Oberoi Motors vs State Of Uttarakhand And Another
2021 Latest Caselaw 339 UK

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL

             Writ Petition No.1445 (M/S) of 2019


Oberoi Motors, A Unit of S.I. Oberoi Minerals Pvt. Ltd.
and others
                                     ...........Petitioners


                               Versus

State of Uttarakhand and another              ......... Respondents

With

Writ Petition No.1093 (M/S) of 2019

ESS ELL Motors, a Unit of ESS ELL Foods Ltd. and others ...........Petitioners

Versus

State of Uttarakhand and another ......... Respondents

Mr. V.K. Kohli, Senior Advocate assisted by Mr. Kanti Ram Sharma, Advocate for the petitioners.

Mr. J.P. Joshi, Additional Advocate General along with Ms. Anjali Bhargava & Mr. P.C. Bisht, Addl. C.S.C. and Mr. N.P. Sah and Mr. Sushil Vashistha, Standing Counsel for the respondent State.

Reserved on 04.01.2021 Delivered on 12.02.2021

Judgment

[Per: Hon'ble Lok Pal Singh, J.]

Since, the controversy involved in the above noted petitions are identical, therefore, they are being decided together by this common judgment and order for the sake of brevity and convenience.

2. The writ petition No.1445 (M/S) of 2019 shall be the leading case.

3. The relief claimed by the petitioners in both the writ petitions is reproduced as under:-

"a) To declare sub-section (4) of Section 4 as well as clause 5(b) of Section 4 of the Uttaranchal Motor Vehicles Taxation Reforms Act, 2003 as unconstitutional, illegal, void and without jurisdiction and also the Notification No.06/ix-1/106/2012/2019 dated 02.01.2019 issued by respondent no.1 as well as earlier Notification No.1011/106/ix-1/2012 dated 29th November, 2012.

aa) To declare the rate of tax as fixed vide Notification No. 06/ix-1/106/2012/2019 dated 02.01.2019 to be exorbitant, illegal and punitive.

ab) To declare clause 5(b) Section 4 of the Uttaranchal Motor Vehicles Taxation Reforms Act, 2003 as illegal, void and without jurisdiction and further be declared that the State has no right to charge the Tax before it has accrued."

4. The petitioners herein are dealers engaged in sale and purchase of two wheelers, Light Motor Vehicles and Heavy Motor Vehicles. They have been granted the Form of Trade Certificate Form No.17 under Rule 35(1) by the Tax/Registration Officer, Regional Transport Office, Dehradun, District Dehradun. The State of Uttarakhand has enacted an Act known as the "Uttaranchal Motor Vehicles Taxation Reforms Act, 2003" (hereinafter referred as the "Act 2003"). Section 4(1) of the Act 2003 provides that no motor vehicle shall be used in any public place in Uttaranchal (now Uttarakhand) unless a one-time tax at the rate applicable in respect of such motor vehicle, as specified in Part 'B' of the First Schedule has been paid. Section 4(2) of the Act 2003 provides that no transport vehicle shall be used in any pubic place in Uttaranchal (now Uttarakhand) unless a tax at the rate applicable to such motor vehicle, as specified in Part 'D' of the First Schedule has been paid.

Section 4(3) of the Act 2003 provides that where any motor vehicle other that a transport vehicle, in respect whereof on-time tax has been paid, is operated as a transport vehicle, the tax payable under this Act on such transport vehicle shall be payable. Section 4(4) of the Act 2003 (un-amended) provides that the State Government may, by notification, increase by not more than fifty percent, the rates of tax, specified in Part 'B', Part 'C' or Part 'D' of the First Schedule.

5. Respondent no.1 had issued a Notification No. 1011/106/ix-1/2012 dated 29th November, 2012, whereby, a tax has been imposed on the vehicles under the possession of the dealers under Section 4(4) of the Act 2003. The rate so imposed was Rs. 50/- for two wheelers & light motor vehicles and Rs.100/- for medium and heavy motor vehicles. By amending Act No. 8 of 2013, which came into force on 01.12.2012, the original sub section (4) of section 4 has been omitted and in its place following sub section (4) of section 4 has been substituted:-

"Save as otherwise provided by or under this Act a Tax at such rate as may be notified by the State Government shall be levied on the motor vehicles kept in possession of dealer for purpose of sale."

