not a penalty.”
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