IMPORTANT POINT
Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1991, is held to be constitutionally valid.

Headnote:Constitution of India-Articles 301 and 304-Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1991 (Act No. 10 of 1991)-Constitutional validity-Road tax, levy of-State Government incurring much more expenditure than revenue from road tax-Whether High Court was justified in holding that levy is not compensatory-(No)-Tax is compensatory in nature for giving better facilities to passengers and traders-It would not come within the purview of restrictions contemplated under Article 301-No question of complying with requirement of proviso to Article 304(b), of obtaining previous sanction of President.
       Held :
        (a) A demand for tax from the traders in common with others is not a restriction on the right to carry on trade, commerce and intercourse.
        (b) Such tax would not come within the purview of the restrictions contemplated under Article 301 unless it is established that in reality, it hampers or burdens the trade and commerce.
        (c) So long as the tax remains compensatory or regulatory, it cannot operate as a hindrance.
        (d) If a State tax law accords identical treatment in the matter of levy and collection of tax on the goods manufactured within the State and identical goods imported from outside the State. Article 304(a) would be complied with. There is an underlying assumption in Article 304(a) that such a tax when levied within the constraints of Article 304(a) would not be violative of Article 301 and State legislature has the power to levy such tax.
       In the present case, after the judgment rendered by the High Court in Writ Petition No.58/1978, the State Legislature enacted the 1991 Act wherein in Preamble, it is specifically stated that it was incurring much more expenditure than the revenue from the road tax. Necessary affidavit stating the expenditure incurred for construction and maintenance of roads and bridges as well as the total amount collected on the basis of tax was filed before the High Court. Undisputedly, most part of the State of Himachal Pradesh is not connected by railway. For a hilly area having heavy downpour every year, the roads require more expenditure for maintenance. For trade, commerce and intercourse, lying down of additional roads is also the necessity. The aforesaid facts were pointed out to the High Court, but the Court surprisingly arrived at the conclusion that as the State Government recovers only a part of the expenses incurred in construction and maintenance of roads and bridges, levy is not compensatory. As stated above, this reasoning cannot be sustained. In the present case, it is required to be held that the tax is compensatory in nature for giving better facilities to the passengers and traders, therefore, it would not come within the purview of restrictions contemplated under Article 301. Hence, there is no question of complying with the requirement of proviso to Article 304(b) of the Constitution of obtaining previous sanction of the President. (Paras 22 & 23)
       (ii) Constitution of India-Articles 301 and 304-Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1991 (Act No. 10 of 1991) -Constitutional validity-Legislative competence of State Legislature-High Court having held provisions of H.P. Taxation (On Certain Goods Carried by Road) Act, 1976, as unconstitutional and invalid-State Legislature enacted 1991 Act by specifically stating that levy of tax was compensatory and that revenue recovered from tax was much less than the expenditure incurred by it for construction of roads and bridges etc. in a hilly area-Whether can it be held that Legislature was overruling previous decision of High Court in M/s. Yashpal Garg s case-(No)-Competence of legislature to pass such law cannot be challenged.
       Held : It is settled law that the Legislature can change the basis on which a decision is rendered invalidating the Act and thereby validating the legislation which has been declared to be null and void. The cause for invalidating the Act can be removed and if such cause is removed, it cannot be said that the Legislature had acted beyond its competence. The Legislature under the Constitution has within the prescribed limits powers to make laws prospectively as well as retrospectively. By exercise of its powers, the Legislature can remove the basis of a decision rendered by a competent Court thereby rendering that decision ineffective. (Paras 24 & 25)
       The State Legislature enacted a new law by specifically stating that levy of tax was compensatory and that the revenue recovered from the tax was much less than the expenditure incurred by it for construction, maintenance and repair of roads and bridges is a hilly area. By pointing out these facts, it cannot be said that the Legislature was overruling the decision rendered in M/s Yashpal Garg s case. This only makes it clear that levy of road tax was compensatory. Competence of legislature to pass such law is not at all challenged and cannot be challenged. (Para 27)

JUDGMENT

Shah, J.-The High Court of Himachal Pradesh by judgment and order dated 10-12-1990 allowed Civil Writ Petitions No. 58 of 1978 etc. filed by the respondents challenging the validity of the provisions of the H.P. Taxation (On certain Goods carried by Road) Act, 1976) No. 34 of 1976) (hereinafter referred to as "the 1976 Act") and held that the said provisions were unconstitutional and invalid. The Court held thus:--

"We have seen earlier that by the impugned provision, there is a direct levy upon the carriage of goods by road and water ways. It is not the case of the respondent State that the levy was compensatory or regulatory in character. In any case, we do not find any mention in the reply filed by the State of any facts which may bring the levy in either of the two categories.

On the averments made in the petition, noticed by us earlier, which have not been effectively denied on behalf of the State, there is hardly any scope for saying that the levy does not amount to restriction within the meaning of Article 301 of the Constitution of India. The levy could only have been saved, in case the restriction brought about by it purported to be in public interest, and that too, if the assent of the President had been obtained either by way of previous sanction or even by obtaining his assent to the Act subsequently to bring it within the four corners of Article 255. Admittedly, there is no sanction of the President at any stage."

2. The High Court also directed that the amount deposited towards the tax be refunded in terms of interim orders.

3. That judgment and order is challenged by the State of Himachal Pradesh by filing Civil Appeal Nos.3545/91 and others.

4. It appears that being aggrieved by the said judgment and order and in order to avoid delay in recovering the road tax, apart from filing appeals, the State enacted the Himachal Pradesh Taxation (On Certain Goods carried by Road) Act, 1991 (Act No.10 of 1991) (hereinafter referred to as "the 1991 Act"). The objects and reasons of the 1991 Act read thus:-

"The Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1976 was enacted under Entry 56, List II of the Seventh Schedule to the Constitution of India to levy a tax on certain goods which are carried by road within the State of Himachal Pradesh. The charging Section 3 of this Act categorically declared the levy of tax to be in addition to the tax levied or leviable under the Himachal Pradesh Passengers and Goods Taxation Act, 1955. The conspicuous distinction between the taxes imposed by the Act of 1955 and Act of 1976 is that while under the former Act the tax is calculation with reference to the fare or freight charged or chargeable, whereas under the Act of 1976, it is calculated with reference to weight or volume of goods carried by road. Nevertheless in both these enactments there exists identity of inextricable nexus with the carriage of goods by road.

2. In various writ petitions, the Hon ble High Court of Himachal Pradesh has held that the tax levied under the aforesaid Act is a direct levy upon the carriage of goods by road and waterways and it is constitutionally invalid being violative of Article 301 read with Article 304(b) of the Constitution of India. The High Court has further ordered that the State Govt. shall refund, along with interest, the amount of tax deposited towards tax by the petitioners. This judgment, therefore, went against the basic intention underlying the enactment of the H.P. Taxation (On Certain Goods Carried by Road) Act, 1976, namely, a compensation for the huge expenditure incurred each year by the Govt. on construction, development and maintenance of roads and bridges within the State.

3. The Hon ble Supreme Court in its various judgments has held that measures imposing compensatory taxes, do not come within the purview of restrictions contemplated by Article 301 and such measures need not comply with the requirements of the proviso to Article 304(b) of the Con

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2003 Supreme(SC) 528

IMPORTANT POINTHimachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1991, is held to be constitutionally valid.

Cases Referred (10)

IMPORTANT POINT
Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1991, is held to be constitutionally valid.