KAUSHIKBHAI K. PATEL v. STATE — 1998 DIGILAW 262 (GUJ)

K. SREEDHARAN, J. ( 1 ) RULE. Ms. Amee Yajnik, Assistant Government pleader, waives service of Rule on behalf of the respondents. ( 2 ) WHEN this petition came up for hearing on 16-4-1998, Counsel appearing on either side wanted main petition itself heard and disposed of. Accordingly, as agreed to by Counsel, we heard arguments at length. We are disposing of the same by this judgment. ( 3 ) GUJARAT State Legislature amended the Bombay Motor Vehicles Tax Act, 1958 by Act 3 of 1992. As a result of the amendment, sub-S. (5) of S. 3a was substituted. It dealt with the cases of omnibuses. By sub-clause (a) to sub-S. (5), an owner of an omnibus is entitled to refund of the tax upto a maximum of three months in an year on proof of non-user. If refund is claimed for more than three months in any year, he must establish non-user of the omnibus for reasons beyond his control to the satisfaction of an Authorised Officer. The consequence is that on account of non-user of an omnibus, the owner or person having possession or control of the vehicle can get refund of the tax for a period of three months, if he shows that the omnibus has not been used or kept for use during that period. In case refund is claimed beyond three months, then the owner and person in possession or control has not only to prove that the vehicle was not used or kept for use, but also to establish to the satisfaction of the Authorised Officer that the non-user was for reasons beyond his control. Additional burden to prove that the vehicle was not used for reasons beyond the control of the owner or the person in possession of the vehicle is under challenge on the ground that no such additional proof can be insisted on by the State. In other words, the contention raised by the petitioners is that omnibuses, like any other class of vehicles, are not liable to pay tax for the period during which they were not used or put on road for the whole period of its non-user. ( 4 ) PETITIONER No. 1 is the owner of omnibus, bearing registration No. GRQ 8403. That vehicle was not put on road for the period from 1-7-1995 to 31-3-1996. He gave intimation of the non-user to the Motor Vehicle Inspector. ( 4 ) PETITIONER No. 1 is the owner of omnibus, bearing registration No. GRQ 8403. That vehicle was not put on road for the period from 1-7-1995 to 31-3-1996. He gave intimation of the non-user to the Motor Vehicle Inspector. The Inspector checked the vehicle and reported that the vehicle was not put to use during the above period. Petitioner claimed refund of the tax for the entire period from 1-7-1995 to 31-3-1996. The claim was not allowed, stating that refund of tax for three months on account of non-user alone can be permitted. According to the Authorities, since the petitioners have not established before the Authorised Officer that the vehicle was not used for reasons beyond the control of the owner, refund of tax for more than three months cannot be allowed in view of the amended provision contained in sub-S. (5) of S. 3a of the Act. This action of the respondents is under challenge. Petitioners also question the Constitutional validity of sub-S. (5) of S. 3a, wherein owner of an omnibus is required to prove non-user for reasons beyond his control for claiming refund of the tax for periods over three months in a year. ( 5 ) SECTION 3 of the Bombay Motor Vehicles Tax Act, 1958 imposes tax on motor vehicles used or kept for use in the State. The rate of tax as per this Section is to be fixed by the State Government by Notification in the Official Gazette. The tax so fixed should not exceed the maximum rate fixed in the First Schedule to the Act. Sub-S. (2) of S. 3 states that a motor vehicle, of which the certificate of registration is current, shall be deemed to have been used or kept for use in the state except during the period for which the taxation authority has certified that the vehicle was not used or kept for use. Section 3a provides for levy of additional tax on omnibuses, which are used or kept for use in the State as contract carriage. Those vehicles are to pay not only the tax contemplated by S. 3, but also the additional tax. Section 3a provides for levy of additional tax on omnibuses, which are used or kept for use in the State as contract carriage. Those vehicles are to pay not only the tax contemplated by S. 3, but also the additional tax. Sub-S. (5) of S. 3a prior to its amendment by Act 3 of 1992 stated that when the registered owner or the person having possession of an omnibus, who has paid tax, proves to the satisfaction of the Taxation Authority that the vehicle has not been used for a continuous period of not less than two months, he shall