Further, as per Clause V(b) in sub-section (4) of Section 4, the tax is to be paid in advance or on or before 15 day of January each year. The explanation given in the Notification dated 29.11.2012 is that assessment and payment of tax shall be on the basis of number of vehicles sold in the last calendar year.

Thereafter, respondent no.1 superseding the prior Notification issued further Notification no. 06/ix- 1/106/2012/2019 dated 02.01.2019, whereby, the respondent no.1 has increased the annual rate of tax in

respect of the vehicles under the possession of the dealers in the following manner:

     a)    Two wheelers Rs.100/- per vehicle
     b)    Light Motor Vehicle Rs.200/- per vehicle
     c)    Medium and Heavy Vehicles Rs.300/- per
           vehicle.

6. Feeling aggrieved by notification no. 06/ix- 1/106/2012/2019 dated 02.01.2019, petitioners are before the Court.

7. Learned Senior Counsel appearing for the petitioners urged that the rate of possession tax for two wheelers and light motor vehicles has been enhanced 100 per cent i.e. from Rs. 50/- per vehicle to Rs. 100/- per vehicle and for medium and heavy vehicles, the rate of possession tax has been enhanced 300 per cent i.e. from Rs. 100/- per vehicle to Rs. 300/- per vehicle, wherefor, the rate of possession tax as earlier was provided Rs. 50/- for two wheelers and light motor vehicle and Rs.100/- for medium and heavy motor vehicles. For the two wheelers and light motor vehicles, the possession tax has been enhanced from Rs.100/- to Rs. 200/-, whereas for the medium and heavy vehicles, the tax has been enhanced to Rs. 300/- per vehicle.

8. Learned Senior Counsel for the petitioners would submit that the State has no right to impose possession tax as has been done by the Amending Act No. 8 of 2013. It is contended that there is no justification for enhancement of possession tax to such an extent. It is further contended that the tax should not be enhanced for more than 50% of the existing tax but, in the case in hand; the possession tax, as levied by respondent no. 1 is more than 50%. Since, the State has no jurisdiction to impose and collect the possession tax; the provisions of the said Act are liable to be declared

unconstitutional. It is contended that as per Article 246 of the Constitution of India, the State Government is not competent to impose the possession tax.

9. Learned Senior Counsel for the petitioners further urged that the imposition of possession tax is illegal, void and without jurisdiction on the following grounds:-

"a) That the respondent no.1 has no jurisdiction to impose possession tax on the possession of the vehicles by the dealers, under any provision of law and the same is unconstitutional as well.

b) That the imposition of possession tax in advance as per the sale of the last year is most illegal and unreasonable.

c) That the act of respondent no.1 is void ab initio from the very date of imposition.

d) That imposition of possession tax when the vehicle is possessed is the private property of the dealer, is not warranted under any Act of India, nor such tax can legally be imposed and the provision of Sub-Section (4) of Section 4 is void being without jurisdiction and against the spirit of Constitution and similarly the Notification dated 01.01.2019 is also illegal, void and illogical.

e) That imposition of possession tax when the vehicle is possessed as the private property of the dealer, is not warranted under any Act of India, nor such tax can legally be imposed, it is illogical as well as unfair and unreasonable trade restriction forced upon the dealers.

f) That the Constitution of India does not give any power to State Government to impose tax upon the unsold private property under the possession of an individual or a firm or a Company.

g) That assessment & profit of tax in advance by 15th of January every year on the basis of last year sale is illegal and illogical. No tax can be raised in advance on probabilities that too even before possession of the vehicle when even the number is not known."

