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TMI Blog2022 (12) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Rule 7 of the OMVT Rules, 1976 of the dealers having to give a declaration regarding the number of vehicles possessed under the TC would become entirely redundant. Likewise, the declaration in Form-XIV of the OMV Rules 1993 which also contains a similar declaration would become redundant. The learned Single Judge does not appear to have, while upholding the circular dated 29th March, 2016, discussed either Rule 7 of the OMVT Rules 1976 or Form-XIV of the OMV Rules, 1993. The concept of a TC is that it can be used on several vehicles of the same make and model which are possessed by the dealer under the TC limited to the purposes specified in Rule 41 of the MV Rules. Since the purposes for which the vehicles are used is clearly specified in Rule 41 of the MV Rules, there can be no apprehension of misuse by the dealer of such vehicles for purposes other than Rule 41 of the MV Rules. It will have to be found as a fact that there has been such misuse for which there would have to be an enquiry of some sort preceded by a notice to the concerned dealer. This Court is unable to subscribe to the view of the learned Single Judge that the interpretation placed on Section 5 of the OMVT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USTICE AND M.S. RAMAN, JUDGE W.A. No.223 of 2017 W.A. No.233 of 2017 W.A. No.250 of 2017 W.A. No.251 of 2017 W.A. No.257 of 2017 W.A. No.282 of 2017 W.A. No.336 of 2017 W.A. No.382 of 2017 W.A. No.222 of 2017 W.A. No.232 of 2017 W.A. No.236 of 2017 W.A. No.237 of 2017 W.A. No.242 of 2017 W.A. No.243 of 2017 W.A. No.244 of 2017 W.A. No.245 of 2017 W.A. No.246 of 2017 W.A. No.253 of 2017 W.A. No.330 of 2017 W.A. No.142 of 2018 W.A. No.143 of 2018 W.A. No.381 of 2018 W.A. No.188 of 2017 W.A. No.24 of 2018 W.A. No.34 of 2019 W.A. No.197 of 2017 M/s. Sushree Automotives, M/s. Kanchan Murali Auto, Mahindra & Mahindra Financial Services Ltd., Jyote Motors, Odisha Automobiles Dealers Association (OADA), M/s. Urbasi Bajaj, Ashirbad Automobile and another, M/s. Shree Durga Motors, M/s. S.K. Motors, Ananta Automobiles Private Ltd., M/s. Narayani Motors Pvt. Ltd., and another, M/s. Chandan Automobiles M/s. Paradeep Motors, M/s. Varsa Motors, M/s. Sanjibani Motors Pvt. Ltd., M/s. Maa Tarini Motors, M/s. Choudhary Automobiles, M/s. Sova Automobiles, M/s. Bharat Automobiles, Sundaram Finance Ltd., M/s. Bina Motors, M/s. Consortium Automobiles Pvt. Ltd., M/s. Ayush Automobiles, M/s. Shree Gayatr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parliament and it is therefore a 'Central Act'. It has been enacted with reference to Entry-35 of List-III of the Schedule-VII of the Constitution which reads as under: "Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied." 4. In terms of Section 39 of the MV Act, registration of a motor vehicle is compulsory. Section 39 of the MV Act reads as under: "39. Necessity for registration No person shall drive any motor vehicle and no owner of a motor vehicle shall cause or permit the vehicle to be driven in any public place or in any other place unless the vehicle is registered in accordance with this Chapter and the certificate of registration of the vehicle has not been suspended or cancelled and the vehicle carries a registration mark displayed in the prescribed manner: Provided that nothing in this section shall apply to a motor vehicle in possession of a dealer subject to such conditions as may be prescribed by the Central Government." 5. As far as the proviso to Section 39 of the MV Act is concerned, reference is required to be made to Rule 33 of the Central Motor Vehicles Rules, 1989 (MV Rules) which reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or vehicles or any place at which the vehicle is to be or has been offered for sale; or (h) for removing the vehicle after it has been taken possession of by or on behalf of the financier due to any default on the part of the other party under the provisions of an agreement of hire-purchase, lease or hypothecation." 9. It is not in dispute that all of the Appellants herein have applied for or obtained TC. Rule 39 of the MV Rules states that a trade registration mark that has been assigned in respect of each TC granted or renewed under Rule 35 of the MV Rules shall not be used upon more than one vehicle at a time or upon any vehicle other than a vehicle "bona fide in possession of the dealer or manufacturer of automobile or automobile ancillaries" in the course of his business or any type of vehicle other than the one for which the TC is issued. Rule 39 (2) requires a TC to be carried on a motor vehicle in a weatherproof circular folder and the trade registration mark is required to be exhibited in a conspicuous place in the vehicle. The contention of the Appellants has been that