be entitled to refund of the tax for each complete month of the period for which tax has been paid. This sub-section was amended by Act 3 of 1992. Newly substituted sub-section is as follows :-". . . . . . . . . (5) (a) Where the registered owner or any person having possession or control of a designated omnibus who has paid tax under this section proves to the satisfaction of the Taxation Authority that the designated omnibus in respect of which the tax has been paid, has not been used or kept for use or kept for use for a continuous period of not less than one month, he shall be entitled to the refund of an amount equal to one-twelfth of the annual rate of tax paid in respect of such omnibus for each complete month of the period for which the tax has been paid, so however that, except as otherwise provided in clause (b) the total amount of a refund in a year shall not exceed - (i) three hundred seventy-five rupees per passenger permitted to be carried in the case of an ordinary designated omnibus, (ii) six hundred seventy-five rupees per passenger permitted to be carried in the case of a luxury or tourist designated omnibus; provided that for the purpose of determining the amount of refund under this clause only such of the period in which a designated omnibus has not been used or kept for use shall be taken into account as comprises of complete months. (b) Where a registered owner or a person having possession or control of a designated omnibus who has paid tax under this section proves to the satisfaction of the State Government or such officer not below the rank of the Director of transport, Gujarat State, as may by notification in the Official Gazette be authorised in this behalf by the State Government that the designated omnibus in respect of which the tax has been paid has for reasons beyond the control of such owner or person not been used or kept for the use for a continuous period of not less than one month but exceeding three months in a year, he shall be entitled to the refund of an amount equal to one-twelfth of the annual rate of the tax paid in respect of such omnibus for each complete month of the period of which the tax has been paid. Provided that for the purposes of determining the amount of refund under this clause only such of the period in which a designated omnibus has not been used or kept for use shall be taken into account as comprises of complete months. . . . . . "sub-section (5) (a) allows refund of tax for a period of three months on proof of non-user. If the period of non-user is more than three months, clause (b) of subsection (5) comes into operation. As per that clause, refund of tax for more than three months can be claimed only if the owner or the person in possession of the vehicle proves to the satisfaction of the Authorised Officer that the vehicle was not used for reasons beyond his control. The question that now arises for decision is whether refund of tax remitted in relation to an omnibus can be claimed on account of non-user of the vehicle if the period of non-user exceeds three months even in the absence of proof of reasons beyond the control of the owner or person in possession. In the instant case, it is the admitted case of parties that vehicle belonging to the petitioners was not used during the period from 1-7-1995 to 31-3-1996. Respondent No. 3 accepted the report submitted by the Motor Vehicle Inspector regarding its non-user for three months from 1st July, 1995 to 30th September, 1995 and ordered refund of the tax. In the instant case, it is the admitted case of parties that vehicle belonging to the petitioners was not used during the period from 1-7-1995 to 31-3-1996. Respondent No. 3 accepted the report submitted by the Motor Vehicle Inspector regarding its non-user for three months from 1st July, 1995 to 30th September, 1995 and ordered refund of the tax. In relation to the remaining period, refund was not granted because the 2nd respondent, the Director of Transports, was not satisfied of the non-user for reasons beyond the control of the petitioners. ( 6 ) ENTRY 57 of List II in Schedule Seven of the Constitution authorises the state Legislature to legislate on taxes on vehicles subject to the provisions of Entry 35 of List III. The scope of State laws, imposing taxation on motor vehicles, enacted by virtue of Entry 57 of List II came up for decision before the Supreme Court in Bolani Ores LIMITED v. State of Orissa, AIR 1975 SC 17 , Travancore Tea Co. LIMITED v. State of Kerala , AIR 1980 SC 1547 and State of Karnataka v. K. Gopalakrishna Shenoy , AIR 1987 SC 1911 . The Supreme Court, in these cases, consistently took the view that the Taxation Act of a State is a regulatory measure, imposing compensatory