1999 JTR(SC) 1160
1999 AIR(SC) 3880 ; 1999 AIR(SCW) 3964 ; 1999 3 CTC 615 ; 1999 DNJ 486 ; 1999 8 JT 128 ; 2000 LatestHLJ 74 ; 1999 6 Scale 389 ; 1999 9 SCC 559 ; 1999 Supp3 SCR 430 ; 2000 1 UJ 223 ; 1999 KHC 1556 ; 1999 3 KLT(Online) 1115 ; 1999 8 Supreme 621
1999(8) Supreme 621
Supreme Court of India
(From Himachal Pradesh High Court)
S.P. Bharucha, B.N. Kirpal, V.N. Khare, D.P. Mohapatra & N. Santosh Hegde, JJ.
State of Himachal Pradesh & Ors. etc. etc. -Appellants
versus
Nurpur Private Bus Operators Union & Ors. etc. etc. -Respondents
Civil Appeal Nos. 6466-6476 of 1995
With
Civil Appeal Nos. 6477-6480 of 1995
Decided on 6-10-1999
Counsel for the Parties :
For the Appearing Parties : N.C. Kochhar, Sr. Advocate, Naresh K. Sharma, Uma Datta, Ashok Kumar Sharma and Pradeep Kumar Bakshi, Advocates.
Important Point
Proviso to Section 4 of the Himachal Pradesh Passengers and Goods Taxation Act, 1955 which makes it obligatory for the operators to pay lumpsum tax is invalid as it is beyond the scope of the Act.
Act Referred :HIMACHAL PRADESH PASSENGERS AND GOODS TAXATION ACT : S.3, S.9, S.4
(A) The Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended, governs the levy, method of collection, and assessment of tax on fares and freights for passengers and goods transported by motor vehicles. Section 3 of the Act mandates that tax be levied on all fares and freights in respect of all passengers carried, while Section 4, read with the impugned proviso and rule, prescribes that the owner of the motor vehicle shall collect and pay the tax in the prescribed manner, with the challenged proviso allowing the State Government to assess and collect a lump sum tax based solely on registered capacity and distance, without accounting for actual fares. The Rules framed under the Act further prescribed the formula for such lump sum assessment. These statutory provisions are directly at issue in this constitutional challenge, where the validity of the amended proviso and rule is contested on the ground that it undermines the comprehensive charging and collection framework contemplated by the Act.
(B) The core legal principles include that taxation must be based on actual fares and freights, and cannot be determined by hypothetical or arbitrary assumptions; the provision for lump sum assessment must not override the mandatory requirement to account for all fares; a taxpayer cannot be compelled to opt for lump sum payment if the statute provides an alternative method; and the doctrine of prospective overruling cannot be applied to invalidate past collections once a provision is struck down as unconstitutional.
Facts of the case:
The State of Himachal Pradesh amended the Himachal Pradesh Passengers and Goods Taxation Act, 1955, to introduce a proviso to Section 4 and a formula under the Rules allowing the assessment of lump sum tax on motor vehicles, including stage and contract carriages, based on registered capacity and distance, without regard to actual fares. This amendment was challenged through writ petitions under Article 226 of the Constitution, leading to a Division Bench judgment that struck down the proviso and rule, holding them invalid, and further holding that the earlier method of tax collection for the period between 1st April, 1991 and 30th September, 1992 was also invalid.
Findings of Court:
The Division Bench found that confining tax payment to a lump sum mode made the provision invalid because it disregarded actual fares and freights in respect of all passengers carried, which is mandatory under Section 3. It held that the amendment was beyond the scope of the Act and that the rule did not alter the fundamental requirement. The Court also held that the doctrine of prospective overruling could not be applied to retrospectively validate past collections.
Issues:
Whether the proviso to Section 4 and the Rule prescribing the lump sum formula are constitutionally valid; whether the State can compel operators to pay tax based solely on registered capacity and distance without regard to actual fares; whether the doctrine of prospective overruling applies to the impugned provisions; and whether past tax collections based on the invalid provisions should be invalidated.