the same TC can be used in multiple types and multiple vehicles, subject to the condition that it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business as such manufacturer or dealer under the authorization of a TC granted under the MV Rules". Section 5 reads as under: 5. Tax payable by Manufacturers and Dealers Notwithstanding the provisions contained in Sections 3, 3-A, 4 or 4-A, a tax at the annual rate specified below shall be paid in advance by a manufacturer or dealer in motor vehicles in respect of the vehicles in his possession in the course of his business as such manufacturer or dealer under the authorization of trade certificate granted under the Motor Vehicles Rules: Description of motor vehicle Annual rate 1. Motor Cycles- (a) where the total number of vehicles does not exceed ten Rs.2000.00 (b) where such total number exceeds ten Rs.2000.00 Plus Rs.200.00 for each vehicle exceeding ten 2. Motor vehicles other than Motor Cycles weighing not more than 3048 kilograms unladen- (a) where the total number of vehicles does not exceed ten Rs.5,000.00 (b) where such total number exceeds ten. Rs.5000.00 Rs.500.00 for each vehicle exceeding ten 3. Motor vehicles weighing more than 3048 kilograms unladen- (a) where the total number of vehicles does not exceed ten. Rs. 10,000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession vehicles exceeding the total number covered under the TC at any point in time. Impugned communication 19. The problem that arose for the Appellants was the impugned communication dated 29th March, 2016, issued by the STA, which reads as under: "To, All Regional Transport Officers, Sir, It is observed that there is huge leakage of M.V revenue at dealer/manufacturer points while collecting tax for vehicle in their possession. As per the Rule-35 of CMVR-1989 an application for the grant/renewal of trade certificate shall be made in form-16 accompanied by appropriate fees as specified in Rule-81 by the dealer/manufacturer. Separate application shall be made for each class of vehicles as per rule 34 of CMV Rules. On receipt of application from the dealers, the grant/renewal of trade certificate is issued under Rule-35 of CMVR-1989 by the Registering Authority to the dealers/manufacturers. Accordingly under Rule-36 of OMV Rules 1993(1). The manufacturer/dealer shall furnish to the registering Authority having jurisdiction in the locality with the information in Form XIII & XIV, in respect of the vehicles received in stock & sold by him during every month by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The above communication was challenged on several grounds before the learned Single Judge. One ground was that the said tax was beyond the scope of Section 5 of the OMVT Act and secondly that it could not be by means of a mere communication from the STA that there was no authority with the STA to issue such a communication regarding collection of tax. The Appellants contended that TC holders or dealers were not required to keep in possession vehicles in excess of what is stated in the TC. As far as the tax payable at the time of registration is concerned, Sections 3, 4-A and 4-B of the OMVT Act are relevant. Therefore, irrespective of the number of vehicles sold by the dealer in a year, tax under Section 5 of the OMVT Act was only to be demanded in respect of vehicles possessed under the TC. It was also pointed out that the assumption that the dealer had kept vehicles in his possession beyond that specified in the TC was not preceded by any enquiry and there was no show-cause notice issued to such dealer before raising the demand. 22. The above submissions were countered by the Respondent-STA by contending that even if at a given point of time the dealer does not possess vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles mentioned therein and not beyond that at a given point of time, but that ipso facto cannot disentitle him to pay tax in respect of the vehicles in his possession in course of business. In other words, if the dealer possesses vehicles in course of his business, he is liable to pay the tax in consonance with the circular issued by the authority concerned." (v) Since no vehicle could be sold for the purpose of registration without the dealer being in possession of such vehicle, if at the end of twelve months it was found that the dealer had possession of vehicles even not exceeding the number of vehicles in possession at a given point of time as per the TC issued, then he is liable to pay the tax "at the end of twelve months, if it is found that the dealer having remained in possession of number of vehicles even not exceeding the number of vehicles in possession at a given point of time as per the trade certificate issued, then he is liable to pay the tax as demanded by the authority concerned because such vehicles were in possession in course of his business." 