taxes for the purpose of raising revenue to meet the expenditure for making the roads, maintaining them and for facilitating the movement and regulation of traffic. Their Lordships categorically laid down that the purpose of the Taxation Act is not to levy taxes on vehicles, which do not use the roads or in any way form part of the flow of traffic on the roads, which is required to be regulated. In other words, Their Lordships held that the power of taxation cannot exceed compensatory nature, which must have some nexus with the vehicles using the roads, viz. , public roads. If the vehicles do not use the roads, notwithstanding that they are registered under the Act, they cannot be taxed. Subsection (2) of S. 3 of the Bombay Motor Vehicles Tax Act, 1958 clearly provides that where a motor vehicle is not using the roads, no tax is leviable thereon. If any tax has been paid in relation to that vehicle, then that portion of the tax for the period during which it was not put on the road must be refunded. If any tax has been paid in relation to that vehicle, then that portion of the tax for the period during which it was not put on the road must be refunded. A reading of S. 3 and S. 3a prior to the amendment brought out by Act 3 of 1992 makes it very clear that like all motor vehicles, omnibuses are not to pay tax for the period during which they are not used or kept for use. By the amendment, omnibuses were to get tax refund for more than three months only, if the owner or the person in possession proves to the satisfaction of Authorised Officer that the non-user of the vehicle was on account of reasons beyond his control. ( 7 ) IT is settled law that levy of tax on motor vehicles can be imposed only on the vehicles that are used or kept for use on the public roads of the State. In order to avoid evasion of tax, the State can compel the owner to pay the tax in advance. The interest of a bona fide owner of the vehicle, who has not put the vehicle on the road, is safeguarded by enabling him to claim refund by obtaining a certificate of non-user. If the owner or the person in possession of the vehicle gets a certificate from the concerned authority in the prescribed form regarding the non-user, he must get refund of the tax. Non-user of the vehicle alone is sufficient to enable the owner or the person in possession to claim refund of the tax for the period during which the vehicle was not put to use. If during that period, on verification it is found that the vehicle has been used on public road, the State has the right to refuse the claim of refund. In a case where the non-user of the vehicle is found by the Authorities of the Motor Vehicles Department, the owner is entitled to get refund of the tax for that period whether the non-user was beyond his control or otherwise. As held by the Supreme Court, the tax on motor vehicles is a compensatory tax levied for the use of the road and it is not a tax on ownership or possession of the motor vehicles. As held by the Supreme Court, the tax on motor vehicles is a compensatory tax levied for the use of the road and it is not a tax on ownership or possession of the motor vehicles. The registered owner or person, having possession or control of the vehicle, is liable to pay the tax in advance and he is entitled to get a refund of the tax for the period during which the vehicle was not used subject to the conditions prescribed. It is the non-user that is the crucial fact that entitles the registered owner or the person in possession to get refund. The reason for nonuser is irrelevant. The scheme of motor vehicles taxation is that tax has to be paid at a prescribed rate in advance. The liability to pay tax continues as long as the certificate of registration is current. If the vehicle had not actually been put to use for any period not being less than one calendar month, the person paying tax, should apply to the prescribed authority for getting refund of the tax after satisfying the authority about the non-user and the truth of the claim for refund. Whenever the person paying the tax has not made use of the roads by plying the vehicle and substantiates his claim by proper proof, he is entitled to get refund of the tax in respect of that period of non-user. Person who paid the tax in advance in relation to an omnibus in the light of the provisions contained in the Constitution and in view of the pronouncement made by the Supreme Court is entitled to get refund of the tax for the period during which the vehicle was not put on road. He need not show that the non-user was on account of reasons beyond his control. The insistence on proof of reasons beyond the control of the registered owner or the person in possession is beyond the