10. It is averred that earlier Notification was issued on 29.11.2012, the petitioners did not challenge the imposition of possession tax at that point of time for the sole reason that the respondents shall consider the

grievance of the petitioners. But, respondent no. 1, subsequent thereto, issued a fresh Notification dated 02.01.2019, and increased the possession tax in arbitrary and illegal manner, therefore, the petitioners are constrained to file the present writ petitions.

11. For ready reference, the impugned Notifications dated 29.11.2012 is extracted hereunder:-

"In pursuance of the provisions of Clause (3) of Article 348 of the Constitution of India, the Governor is pleased to order the publication of the following English translation of notification no. 1018/106/ix-1/2012 dated 29 November 2012 for general information.

Government of Uttarakhand Transport Section-1 No. 1018/106/ix-1/2012 Dehradun : Dated 29 November, 2012

Notification In exercise of the powers conferred by sub section (4) of Section 4 of the Uttarakhand Motor Vehicles Taxation Reforms Act, 2003 (Uttarakhand Act No.12 of 2003), the Governor is pleased to fix the rate of tax of the motor vehicles as specified in column (3) of the table below in respect of motor vehicles kept in possession of dealers of sale specified in corresponding entry in column (2) thereof-

Table Rate of tax on vehicles under the possession of dealers under sub-section (4) of Section 4- Sl.No. Description of vehicles Annual rate of tax on every vehicle (in rupees)

Explanation- Assessment and payment of tax shall be on the basis of number of vehicles sold last calendar year. Where

there is a difference between the number of vehicles sold last year, then the number of vehicles in possession of dealer during the current calendar year, then the difference of tax paid and access or the tax due as the case may be, shall be adjusted or paid in next calendar year, where depositing the tax.

By order

(Dr. Umakant Panwar) Sachiv"

12. Further, Notification dated 02.01.2019 is extracted hereunder:

"In pursuance of the provisions of Clause (3) of Article 348 of the Constitution of India, the Governor is pleased to order the publication of the following English translation of notification no. 06 dated 02, January, 2019 for general information.

Government of Uttarakhand Transport Section-1 No. 06/ix-1/106/2012/2019 Dehradun : Dated 02 January, 2019

Notification In exercise of the powers conferred by sub section (4) of Section 4 of the Uttarakhand Motor Vehicles Taxation Reforms Act, 2003 (Uttarakhand Act No.12 of 2003), and in supersession of notification no.1018/ix- 1/106/2012 dated 29.11.2012, the Governor is pleased to fix the rate of tax of the motor vehicles as specified in column (3) of the table below in respect of motor vehicles of specified category kept in possession of dealers for the purpose of sale in front of column (2) thereof-

Table Rate of tax on vehicles under the possession of dealers under sub-section (4) of Section 4

Sl.No. Description of vehicles Annual rate of tax on every vehicle (in rupees)

Explanation- Assessment and payment of tax shall be on the basis of number of vehicles sold last calendar year. Where there is a difference between the number of vehicles sold in the last year and the number of vehicles in possession of dealer during the current calendar year, then the difference tax paid less or access, as the case may be, shall be adjusted or paid in next calendar year, while depositing the tax.

By order

(Hari Chandra Semwal) Additional Secretary"

13. Respondents filed their counter affidavit in writ petition no. 1093 (M/S) of 2019. It is stated in said counter affidavit that interim order was granted by this Court on 27.04.2019 with the directions that any amount recovered, pursuant to the impugned Notifications, shall be subject to the final outcome of the writ petition and the amount, so recovered, shall be kept in a separate account. Similar, interim order has also been passed in Writ Petition no. 1445 (M/S) of 2019 on 23.05.2019. The respondents have contended that the State Legislature is empowered to impose taxes on goods and passengers carried by road and inland waterways in Entry 56 of List- II (State List) and to impose taxes on vehicles suitable for use on roads under Entry 57 of List-II. The Entry 56 and 57 in List-II (State List) of Seventh schedule to the Constitution of India are quoted as under:-

"Entry 56-Taxes on goods and passengers carried by road or on inland waterways.

Entry 57-Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of entry 35 of List III."