Ratio Decidendi:
Taxation under the Act must be based on all fares and freights in respect of all passengers carried, and any method of assessment must adhere to this requirement; a lump sum assessment that ignores actual fares is invalid; taxpayers retain the right to opt for tax based on actual fares; and past collections under an invalid provision cannot be retrospectively validated.
Result:
The civil appeals challenging the lump sum provision are allowed, the Division Bench judgment is restored in full, the prospective overruling direction is set aside, and the invalidated provisions are declared wholly invalid for the entire period.
(A) The Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended, governs the levy, method of collection, and assessment of tax on fares and freights for passengers and goods transported by motor vehicles. Section 3 of the Act mandates that tax be levied on all fares and freights in respect of all passengers carried, while Section 4, read with the impugned proviso and rule, prescribes that the owner of the motor vehicle shall collect and pay the tax in the prescribed manner, with the challenged proviso allowing the State Government to assess and collect a lump sum tax based solely on registered capacity and distance, without accounting for actual fares. The Rules framed under the Act further prescribed the formula for such lump sum assessment. These statutory provisions are directly at issue in this constitutional challenge, where the validity of the amended proviso and rule is contested on the ground that it undermines the comprehensive charging and collection framework contemplated by the Act.
(B) The core legal principles include that taxation must be based on actual fares and freights, and cannot be determined by hypothetical or arbitrary assumptions; the provision for lump sum assessment must not override the mandatory requirement to account for all fares; a taxpayer cannot be compelled to opt for lump sum payment if the statute provides an alternative method; and the doctrine of prospective overruling cannot be applied to invalidate past collections once a provision is struck down as unconstitutional.
Facts of the case:
The State of Himachal Pradesh amended the Himachal Pradesh Passengers and Goods Taxation Act, 1955, to introduce a proviso to Section 4 and a formula under the Rules allowing the assessment of lump sum tax on motor vehicles, including stage and contract carriages, based on registered capacity and distance, without regard to actual fares. This amendment was challenged through writ petitions under Article 226 of the Constitution, leading to a Division Bench judgment that struck down the proviso and rule, holding them invalid, and further holding that the earlier method of tax collection for the period between 1st April, 1991 and 30th September, 1992 was also invalid.
Findings of Court:
The Division Bench found that confining tax payment to a lump sum mode made the provision invalid because it disregarded actual fares and freights in respect of all passengers carried, which is mandatory under Section 3. It held that the amendment was beyond the scope of the Act and that the rule did not alter the fundamental requirement. The Court also held that the doctrine of prospective overruling could not be applied to retrospectively validate past collections.
Issues:
Whether the proviso to Section 4 and the Rule prescribing the lump sum formula are constitutionally valid; whether the State can compel operators to pay tax based solely on registered capacity and distance without regard to actual fares; whether the doctrine of prospective overruling applies to the impugned provisions; and whether past tax collections based on the invalid provisions should be invalidated.
Ratio Decidendi:
Taxation under the Act must be based on all fares and freights in respect of all passengers carried, and any method of assessment must adhere to this requirement; a lump sum assessment that ignores actual fares is invalid; taxpayers retain the right to opt for tax based on actual fares; and past collections under an invalid provision cannot be retrospectively validated.
Result:
The civil appeals challenging the lump sum provision are allowed, the Division Bench judgment is restored in full, the prospective overruling direction is set aside, and the invalidated provisions are declared wholly invalid for the entire period.
Judgment
Bharucha, J.-Civil Appeal Nos. 6466-6476 of 1995 :
Under challenge by the State of Himachal Pradesh is the judgment of a Division Bench of the High Court of Himachal Pradesh delivered on writ petitions filed under Article 226 of the Constitution to challenge amendments to the Himachal Pradesh Passengers and Goods Taxation Act, 1955 and the Rules framed thereunder. The High Court allowed the writ petitions, coming to the conclusion that confining the payment of tax under the said Act to the mode of payment by lump sum made the provision invalid.
