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Supreme Court
Taxing Statutes Cannot Be Tested On Same Principles As Law Affecting Civil Rights- Supreme Court
|15 Jan 2023 9:30 AM GMT
The Supreme Court has held that taxing statutes cannot be tested on the same principles as laws affecting civil rights and lawmakers should be given "greater latitude" while testing these legislations.
The Apex Court set aside the July 2007 judgment of the Himachal Pradesh High Court which had held section 3A (3) of the Himachal Pradesh Motor Vehicles Taxation (Amendment) Act, 1999, as ultra vires.
A bench of Justice SK Kaul, Justice Abhay S. Oka and Justice Vikram Nath observed that Courts must show judicial restraint and not interfere with tax legislation unless it is shown and proved that such taxing statute is manifestly unjust or glaringly unconstitutional.
The Court noted that the High Court was of the opinion that tax imposed by section 3A (3) was in the nature of a penalty for which the state legislature had no power to make laws.
A bench of Justice SK Kaul, Justice Abhay S. Oka and Justice Vikram Nath observed that Courts must show judicial restraint and not interfere with tax legislation unless it is shown and proved that such taxing statute is manifestly unjust or glaringly unconstitutional.
The Court noted that the High Court was of the opinion that tax imposed by section 3A (3) was in the nature of a penalty for which the state legislature had no power to make laws.
Counsel Abhinav Mukerji appeared for the Appellant-State, and Senior Counsel Siddharth Bhatnagar appeared as Amicus Curiae before the Apex Court.
While referring to the scope of interference in fiscal statutes, the Apex Court observed, "It is by now well settled that any tax legislation may not be easily interfered with."
"Taxing statutes cannot be placed or tested or viewed on the same principles as laws affecting civil rights such as freedom of speech, religion, etc. The test of taxing statutes would be viewed on more stringent tests and the lawmakers should be given greater latitude," the Bench held.
The Bench noted the object and reasons for bringing out the Amending Act of 1999 were mainly to augment funds and finances for the development, construction, and maintenance of roads and bridges that were a vital part of expanding and developing trading facilities in the state.
It also noted that by the Amending Act of 1999, section 3A (levy of special road tax) was introduced and this special road tax was in addition to the tax levied under section 3.
"From the very object and reasons of the Amending Act 1999, it is apparent that the special road tax was introduced as a compensatory measure," the Bench observed.
It noted that section 3 of the Himachal Pradesh Motor Vehicles Taxation Act, 1972 provided for the levy of taxes on all motor vehicles kept or used in the state as per the schedules appended to the Act, and insertion of section 3A provided for the levy of special road tax.
The Court held, "The Legislatures of the State have not only the power to make laws on the taxation to be imposed on motor vehicles as also the passengers and goods being transported by motor vehicles but also the power to lay down principles on which taxes on vehicles are to be levied."
It said there is nothing on record to indict the provision as being manifestly unjust or glaringly unconstitutional.
"For all the reasons recorded above, the validity of section 3A(3), in our opinion, has been wrongly held to be ultra vires by the high court. The tax imposed under section 3A(3) is regulatory in character and is not a penalty," the Apex Court held while allowing the appeals.
While referring to the scope of interference in fiscal statutes, the Apex Court observed, "It is by now well settled that any tax legislation may not be easily interfered with."
"Taxing statutes cannot be placed or tested or viewed on the same principles as laws affecting civil rights such as freedom of speech, religion, etc. The test of taxing statutes would be viewed on more stringent tests and the lawmakers should be given greater latitude," the Bench held.
The Bench noted the object and reasons for bringing out the Amending Act of 1999 were mainly to augment funds and finances for the development, construction, and maintenance of roads and bridges that were a vital part of expanding and developing trading facilities in the state.
It also noted that by the Amending Act of 1999, section 3A (levy of special road tax) was introduced and this special road tax was in addition to the tax levied under section 3.
"From the very object and reasons of the Amending Act 1999, it is apparent that the special road tax was introduced as a compensatory measure," the Bench observed.
It noted that section 3 of the Himachal Pradesh Motor Vehicles Taxation Act, 1972 provided for the levy of taxes on all motor vehicles kept or used in the state as per the schedules appended to the Act, and insertion of section 3A provided for the levy of special road tax.
The Court held, "The Legislatures of the State have not only the power to make laws on the taxation to be imposed on motor vehicles as also the passengers and goods being transported by motor vehicles but also the power to lay down principles on which taxes on vehicles are to be levied."
It said there is nothing on record to indict the provision as being manifestly unjust or glaringly unconstitutional.
"For all the reasons recorded above, the validity of section 3A(3), in our opinion, has been wrongly held to be ultra vires by the high court. The tax imposed under section 3A(3) is regulatory in character and is not a penalty," the Apex Court held while allowing the appeals.
Cause Title - The State of Himachal Pradesh & Ors. v. Goel Bus Service Kullu, etc., etc.
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