2024 (11) TMI 1206 - HC - GST

Validity of exemption notification dated 02.03.2023 - imposition of condition for the purpose of getting exemption that the vehicle in question must have been purchased in the State of Uttar Pradesh - Section-3 of the U.P. Motor Vehicle Taxation Act, 1997 - HELD THAT - Perusal of the provisions of section 3, would reveal that the State Government, subject to such conditions and for such period, as may be specified, may exempt either wholly or partly any motor vehicle or class of motor vehicles from the payment of any tax under the Act. The Section, does not restrict the power of the State to indicate the conditions for grant of exemption. The notification dated 02.03.2023, inter alia, provides for 100% exemption of tax qua the vehicles purchased and registered in Uttar Pradesh. The very fact that the aforesaid Section does not restrict the powers of the State in imposing condition, the plea raised seeking to question the condition imposed regarding purchase of vehicle cannot be countenanced. The submissions made that as the tax imposed is on plying of the vehicle, no condition on the basis of place of the purchase of the vehicle can be imposed, apparently also has no basis. There is substance in the submissions of learned counsel for the respondents that on purchase of vehicle within the State, the State gets revenue through its share of G.S.T. and in case the vehicle is purchased from outside the State, even that part of the revenue is lost and therefore, instead of making it open-ended exemption, the State is well within its power to impose the condition of purchase of vehicle within the State, which condition cannot be said to be unreasonable. Thus, no case for interference is made out in the petition, the same is, therefore, dismissed.

Summary

Issues:
1. Validity of exemption notification imposing condition on vehicle purchase location for tax exemption.

Analysis:
The petitioner filed a writ petition challenging an exemption notification dated 02.03.2023, which required vehicles to be purchased in the State of Uttar Pradesh to qualify for tax exemption. The petitioner argued that this condition was contrary to the U.P. Motor Vehicle Taxation Act, 1997, as road tax is levied for operating vehicles within the state, not based on the purchase location. The petitioner sought to quash the condition as it was unfair to those who purchased vehicles from outside the state and were denied the exemption. The government contended that the condition was valid as it ensured revenue for the state through GST on in-state vehicle purchases.

The court examined Section-3 of the Act, which grants the State Government the power to exempt vehicles from tax subject to specified conditions. The notification in question provided 100% tax exemption for vehicles purchased and registered in Uttar Pradesh. The court noted that the Act did not limit the state's power to impose conditions for granting exemptions. Therefore, the condition regarding the purchase location of the vehicle was deemed valid by the court.

The court rejected the petitioner's argument that the condition based on the purchase location was unreasonable. It agreed with the government's stance that in-state vehicle purchases generated revenue for the state through GST, unlike purchases from outside the state. The court held that the state was justified in imposing the condition to ensure revenue retention. Ultimately, the court dismissed the petition, finding no grounds for interference in the matter.