Legislative competence of the State. ( 8 ) IN the Statement of Objects and Reasons for enacting the Amending Act 3 of 1992, it was stated that it is generally uneconomic for the registered owners of omnibuses not to use them for a very long time. Many a time omnibuses, which were purported to have been put to non-use, were operated clandestinely, resulting in evasion of tax. Many a time omnibuses, which were purported to have been put to non-use, were operated clandestinely, resulting in evasion of tax. In order to prevent evasion of tax, it is necessary to make provision to restrict refund of tax to a total period of three months for non-use in a financial year. In order to meet the genuine cases of non-user for the period exceeding three months on account of reasons beyond the control of the registered owner, sub-S. (5) of the parent Act has to be amended. Intention of the State Government to avoid evasion of tax is laudable, but the legislation to give effect to that purpose must depend upon the regulatory and compensatory nature of the tax. Taxation on motor vehicles can be compensatory only. That means the State cannot impose tax on motor vehicles for the purpose of raising revenue. The liability to pay tax cannot exceed the compensatory nature. The tax must have correlation with the use of the road by the vehicle. If the vehicles do not use the road, whatever be the reason, they cannot be taxed. To avoid evasion of tax, the registered owner or the person in possession can be directed to surrender the registration certificate, fitness certificates, etc. , for the period of non-user. In case, in spite of such surrender of the certificates, vehicles are clandestinely put to use, the State must take appropriate action against the owner in accordance with law. The possibility of such vehicles being put to clandestine use cannot be a ground for imposing tax on omnibuses, which are not put on road and which are, in fact, kept away from the road. The provision contained in clause (b) of sub-S. (5) of S. 3a, requiring the registered owner or person in possession or control of an omnibus to prove that the vehicle was not used or kept for use for reasons beyond his control for the purpose of claiming refund for over three months, is beyond the legislative competence of the State Legislature. So, the words, "for reasons beyond the control of such owner or person" in clause (b) of sub-S. (5) of S. 3a has to be struck down and we do so. ( 9 ) CLAUSES (a) and (b) of sub-S. (5) of S. 3a contemplates two authorities for ordering refund of tax on account of non-user of omnibus. So, the words, "for reasons beyond the control of such owner or person" in clause (b) of sub-S. (5) of S. 3a has to be struck down and we do so. ( 9 ) CLAUSES (a) and (b) of sub-S. (5) of S. 3a contemplates two authorities for ordering refund of tax on account of non-user of omnibus. For getting refund of tax for three months, the owner or person in possession need prove that omnibus has not been used or kept for use, to the satisfaction of the taxation authority. If the refund is claimed for more than three months, the owner or person in possession of the omnibus should prove non-user to the satisfaction of State Government or an Authorised Officer. This provision is challenged as arbitrary. Tax on omnibus is based on the seating capacity of the vehicle. The amount of tax on such vehicle is substantial and the State cannot forgo the same on flimsy reasons. So, as a policy state decided to authorise taxation authorities to deal with claims for refund upto three months. The responsibility of dealing with clauses for refund for more than three months has been entrusted with a more senior authority. We do not find any arbitrariness in conferring the power to order refund of tax on two authorities depending on the period. In this view, we do not find any vice in entrusting the above responsibility with two authorities as per clauses (a) and (b) of sub-S. (5) of S. 3a of the Act. ( 10 ) ABOVE discussion leads to the following conclusion : We allow this petition and the words "for reasons beyond the control of such owner or person" occurring in clause (b) of sub-S. (5) of S. 3a of the Bombay Motor Vehicles Tax Act, 1958, as amended by Act 3 of 1992, is struck down as being beyond the legislative competence of the State Legislature. Respondents are directed to pass appropriate orders on the claim put forth by the petitioner for refund of the tax for the period from 1-7-1995 upto 31-3-1996 in relation to his omnibus, bearing registration No. GRQ 8403, as expeditiously as possible, at any rate within two months from the date of receipt of a copy of this judgment. Rule is made absolute accordingly. No costs. .