2. Section 3 of the said Act is the charging section. It provides, in so far as is relevant :
“3. Levy of Tax.-(1) There shall be levied, charged and paid to the State Government a tax on all fares and freights in respect of all passengers carried and goods transported by motor vehicles at such rates not exceeding .......as the Government may, by notification, direct,”
(Emphasis supplied.)
3. Section 4 lays down the method of collection of the tax and states that the tax shall be collected by the owner of the motor vehicle and paid to the State Government in the prescribed manner. The proviso thereto, which is under challenge, reads :
“Provided further that in case of motor vehicles (including the stage or contract carriages), other than those specified in the first proviso, in which the passengers are carried, the State Government may assess the tax ............at lump sum, in the manner prescribed, taking into consideration the registered capacity of the vehicle and the distance travelled or to be travelled by such motor vehicles under a permit issued to such vehicles.” (Emphasis supplied.)
4. The Rule made to effectuate the said proviso, which was also the subject matter of challenge, laid down the formula for such assessment of the lump sum tax. The formula was this :
“Number of seats x number of scheduled kilometers x 3/5 x rate of passengers tax x rate per kilometer.
Explanation :-In this formula, 3/5 represents average occupancy taken at sixty per cent of the number of seats.”
(Emphasis supplied)
5. It may be mentioned that, earlier, the relevant proviso had provided that in case of contract carriages the State Government “may accept a lump sum in lieu of the tax chargeable on fare in the manner prescribed”. This proviso was challenged. This Court, in M/s. Sainik Motors, Jodhpur & Ors. v. The State of Rajasthan1, upheld the proviso for the reason that “payment of lump sum is not obligatory, and a person can elect to pay tax calculated on actual fares and freights......There is no compulsion for any operator to elect to pay a lump sum if he does not choose to do so.”
6. As far as the said Act, as it now stands is concerned, it is plain from Section 3 thereof that the levy of the tax is on “all fares......in respect of all passengers carried............”. The proviso to Section 4 that is under challenge takes into account for the purpose of assessment of the lump sum tax only “the registered capacity of the vehicle and the distance travelled or to be travelled.......”. It takes no account of “all fares...........in respect of all passengers carried........”, and it makes it obligatory for the operator to pay such lump sum tax.
7. Learned counsel for the appellant-State submitted that the said Section 4 and Rule had been so amended having regard to surveys made and data collected by the State Government and with a view to prevent tax evasion. This may be so, but there can be no generalisation of tax that can be levied under Section 3. It can only be levied with due regard to all fares in respect of all passengers carried by the particular operator. No hypothetical assumption can be made about how many passengers an operator has carried. The amendment of the said Section 4, by the inclusion of the proviso quoted above, is beyond the scope of the said Act. It is, therefore, unnecessary to consider Rule 9, as amended, whose terms also, in fact, leave the matter in no doubt.
8. The State may now make assessments of passenger tax on the basis that is provided for in Section 3 of the Act.
9. The civil appeals are dismissed with costs.
Civil Appeals Nos. 6477/1995 and 6480/ 1995 :
10. The High Court, in the judgment afore-mentioned, held that the levy and realisation of tax on the basis which had been held to be invalid by it “for the period between 1st April, 1991 and 30th September, 1992 shall not stand invalidated.......We propose to direct that the declaration made by us today shall be applicable prospectively and with effect from October 1, 1992 alone.” Some operators challenge the correctness of this. They are right, for the doctrine of prospective over-ruling cannot be utilised by the High Court. Once the High Court came to the conclusion, rightly, that the concerned provisions were invalid, it was obliged to so declare and, consequently, the collections made thereunder stood invalidated.
11. These civil appeals are, therefore, allowed and the direction of the High Court insofar as it relates to prospective over-ruling is set aside. The judgment and order of the High Court shall also operate for the period between 1st April, 1991 and 30th September, 1992.
No order as to costs.
Civil Appeal Nos. 6466-6476 of 1995 dismissed. Civil Appeal Nos. 6477/1995 and 6480/1995 allowed.
(C.R.)
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