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TMI Blog2018 (12) TMI 795X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bihar Act is paid by the ultimate buyers who, on purchase of vehicles and becoming owners thereof, get these vehicles registered in their names. After the manufacture of the vehicle and before it is sold to the ultimate buyer to use the said vehicle, a temporary registration is required by the manufacturer under Section 7 of the Bihar Act. Since this registration is temporary for a limited duration, a fractional tax is paid by the manufacturer or dealer under Section 7(4) of the Bihar Act. Section 6, on which the fulcrum of dispute revolves, deals with those vehicles which are in possession of a manufacturer or dealer in the course of his business and are held under trade certificates. Sections 5, 6 and 7 are reproduced below in order to have an idea of the payment of these three motor vehicle taxes: "5. Levy of tax - (1) Subject to other provisions of this Act, on and from the date of commencement of this Act, every owner of a registered motor vehicle shall pay tax on such vehicle at the rate specified in Schedule I. (2) Subject to other provisions of this Act, on and from the date of commencement of this Act, every owner of a registered motor vehicle shall pay Additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en granted trade certificate which authorises him to possess the said vehicle before it is sold to the ultimate consumer. Obviously, the rate specified in Schedule III is much lesser than the tax which is payable by the registered owner under Section 5 of the Bihar Act. 5) Section 7(4), on the other hand, applies to those cases where the motor vehicles are temporarily registered under Section 43 of the Motor Vehicles Act, 1988 (hereinafter referred to as the 'MV Act'). In contrast with Section 6, here the person, unlike the manufacturer or dealer having trade certificate, gets the vehicle registered on temporary basis. The tax levied here is 1/12th of the tax payable for the year for such vehicles. 6) The three situations, thus, become obvious. A manufacturer after manufacturing motor vehicle would be in possession of the said vehicle till it is delivered to a dealer. Likewise, a dealer would remain in possession of such a vehicle till it is sold to the consumer. Ordinarily, a motor vehicle cannot be driven unless it is registered. That requirement is provided under Section 39 of the MV Act. It is in consonance with this provision that under Section 5 of the Bihar Act, tax is lev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t remains with the dealer after delivery thereof to the dealer by the manufacturer) and before it is sold to the ultimate consumer, the vehicle is brought on the road and is driven. It maybe for the purpose of testing the technical suitability of such a vehicle or when it goes for delivery from the manufacturer's factory to the dealer's showroom. Likewise, dealer may also drive this vehicle for limited purpose, say it is driven by the customer etc. Since, a vehicle cannot be brought on road and be driven without any valid registration, contemplates two situations to meet such contingencies. It provides for temporary registration under Section 43 of the MV Act. Another option is given to those manufacturers or dealers who obtain trade certificates from the registering authority and in such a case as per Rule 33 of the Motor Vehicle Rules, manufacturers or dealers are exempted from the necessity of registration. The appellants in these appeals are either manufacturers or dealers. They have paid taxes under Section 7(4) of the Bihar Act. In respect of such vehicles, taxes also stand paid under Section 5 of the Bihar Act. Question of additional tax liability under Section 6 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturer stands withdrawn. The manufacturer undoubtedly can possess a vehicle, which is in his factory as long as it is not used in any place contrary to Section 39 of the Bihar Act. The only manner in which a manufacturer can use a vehicle is the manner indicated under Section 39 without obtaining a registration. 15) Prior to the above-said amendment of the Central Act, a Division Bench of the Patna High Court took the view that vehicles, which were in use, would either require a registration certificate, permanent or temporary, or would require a trade certificate. A manufacturer who is required to obtain a trade certificate but did not do so, would not escape the net of tax by being the beneficiary of his own wrong. 16) To complete the narrative, it would also be pertinent to mention that after the amendment in November, 1994, as noted above, when the Assessing Authority sought to levy tax under Section 6 of the Bihar Act, this action was challenged by the appellants by filing writ petitions in the High Court of Patna. In those writ petitions, vires of Section 6 of the Bihar Act were also challenged. The challenge was repelled by the High Court vide its judgment dated July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hicles which are suitable for use on roads can be imposed and it was undisputed case of the parties that the vehicles manufactured by the appellants are suitable for use on roads. Therefore, the provision which stipulates the manufacturer 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 legislative 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 predicated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Orissa (1974) 2 SCC 777, Travancore Tea Estates Co. Ltd. & Ors. v. State of Kerala & Ors. (1980) 3 SCC 619 and M/s Central Coal Fields Ltd. v. State of Orissa & Ors. 1992 Supp. (3) SCC 133. Once Section 6 is held to be valid, it is only the interpretation thereof which was to be gone into by the High Court in this round, in order to find out whether the assessment orders passed in respect of these appeals were valid or not. On interpreting this provision, as observed earlier as well, liability to pay tax under Section 6 is linked with the incidence of manufacturer or the dealer possessing the vehicle which is suitable for use on road during the the course of his business. 24) A half-hearted argument was also made by the appellants to the effect that Section 6 uses the expression 'in lieu of the rates specified in Schedule I' and it was argued that the tax which is to be paid is either as per Schedule I i.e. in accordance with Section 5 of the Bihar Act or at the annual rates specified in Schedule III. It was emphasised that the words 'in lieu of' cannot be read as 'in addition to'. However, there is no merit in this argument as well. Sections 5 and 6 operate in altogether differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellants was bona fide inasmuch as when the notices were received for the first time for payment of tax under Section 6 of the Act, the same were challenged albeit the validity of Section 6 was upheld by the High Court. Thereafter, tax was paid by the appellants though challenged again in the present round of litigation. On that basis, it was argued that action of the appellants was bona fide. 27) In order to test this argument, we shall have to consider the provision under which penalty can be imposed. The provision in the Act is Section 23 and Rule 4 of the Taxation Rules provides for the rates of penalty. Section 23 reads as under: "Liability to pay penalty for non-payment of tax in time. - If the tax payable in respect of a vehicle other than personalised vehicle has not been paid during prescribed period, the person liable to pay such tax shall pay together with the arrears of tax, a penalty at the rates prescribed by the State Government." 28) Rule 4, likewise, is to the following effect: "4. Due date of payment and penalty for non-payment of taxes in time.- (1) For vehicles other than personalised vehicles the due date of payment of tax shall be the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of U.P. & Ors. v. Sukhpal Singh Bal (2005) 7 SCC 615 wherein this Court held: "15. ...A penalty may be the subject-matter of a breach of statutory duty or it may be the subject-matter of a complaint. In ordinary parlance, the proceedings may cover penalties for avoidance of civil liabilities which do not constitute offences against the State. This distinction is responsible for any enactment intended to protect public revenue..." 30) It is clear that under the Bihar Act, as per Section 23, penalties levied for breach of statutory duty for non-payment of tax. 31) In view of the aforesaid specific legal provisions, judgment in the case of Hindustan Steel Ltd. referred to by the appellants will not be applicable in the instant case. It is also to be borne in mind that while upholding the validity of Section 23 of the Act in Telco, 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 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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