2005 Supreme(SC) 507

2005(3) Supreme 75
Supreme Court of India
(From Madras High Court)
S.N. Variava, Dr. AR. Lakshmanan and S.H. Kapadia, JJ.
State of Tamil Nadu —Appellant
versus
M. Krishnappan and Ors. —Respondents
Civil Appeal Nos. 1869-1880 of 2000
Decided on 18-3-2005
Counsel for the Parties :
For the Appellant : A.K. Ganguli, Sr. Advocate, Subramonium Prasad, Gopala Krishna R., Abhay Kumar and Jai Kishore, Advocates.
For the Respondent No. 1 : M.G. Ramachandran, K.V. Mohan, K.V. Balakrishnan and Ms. Taruna Singh Baghel, Advocates.

Important point
‘Life time tax’ leviable in lump sum in advance for the life time of a motor vehicle (four wheeler) on the basis of the index of ‘weight-cum-value’ does not cease to be compensatory in nature and the impugned levy is based on rational and reasonable classification, therefore, valid.

Headnote:Tamil Nadu Motor Vehicles Taxation Act, 1974—Section 4(1-A)(a) r/w Part-I Schedule-III—‘Life time tax’ leviable in lump sum in advance for life time of a motor vehicle (four wheeler) on basis of index of ‘weight-cum-value’ —Validity challenged—Impost challenged as unconstitutional, discriminatory, arbitrary—Respondent had purchased on 23-9-1998, a passenger car on payment of Rs. 5,25,451/-, the unladen weight of which was 1700 kg. on which he was charged a one time tax of Rs. 20,540/- —Allegations that value of the vehicle cannot constitute the basis for fixing the life time tax and such value had no relevance with the maintenance of roads—High Court held that impugned amending Act 27 of 1998, which imposed the levy of life time tax based on value of vehicle was inconsistent with Section 4(1-A)(b) of the Act—Whether High Court was right in holding that with the introduction of concept of ‘value’ as the basis of tax, impugned levy fell outside entry 57 of list-II of the Seventh Schedule to the Constitution—(No)—Introduction of ‘weight-cum-value’ index will not make the levy non regulatory/non compensatory.

       Held : It is well to remember that the State maintains old roads and makes new ones. These roads are at the disposal of those who use motor vehicles either for private purpose or for trade or commerce. India is a cost-push economy. It has high rate of inflation. The costs of maintenance as well as the costs of material used in the maintenance of the roads increases by the day. This naturally costs the State, which has to find funds for making new roads and for maintenance of those that are in existence. The impugned tax is regulatory and compensatory in nature in the sense that it is imposed to meet the increasing costs of maintenance and upkeep and to that extent it is not plenary. However, as stated above, the limited question is : whether the tax ceases to be compensatory and regulatory with the introduction of “weight-cum-value” index and whether the said index is contrary to the schedule of the said 1974 Act. At the outset, it may be noted that depreciation is a function of time and maintenance. In the present case, we are concerned with the “life time tax” which is one time payment spread over the economic life of the vehicle. The said tax is based on time, use and maintenance of the roads. As stated in the judgment of this Court in Bombay Tyre (supra), any standard, which maintains a nexus with the essential character of the levy can be regarded as a valid basis for assessing the measure of the levy. Applying the said test to the present case, we hold that the index of “weight-cum-value” maintains the nexus with the essential character of the levy in question and, therefore, the High Court erred in holding that by introduction of the value of the vehicle as a parameter, the levy ceases to be regulatory and compensatory in nature. It is important to bear in mind that entry 57 of list-II of the seventh schedule to the Constitution refers to taxes on vehicles suitable for use on roads. Under the said entry, a field is provided to the State Legislature to impose the impugned tax in respect of every aspect of a vehicle. When the Constitution provides a field of legislation, it has to be read in the broadest possible terms. When the State is empowered to levy taxes on goods, it is empowered to levy such taxes on every aspect of such goods. Similarly, when the State is empowered to levy tax on the vehicle, it is empowered to levy tax on every aspect of the vehicle. Throughout the Constitution, the legislative power relating to taxes and the legislative power relating to general subjects is treated separately and is not subsumed under a general head. Applying the above tests to the present case, we are of the view that the High Court had erred in holding that on account of introduction of “weight-cum-value” index in the third schedule to the Act, the impugned tax had ceased to be regulatory and compensatory and consequently, the said levy fell outside entry 57 list-II. (Paras 18 & 19)

       In the present case, we are satisfied that the levy in question being one time tax continues to be a part of regulatory measure. For administrative reasons, in the matter of collection of tax, one time payment of tax is administratively convenient and at the same time, it is also beneficial to the users of the vehicles who do not have to go to the office of the RTO every year to pay the annual taxes. It is also beneficial to the users of the motor vehicles, as they do not have to pay taxes at the increased rates from time to time over the economic life of vehicle as contemplated by section 3(2) of the Act. Moreover, weight alone may not provide a sufficient parameter/basis for imposition of “life time tax”. As an illustration, we may point out that the weight of the Honda CRV Car is 1500 kg. as against the weight of Tata Indigo GLX which weighs 1490 kg. and yet the cost of Honda CRV is Rs. 15,24,396 lacs whereas the price of Tata Indigo is 5,08,651 lacs. Hence, weight index alone may not constitute the basis of “life time tax”. In the circumstances, we reiterate that introduction of “weight-cum-value” index will not make the levy non-regulatory/non-compensatory. Further, under the unamended 1974 Act, weight was the basis of the impugned levy as an annual tax. But with the introduction of a “life time tax”, the entire future projection spread over the economic life of the vehicle had to be taken into account along with other factors like fall in the value of the rupee, inflation, rising costs of the material, cross subsidy etc. and consequently, it was necessary to introduce the new index of “weight-cum-value” and factors like paying capacity of the owner. In our view, these factors have nexus with the use of the roads over a period of time and hence, the impugned levy fell within entry 57 list-II of the seventh schedule to the Constitution. (Paras 22 & 23)

       There is no violation of article 14 of the Constitution. As stated above, the impugned levy of life time tax is based on rational and reasonable classification founded on an intelligible differentia having a rational relation to the object of the impugned levy. (Para 29)