24. It was therefore concluded that the STA had not committed any illegality in issuing the said commun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- 2 Motor vehicle other than motor cycles weighing not more than 3048 kilograms unladen. Rs.500/- 3 Motor vehicle other than motor cycles weighing more than 3048 kilograms unladen. Rs.1000/- 29. A separate affidavit dated 2nd December 2022 has been filed on behalf of the dealers in W.A. No.180 of 2017 stating as under: "3. That it is humbly submitted that not all dealers have passed on the additional incidence of Trade Certificate Tax (TC Tax) in terms of Section 5 of the OMVT Act and Trade Certificate Fees (TC Fees) in terms of Rule 81 of the Central Motor Vehicles Rules, 1989, to the customers. Some dealers may have passed on the additional incidence to the customers whereas others have paid it from their own resources." 30. The said affidavit refers to an instruction dated 12th January 2022 issued by the STA to all the RTOs asking them to ensure that the dealers will clearly display on the notice board the details of the payment to be made by the purchaser for each category of vehicle and that no extra payment requires to be made other than that mentioned therein. 31. On behalf of the Appellants, this Court has heard the submissions of Mr. Samvit Mohanty, Mr. Jayde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Behera, learned Standing Counsel for the STA submitted that once a vehicle is in possession in the course of business of a dealer under the authorization of a TC issued under the MV Rules and at the end of twelve months, it was ascertained that the dealer was in possession of vehicles in excess of the number indicated in the TC for which no advance tax had been collected, the dealer was liable to pay tax in consonance with the circular dated 29th March, 2016. If a dealer possessed any vehicle in the course of his business, he has to pay tax in terms of the circular dated 29th March, 2016. 34. As regards legislative competence of the State to collect tax from manufacturers/dealers in respect of vehicles possessed under a TC, the complete answer according to Mr. Behera was provided in respect of an identical provision under the Bihar Motor Vehicles Taxation Act (BMVT Act) by the Patna High Court in M/s. Tata Engineering and Locomotive Company Limited v. State of Bihar, AIR 1999 Pat 62, which was affirmed by the Supreme Court of India with the dismissal of the Special Leave Petitions filed against the said judgment. A subsequent challenge by manufacturers of motor vehicles to demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that the State Legislature lacks competence to make a provision of this nature. It was pointed out that Section 6 levies the tax on a manufacturer or a dealer of motor vehicles merely on "possession" thereof by such a manufacturer or a dealer. It was argued that the Bihar Act was enacted by the State Legislature under Entry 57 of List II (State List) of VII Schedule to the Constitution of India, which entry does not empower the State Legislature to impose tax on vehicle merely on possession. This entry reads as under: "57. Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tram-cars subject to the provisions of Entry 35 of List III." 21. The High Court, however, rejected this contention with the reason that under this entry, taxes on vehicles 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 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Manufacturer's Association v. State of M.P. (2004) 2 SCC 249 and Gujarat Ambuja Cements v. Union of India AIR 2005 SC 3020 that it is the charging section in a taxing statute that indicates the nature of the tax imposed. In the "Principles of Statutory Interpretation" (13th Edition, 2012) by Justice G.P. Singh, it has inter alia been stated (at page 823) as under: "The nature of the tax imposed by a statute has to be determined by examining the pith and substance of the statute and by paying more attention to the charging section than to the basis or machinery adopted for assessment and collection of tax for the nature of tax is different from the measure of tax." 40. In the same commentary, it is unambiguously stated that (at page 826) "a taxing statute is to be strictly construed." It is further stated (at pages 827-828) as under: "In fiscal legislation a transaction cannot be taxed on any doctrine of "the substance of the matter" as distinguished from its legal signification, for a subject is not liable to tax on supposed "spirit of the law" or "by inference or by analogy." 41. It has further been observed (at p. 829) by quoting the decision in Ormond Investment Co. