“Imposition of Lifetime Tax on Non – ‘KA’ vehicles is ultravires to the Constitution”: Karnataka High Court [Read Judgment]

The Division Bench of Karnataka High Court, in a recent judgment, upheld the decision of the Single Bench through which the imposition of lifetime tax on vehicles outside the State was held to be unconstitutional on ground of non-competence of State Legislature to pass such legislation. The earlier decision was on a petition filed by the vehicles owners who registered their vehicles outside the state of Karnataka plying for more than 30 days in the state through various writ petitions.

The State Legislature made an amendment to section 3 of the Karnataka Motor Vehicles Taxation Act provides for a mandatory condition to levy tax on all motor vehicles suitable for use on roads at the rates specified in part A of the Act. Part A5 of the Act pertains to the Lifetime tax payable for Motor Cars, Jeeps, Omni Buses and Private Service Vehicles and is made dependent on the registration of vehicles. It is emphasized that section 3 of the Act and the schedule would indicate that the levy of lifetime tax is directly linked to the registration of a vehicle, and that registration is the basis of taxation. The said amendment was challenged before the High Court through various writ petitions as mentioned above. In consequent to the decision of the single bench that the amendment in question is invalid, the demand raised on the petitioners was quashed. Aggrieved by the decision, the State preferred a Writ Appeal before the Division Bench of the High Court against the Single Bench’s decision.

The earlier decision was based on the main contention of the petitioner that the State legislature lacks legislative competence to pass the impugned Amendment as it seeks to legislate on the principles of taxation, which are contained in Entry 35 of List III and is already covered by the MC Act. The State Act, ie, KMVT Act is enacted under Entry 57 of List II. J. Anand Byrareddy, while deciding the case, the Court took a view in favor of the petitioners and held that the Amendment is ultravires to the Constitution as the State legislature lacks legislative competence under the provisions of the Constitution of India. The payment of lifetime tax was held to be continued under ss. 40 and 47 of the MV Act. The vehicles registered outside the State can be used in the State for 12 months without registration. On expiry of this period, the vehicles needs to be re-registered in the State of Karnataka.

The Division Bench comprising J. Patel and Nagaratna, upheld the above order in which the amendment to KMVT Act was held unconstitutional on the basis of Mahesh Gandhi’s judgment.

Read the full text of the Judgment below.