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TMI Blog2005 (3) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... adu Motor Vehicles Taxation Act, 1974 (hereinafter referred to as "the 1974 Act"), as amended. For the sake of convenience, we may mention the facts of the case in writ petition no.15139 of 1998. M. Krishnappan, respondent herein challenged the provisions of section 4(1-A)(a) imposing life time tax on motor vehicles to be registered on and after 1.7.1998 being the date on which the amending Act 27 of 1998 came into force. By the said amending Act, section 3A as also the aforestated section 4(1-A) (a)(b) came to be inserted in the said 1974 Act by which a dichotomy was created between the vehicles registered prior to 1.7.1998 (old vehicles) and the vehicles registered thereafter (new vehicles). In respect of the old vehicles, an option was given either to pay one time tax or an annual tax, but in the case of new vehicles no such option was provided for and consequently, it became compulsory to pay one time tax on and after 1.7.1998. At this stage, it may be stated that the respondent herein, M. Krishnappan, had purchased, on 23.9.1998, a passenger car "Tata Sumo", on payment of ₹ 5,25,451/-, the unladen weight of which was 1700 kg. on which he was charged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of "life time tax" was based on an intelligible differentia, hence, there was no violation of article 14 of the Constitution. By the impugned judgment, the High Court held that the impugned amending Act 27/98, which imposed the levy of life time tax based on the value of the vehicle registered on and after 1.7.1998 was inconsistent with the section 4(1-A)(b); that prior to the amending Act 27/98, the tax was levied only on laden weight and not on the value of the vehicle which had no nexus with the use of the roads; that by introducing the "value" as an index, the tax has ceased to be compensatory and consequently, the levy fell outside entry 57 of list-II of the seventh schedule to the Constitution, which in turn attracted article 265 of the Constitution resulting in levy and collection of tax without the authority of law. Mr. A.K. Ganguly, learned senior advocate appearing on behalf of the State submitted that the concept of collection of one time tax incorporated in section 4(1-A)(a) read with schedule-III (part-I) of the 1974 Act has been upheld. In this connection, reliance was placed on the judgment of this Court in the case of State of Maharashtra & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of sub-section (1-A), be paid in the manner prescribed by the registered owner or by any other person having possession or control of the motor vehicle, at his choice, either quarterly, half-yearly or annually, on a licence to be taken out by him for that quarter, half-year or year, as the case may be. (1-A) Notwithstanding anything contained in sub- section (1), - (a) in respect of the motor vehicles specified in item (A) in Part-I of the Second Schedule and in Part-I of the Third Schedule, at the time of its registration, a life time tax shall be paid at the rates specified in item (A) in Part-I of the Second Schedule or in Part-I of the Third Schedule, as the case may be, on a licence to be taken out for the life time of such vehicles. (b) In respect of motor vehicles specified in item (B) in Part-I of the Second Schedule and in Part-II of the Third Schedule, the tax shall be paid either annually at the rates specified in the First Schedule or for the life time of such vehicles at the rate specified in item (B) in Part-I of the Second Schedule or in Part-II of the Third Schedule, as the case may be, on a licence to be taken out for such vehicles for that year or for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control of such vehicle shall not be required to pay any additional tax either by way of increase or otherwise." Similarly, by the amending Act 27/98, a new schedule was added as the Third Schedule (Part-I), which reads as under:- "THIRD SCHEDULE PART - I AT THE TIME OF REGISTRATION OF NEW MOTOR VEHICLES Item If the value of the vehicle is not more than ₹ 5 lakhs If the value of the vehicle is more than ₹ 5 lakhs but not more than ₹ 10 lakhs If the value of the vehicle is more than ₹ 10 lakhs. Individual Others Individual Others Individual Others Rs. Rs. Rs. Rs. Rs. Rs. (a) Weighing not more than 700 kgs. unladen.. 8,210 16,420 12,320 24,640 16,420 32,840 (b) Weighing more than 700 kgs. but not more than 1,500 kgs. unladen.. 10,950 21,900 16,430 32,860 21,900 43,800 (c) Weighing more than 1,500 kgs. but not more than 2,000 kgs. unladen.. 13,290 27,380 20,540 41,080 27,380 54,760 (d) Weighing more than 2,000 kgs. but not more than 3,000 kgs. unladen.. 15,060 30,120 22,590 45,180 30,120 60,240 (e) Weighing more than 3,000 kgs. unladen in respect of which private transport vehicles permit is not required under Motor Vehicle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omy. It has high rate of inflation. The costs of maintenance as well as the costs of material used in the maintenance of the roads increases by the day. This naturally costs the State, which has to find funds for making new roads and for maintenance of those that are in existence. The impugned tax is regulatory and compensatory in nature in the sense that it is imposed to meet the increasing costs of maintenance and upkeep and to that extent it is not plenary. However, as stated above, the limited question is : whether the tax ceases to be compensatory and regulatory with the introduction of "weight-cum-value" index and whether the said index is contrary to the scheme of the said 1974 Act. At the outset, it may be noted that depreciation is a function of time and maintenance. In the present case, we are concerned with the "life time tax" which is one time payment spread over the economic life of the vehicle. The said tax is based on time, use and maintenance of the roads. As stated in the judgment of this Court in Bombay Tyre (supra), any standard, which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd at the same time, it is also beneficial to the users of the vehicles who do not have to go to the office of the RTO every year to pay the annual taxes. It is also beneficial to the users of the motor vehicles, as they do not have to pay taxes at the increased rates from time to time over the economic life of vehicle as contemplated by section 3(2) of the Act. Moreover, weight alone may not provide a sufficient parameter/basis for imposition of "life time tax". As an illustration, we may point out that the weight of the Honda CRV Car is 1500 kg. as against the weight of Tata Indigo GLX which weighs 1490 kg. and yet the cost of Honda CRV is ₹ 15,24,396 lacs whereas the price of Tata Indigo is 5.08,651 lacs. Hence, weight index alone may not constitute the basis of "life time tax". In the circumstances, we reiterate that introduction of "weight-cum-value" index will not make the levy non- regulatory/non-compensatory. Further, under the unamended 1974 Act, weight was the basis of the impugned levy as an annual tax. But with the introduction of a "life time tax", the entire future projection spread over the economic life of the vehicle h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional concept, whereas collection of a tax as well as incidence of tax comes within the statutory measure. The mode of collection or the incidence of tax cannot be the conclusive test to decide the nature of the levy. The nature of the levy is a concept different from the mode of collection of tax. Levy is a constitutional concept whereas mode of collection of tax is a statutory concept. They stand on different footings. Secondly, it is important to remember the words of Lord Wilberforce, quoted with approval by House of Lords in the case of Barclays Mercantile Business Finance Ltd. v. Mawson (Inspector of Taxes) reported in (2005) 1 All ER 97 stating that "a tax is generally imposed by reference to economic activities or transactions which exist in the real world". When an economic activity is to be valued, it is open to the law maker to take into account various factors including the paying capacity of the user, the value of the vehicle, the economic life of the vehicle etc. Lastly, in the present case, for the vehicles registered before 1.7.1998 the option between annual and one time tax is retained. Before concluding, we may quote the observations of the Division Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X
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