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the OMVT Act states that what the annual rate of the TC tax would be for the total number of vehicles possessed under the authorization of the TC. For e.g., for motor vehicles other than the motor cycles where the total number of vehicles does not exceed ten, it is Rs.2000/- and a further Rs.200/- for each vehicle in excess of ten. The expression "under the authorization of trade certificate" has to be read together with the preceding expression "vehicles in his possession in the course of his business". 45. Therefore, while reading a charging Section like Section 5 of the OMVT Act, applying the rules of strict construction, care has to be taken to ensure that the scope of liability is not enhanced by misinterpreting the charging section itself. 46. The learned Single Judge accepted the plea of the STA that Section 5 of the OMVT Act enables collection of tax thereunder on every vehicle which is "possessed and registered during entire year by the dealer". In order to determine what these total number of vehicles "possessed and registered during the entire year" might be, the impugned communication instructed the RTO to find out the total number of vehicles "received in stock a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y purpose of a TC appears to have been rendered redundant. Whether the dealer possesses under the TC the number of vehicles mentioned therein or in excess of that number, the impugned instruction brings about a 'deeming fiction' that every vehicle sold through the dealer for which he has obtained registration, should be presumed to have been held by him under the TC. This is not the purpose for which Section 5 of the OMVT Act was enacted. 50. The learned Single Judge while focusing on the expression "in respect of vehicles in his possession in the course of his business" omitted the important words following this expression viz., "under the authorization of trade certificate granted under the Motor Vehicle Rules". This disjointed reading of Section 5 of the OMVT Act has resulted in the learned Single Judge accepting the interpretation placed by the STA, which in the opinion of this Court is erroneous. 51. The impugned instruction appears to have been triggered by what the Commissioner perceived to be an under-collection of motor vehicle revenue. If that was the perceived problem, then the solution was not to issue an instruction, but perhaps to amend the statute. The Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e'. These words, 'in advance', and 'annual rate' are elements of Section 5 which gives it the characteristic of a machinery provision since they define the basis on which the tax will be collected. The impugned instruction even changes this nature of Section 5 of the OMVT Act by changing the very basis on which the tax will be collected. On this score also the impugned instruction issued is without the authority of law and far in excess of the powers and jurisdiction of the Commissioner. Such kind of a change can possibly be brought about, particularly in a taxing statute, only by amending the law itself and not otherwise. It is even doubtful if such a change can be brought by merely amending the OMVT Rules as that would change or expand as the case may be the 'taxable event' as well as the 'machinery provision' of the taxing statute which again would be impermissible in law. The amendment would have to be to the statute itself. 56. For all of the aforementioned reasons, this Court is unable to subscribe to the view of the learned Single Judge that the interpretation placed on Section 5 of the OMVT Act through the impugned instruction is correct and in consonance with the legislat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only where that burden has not been passed on by the dealer to the customer. It is for this reason, this Court had in its order dated 18th October, 2022, called for an affidavit from the dealers. The affidavit filed by the dealers is not categorical in this regard. It merely states that "some dealers may have passed on the additional incidence to the customers whereas the others have paid it from their own resources". In view of this vague statement, it is not possible for this Court to direct refund of excess TC tax and TC fees collected by virtue of the impugned instruction issued by the STA to the RTOs. However, what is clear is that the collection hereafter of TC tax and TC fees on the basis of the impugned instructions dated 29th March, 2016 will have to cease forthwith. 59. To summarize the conclusions in this judgment; (i) Section 5 of the OMVT Act is a charging Section and in a taxing statute, it has to be strictly construed. (ii) The challenge to the constitutional validity of Section 5 of the OMVT Act is rejected. (iii) The taxable event under Section 5 of the OMVT Act is the possession of vehicles by the dealer under the TC certificate issued under the MV Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X
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