14. It is further submitted that Entry 35 of List-III (Concurrent List) of the Seventh Schedule to the Constitution of India empowers both the State Government and the Union to determine the principle of

taxation. The Entry 35 of List III (Concurrent List) of the Seventh Schedule to the Constitution of India is quoted hereunder:

"Entry 35- Mechanically propelled vehicles including the principles on which taxes on such vehicle are to be levied."

It is further contended that under the amended sub-

Section (4) of Section 4 vide notification dated 29.11.2012, the rate of the tax on vehicles under the possession of dealer for the purpose of sale has been determined as under:-

S.No. Kind of Vehicle Rate Rs.

15. Learned counsel for the State would submit that by superseding the prior notification dated 29.11.2012, the State Government vide notification dated 02.01.2019 has amended the rate of annual tax for per vehicle which is kept in the possession of the dealer. It is further submitted that the manufacturers of vehicles keep the vehicles in the possession of dealers for the purpose of sale and it is not a personal property of dealer. That in Section 2(ea) of the Wealth Tax Act, 1957 motor car is included in assets but such motor cars are not deemed as assets, which are used in rent business or used as a stock for business. Section 2(ea) of the Wealth Tax, 1957 is quoted as below:-

"2(ea) ASSETS, in relation to the assessment year commencing on the 1st day of April, 1993, or any subsequent assessment year, means.

(i) ..............................

(ii) Motor cars (other than those used by the assessee in the business of running them on higher or as stock-in trade)."

16. It is contended that similar controversy came up before the Hon'ble Apex Court in Special Leave Petition (Civil) No.5299-5304/2003, M/s Tata Motors Ltd. vs. State of Jharkhand and others, whereby, the Hon'ble Apex Court upheld the validity of imposition of tax. It is further contended that by passage of time, the rate of possession tax has rightly been increased and there is no arbitrariness and illegality in increasing the rate of possession tax.

17. Heard learned counsel for the parties and perused the material brought on record.

18. Mr. V.K. Kohli, learned Senior Counsel appearing for the petitioners has admitted the fact that in so far as the challenge to the validity of the Act 2003 is concerned, the controversy has already been upheld by the Hon'ble Apex Court in the case of Tata Motors Company Ltd. Vs. State of Jharkhand. The question is no longer res integra. The learned counsel for the petitioners has vehemently argued that besides the validity upheld by the Hon'ble Apex Court on Act No. 8 of 2003, the respondents have issued the Notification dated 02.01.2019, wherefor the possession tax has been increased 100 per cent.

19. The learned senior counsel for the petitioners would further submit that as the possession tax imposed by the respondents has been increased in arbitrary manner, therefore, the enhanced unreasonable tax is liable to be quashed.

20. Per contra, Mr. J.P. Joshi, learned Additional Advocate General appearing for the State would submit that in the year, the tax was Rs.50 and Rs.100 for light

vehicles and heavy vehicles, but having considered the category of two wheelers, light vehicle and medium and heavy motor, vehicles as distinct the authority has rightly fixed the possession tax separately for two wheelers, light motor vehicle, medium and heavy motor vehicles.

21. It is argued that possession tax for two wheelers amounting to Rs.100 as well as for light motor vehicles amounting to Rs.200 and for medium and heavy motor vehicles an amount of Rs.300 cannot be said to be an exorbitant possession tax. It is stated that imposition of tax is well within the legislative competence of the State Government.

22. The Hon'ble Apex Court in the case of Tata Motors Ltd. vs. State of Jharkhand reported in 2018 SCC OnLine SC 2810, has held as under:-

"19. We may point out that before the High Court, the appellants had challenged the virus of section 6 on the ground that the State Legislature lacks competence to make a provision of this nature. It was pointed out that section 6 levies the tax on a manufacture or a dealer of motor vehicles merely on 'possession' thereof by such a manufacture or a dealer. It was argued that the Bihar Act was enacted by the State Legislature under Entry 57 of List II (State List) of the VIIth Schedule to the Constitution of India, which entry does not empower the State Legislature to impose the tax on vehicle merely on possession. This entry reads as under:-

"Taxes on vehicle, whether mechanically propelled or not, suitable for use on roads, including tram cars subject to the provisions of entry 35 of List III."

