2011 (6) TMI 687 - HC - VAT and Sales Tax

Constitutional vires of charging section 3 of Andhra Pradesh Tax on Entry of Motor Vehicles into Local Areas Act 1996 challenged Held that - Section 3 of the impugned Act does not suffer from any of the infirmities canvassed by the petitioners. The Act is constitutionally valid and within the competence of the State Legislature. The question whether the vehicles purchased and imported by the petitioners are motor vehicles or not in view of our conclusions on Part VIII supra has to be decided at the stage of assessment by the competent officer. Therefore we deem it appropriate to set aside the impugned assessment orders and remit them to the respective assessing officers. Keeping in view the principles laid down by the Supreme Court as summarized in this judgment they shall now proceed to consider the contentions on this question alone if necessary by obtaining an opinion from any Gazetted Officer of the Department of Transport. This exercise shall be completed within a period of eight weeks from the date of receipt of a copy of this Order whereafter it shall be open to the petitioners to avail of the alternative remedy provided under the impugned Act read with the provisions of the VAT Act. We also give liberty to the petitioners to claim refund of tax over and above 12 per cent if it is paid by any of the petitioners. If any such claims are made the respective assessing officers/Government authority shall dispose them of expeditiously and refund the amount of excess entry tax promptly.

Issues Involved:
1. Legislative Competence
2. Freedom of Trade and Commerce
3. Nature of the Vehicles
4. Validity of Notification under the Act

Issue-wise Detailed Analysis:

1. Legislative Competence:
The court examined whether the Andhra Pradesh Tax on Entry of Motor Vehicles into Local Areas Act, 1996 (the Act) falls under entry 52 of List II of the Seventh Schedule to the Constitution and whether it is a colorable piece of legislation. The doctrine of colorable legislation was discussed, which states that if a legislation indirectly transgresses the powers of the Legislature, it is deemed colorable. The court concluded that the State has the legislative competence under entry 52 to enact the law as motor vehicles are considered "goods" under Article 366(12) of the Constitution. The Act was found to be within the legislative competence of the State and not a colorable piece of legislation.

2. Freedom of Trade and Commerce:
The petitioners contended that the Act violates Articles 301 and 304(a) of the Constitution by imposing discriminatory taxes on motor vehicles imported from other States. The court analyzed the Act under Article 304(a) and (b) and concluded that the levy is non-discriminatory and does not require Presidential assent under Article 304(b). The court held that the tax is compensatory in nature, intended to plug revenue leakage and does not directly and immediately restrict trade and commerce. The Act was found to be a reasonable restriction in public interest and thus valid under Article 304(a).

3. Nature of the Vehicles:
The petitioners argued that the vehicles in question are not "motor vehicles" as defined under Section 2(28) of the Motor Vehicles Act, 1988. The court referred to various precedents and concluded that the vehicles, including excavators, wheel loaders, and dumpers, are mechanically propelled and adapted for use on roads, thus falling within the definition of "motor vehicles." The court directed that the nature of the vehicles should be determined at the assessment stage by the competent officer, who may seek an opinion from a Gazetted Officer of the Department of Transport.

4. Validity of Notification under the Act:
The petitioners challenged the validity of the notification issued under Section 12 of the Act, arguing that it should have been issued under Section 3. The court held that mentioning the wrong provision does not invalidate the notification as long as the power to issue it exists under the law. The court found the notification valid and clarified that the rate of tax should not exceed the rates specified in the Andhra Pradesh General Sales Tax Act, 1957. The court allowed petitioners to claim a refund if they paid tax at a rate higher than 12%.

Conclusion:
The court upheld the constitutional validity of the Andhra Pradesh Tax on Entry of Motor Vehicles into Local Areas Act, 1996. It directed the assessing officers to verify the nature of the vehicles and to reassess the tax liability accordingly. The court also allowed petitioners to claim refunds for any excess tax paid. All writ petitions were disposed of accordingly without any order as to costs.

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