2018 (12) TMI 795 - SC - Indian Laws

Levy of Motor Vehicles Tax / additions tax - marginal tax - chassis of the motor vehicles manufactured by the appellants during the period these chassis are in their possession , i.e., before they are delivered to the dealers and/or the purchasers of the said vehicles - Section 6 of the Bihar Motor Vehicles Taxation Act, 1994 - constitutionality of Section 6 - Held that - Under Section 5, tax is payable at the time of registration of the vehicle, which is payable by the registered owner. In contrast, Section 6 is the stage before that as it is on the event of the vehicle being possessed by the manufacturer or dealer - the appellants are liable to pay tax under Section 6 of the Bihar Act. May be, Section 6 is not happily worded. But the intent is to convey that tax will not be payable as per Schedule I which is payable under Section 5 but in place thereof it would be payable as per Schedule III. Penalty - Held that - Section 23, in no uncertain terms, lays down that any person who does not pay the tax during the prescribed period shall pay a penalty at the rate prescribed by the State Government together with arrears of tax. Therefore, for non-payment of the tax within the prescribed period, penalty becomes payable at the rates specified in Rule 4. The vires of Section 6 were challenged in the High Court in earlier proceedings and this challenge was repelled. Further, since Rule 4 uses the expression may , on that basis it was also argued that this rule gives discretion to the Assessing Officer. Under the Bihar Act, as per Section 23, penalties levied for breach of statutory duty for non-payment of tax. While upholding the validity of Section 23 of the Act, insofar as penalty is concerned, the Court had set aside the same on the ground that before imposing the penalty, no show cause notice was issued - Permission was given to the tax authorities to take fresh decision after giving the show cause notice. It is an admitted case that show cause notices were issued and after hearing the appellants, the penalty was imposed. Appeal dismissed.

Summary

Issues Involved:
1. Levy of tax on the chassis of motor vehicles under Section 6 of the Bihar Motor Vehicles Taxation Act, 1994.
2. Legislative competence of the State Legislature to impose such a tax.
3. Impact of amendments to the Central Motor Vehicles Act on the Bihar Act.
4. Validity of the tax assessment orders.
5. Imposition of penalty and interest for delayed payment of tax.

Detailed Analysis:

1. Levy of Tax on Chassis of Motor Vehicles:
The primary issue revolves around the levy of tax by the respondent State under Section 6 of the Bihar Motor Vehicles Taxation Act, 1994, on the chassis of motor vehicles while they are in the possession of manufacturers or dealers. The Bihar Act envisages three kinds of taxes: on registered vehicles (Section 5), on vehicles held under trade certificates (Section 6), and on temporarily registered vehicles (Section 7(4)). The appellants, being manufacturers or dealers, argued that they had already paid taxes under Section 7(4) and Section 5 for vehicles used for their own purposes. However, the court held that Section 6 imposes a tax on vehicles in possession of manufacturers or dealers under trade certificates, distinct from taxes under Sections 5 and 7(4).

2. Legislative Competence:
The appellants challenged the vires of Section 6, arguing that the State Legislature lacked competence to impose a tax on mere possession of vehicles. The court referred to Entry 57 of List II (State List) of the VIIth Schedule to the Constitution of India, which allows the State to tax vehicles suitable for use on roads. The court upheld the High Court's reasoning that the vehicles manufactured by the appellants are suitable for use on roads, thus falling within the legislative competence of the State under Entry 57.

3. Impact of Amendments to the Central Motor Vehicles Act:
The appellants contended that amendments to the Central Motor Vehicles Act, particularly the exclusion of 'manufacturer' from the definition of 'dealer,' impacted the applicability of Section 6 of the Bihar Act. The court found that the Bihar Act and the Central Act operate in different legislative fields. The Bihar Act was enacted under Entry 57 (State List), while the Central Act was under Entry 35 (Concurrent List). Therefore, changes in the Central Act do not affect the Bihar Act, and both manufacturers and dealers are liable to pay tax under Section 6.

4. Validity of Tax Assessment Orders:
The appellants argued against the validity of the tax assessment orders under Section 6. The court noted that the High Court had previously upheld the constitutionality of Section 6 in the TELCO case. The court reiterated that the tax liability under Section 6 is linked to the possession of vehicles by manufacturers or dealers during their business, and the tax is payable as per Schedule III, not Schedule I.

5. Imposition of Penalty and Interest:
The appellants challenged the imposition of penalties and interest for delayed payment of tax. The court referred to Section 23 of the Bihar Act and Rule 4 of the Taxation Rules, which prescribe penalties for non-payment of tax within the prescribed period. The court emphasized that penalties are a statutory consequence of non-payment and upheld the High Court's decision to impose penalties after issuing show cause notices. The court dismissed the appellants' reliance on the Hindustan Steel Ltd. case, stating that penalties under the Bihar Act are for breach of statutory duty and not discretionary.

Conclusion:
The Supreme Court dismissed all appeals, upholding the tax liability under Section 6 of the Bihar Motor Vehicles Taxation Act, 1994, and the imposition of penalties for delayed payment. The court affirmed the legislative competence of the State to impose such a tax and clarified that amendments to the Central Motor Vehicles Act do not impact the Bihar Act.