20. The High Court, however, rejected this connection with the reason that under this entry, taxes on vehicles which are suitable for use on roads can be imposed and it was undisputed case of the parties that the vehicles manufactured by appellants are suitable for used on roads. Therefore, the provision which stipulates the manufacture or a dealer of a motor vehicle, in respect of the motor vehicle in his possession in the course of business as such a manufacturer or dealer shall pay tax, is within the legislature competence of Entry 57. This contention has been raised before us as well. However, we do not agree with the appellants as the reasoning given by the High Court is the correct analysis

of Entry 57 of List II of VIIth Schedule to the Constitution.

21. Insofar as argument predicted on the amendment in the Motor Vehicles Act (the Central Act), 1988 is concerned, we again find that the High Court has rightly concluded that this amendment would have no relevance to the provisions contained in the Bihar Act. Whether the definition of a dealer includes manufacturer or not would be immaterial inasmuch as under Section 6 of the Bihar Act, the Legislature has made provision to tax both the dealer as well as the manufacturer. We agree with the following observations of the High Court in this behalf:

7. ...It goes without saying also that 1994 Act has been enacted under and in terms of Entry 57 (supra) by the State Legislature; whereas 1988 Act has been enacted by the Union Parliament under and in terms of Entry 35 of the Concurrent List. Also, whereas the preamble to 1988 Acts states that the Act has been enacted to consolidate and amend the law relating to Motor Vehicles, the Preamble to 1994 Act states that this Act has been made with a view to regulate the imposition and levy of tax on Motor Vehicles in the State of Bihar (as it was at the relevant time). Both the Act, therefore, deal with two different fields of legislation and the areas of their operation are also different, having been enacted by two different classes of Legislatures, one in terms of the power exercisable and vested under clause (2) and the other in terms of the power vested and exercisable under clause (3) of Article 246 of the Constitution. Therefore, at the risk of repetition, we have no hesitation in saying that any change or alteration in one Act cannot be said to have any effect upon the other.

22. We also agree with the respondents that the tax was in respect of motor vehicles in possession of the manufacturer in the course of his business as a manufacturer, or in possession of the dealer in the course of his business as a dealer under the authorization of trade certificate granted under the Central Motor Vehicle Rules, 1989. The manufacturer comes in the possession of the motor vehicle after the vehicle is manufactured and is suitable for use on roads. The dealer in the course of his business of getting the Motor Vehicle from the manufacturer and selling it to a customer comes in the possession of the Motor Vehicle on the basis of a trade certificate granted under the Central Motor Vehicle Rules, 1989. Neither earlier nor now there is any obligations in a manufacturer to obtain a trade certificate under the 1989 Rules for carrying on the business of a manufacturer."

23. Having considered the submissions of learned counsel for the parties and in view of the proposition of

law laid down by the Hon'ble Apex Court in the judgment (supra), this Court is of the view that the respondents are competent to enact the Act 2003 and amending Act No. 8 of 2013. In so far as, the Notifications dated 29.11.2012 and 02.01.2019 are concerned, the rate of possession tax and its subsequent enhancement for two wheelers & light motor vehicles, as also in respect of medium and heavy motor vehicles are Rs. 100/- and Rs.300/- respectively, which does not seem to be unreasonable and arbitrary. The enactment of the Act 2003, levying possession tax and its subsequent enhancement is purely well within the legislative competence of the State Government.

24. Having considered the facts and circumstances of the case, this Court is of the considered view that the petitioners have failed to make out a case for judicial review. Thus both the writ petitions are devoid of merit and are liable to be dismissed.

25. Consequently, both the writ petitions are hereby dismissed. Interim orders granted earlier in both the writ petitions also stand vacated.

26. However, there will no order as to costs.

(Lok Pal Singh, J.)

Ravi