Important point
Provision of Section 10(3) of U.P. Motor Vehicles Taxation Act providing for penalty of 10 times of tax in case of evasion of payment of additional tax for goods carriage vehicle under the Act is not violative of Article 14 or 19(1)(g) of Constitution of India.

Headnote:Uttar Pradesh Motor Vehicles Taxation Act, 1997—Section 10(3)—Act providing for additional tax on motor vehicles engaged in transport of passengers and goods for hire—Goods carriage plying under permits granted by State Authorities tax payable was different from goods carriage operated under national permits granted under Section 88(12) of Motor Vehicles Act, 1988—Provision of penalty ten times in case of breach in payment of additional tax—High Court declared Section 10(3) of the Act as ultra vires Articles 14 and 19(1)(g) of the Constitution of India—Appeal—While considering the scope of economic as well tax legislation, Courts must bear in mind that unless provision was manifestly unjust or glaringly unconstitutional, Court must show judicial restraint in interfering with its applicability—Penalty provided for in Section 10(3) of the Act was compensatory as was levied for breach of a statutory duty for non-payment of tax—Sufficient safeguards and conditions were provided which were not onerous and provided a forum for aggrieved party to get redressal—High Court erred in declaring the provision of Section 10(3) of the Act as ultra vires.
       Held : In the case of Bhavesh D. Parish & Others v. Union of India & Another reported in (2000) 5 SCC 471, this Court laid down that while considering the scope of economic legislation as well as tax legislation, the courts must bear in mind that unless the provision is manifestly unjust or glaringly unconstitutional, the courts must show judicial restraint in interfering with its applicability. Merely because a statute comes up for examination and some arguable point is raised, the legislative will should not be put under a cloud. It is now well-settled that there is always a presumption in favour of the constitutional validity of any legislation unless the same is set aside for breach of the provisions of the Constitution. The system of checks and balances has to be utilized in a balanced manner with the primary objective of accelerating economic growth rather than suspending its growth by doubting its constitutional efficacy at the threshold itself. (Para 14)
       In the light of the above judgments as applicable to the provisions of the said 1997 Act, we are of the view that the High Court had erred in striking down section 10(3) as ultra vires articles 14 and 19(1)(g) of the Constitution. “Penalty is a slippery word and it has to be understood in the context in which it is used in a given statute. A penalty may be the subject-matter of a breach of statutory duty or it may be the subject-matter of a complaint. In ordinary parlance, the proceedings may cover penalties for avoidance of civil liabilities which do not constitute offences against the State. This distinction is responsible for any enactment intended to protect public revenue. Thus, all penalties do not flow from an offence as is commonly understood but all offences lead to a penalty. Whereas the former is a penalty which flows from a disregard of statutory provisions, the latter is entailed where there is mens rea and is made the subject-matter of adjudication. In our view, penalty under section 10(3) of the Act is compensatory. It is levied for breach of a statutory duty for non-payment of tax under the Act. Section 10(3) is enacted to protect public revenue. It is enacted as a deterrent for tax evasion. If the statutory dues of the State are paid, there is no question of imposition of heavy penalty. Everything which is incidental to the main purpose of a power is contained within the power itself. The power to impose penalty is for the purpose of vindicating the main power which is conferred by the statute in question. Deterrence is the main theme of object behind that imposition of penalty under section 10(3). (Para 16)
       Lastly, we may point out that under section 12, the drivers/operators are entitled to claim refund of tax. Similarly, under section 18, any person aggrieved by the order of the Tax Officer under section 12 is entitled to move the appellate authority within 30 days. Learned counsel for the State stated before us and we record her statement that cases of this type would come under section 18. Learned counsel for the State also pointed out that in appropriate cases where the transport vehicle carries perishable goods, the vehicle is released on the driver depositing the relevant documents with the Tax Officer so that payment could be made within a stipulated period. Although section 18 refer to appellate authority, in our view, on an examination of the scheme of the Act, we find from the provisions of section 18 that the authority deciding appeals against orders passed by Tax Officer under section 12 is really exercising initial jurisdiction and that under the Act, there are sufficient safeguards and conditions which are not onerous and which provide a forum for the aggrieved party to get redressal and, therefore, the High Court had erred in striking down section 10(3) of the Act. (Para 18)

Judgment

Kapadia, J.—These civil appeals by special leave are directed against the judgment and order of the High Court of Allahabad, declaring section 10(3) of the Uttar Pradesh Motor Vehicles Taxation Act, 1997 (for short “the 1997 Act”) as ultra vires articles 14 and 19(1)(g) of the Constitution.

2. The facts lie within a narrow compass and they are as follows:

Sukhpal Singh is the owner of a tanker bearing registration No. MP-24C-0377. The said tanker is covered by national permit granted by the Regional Transport Authority, Durg. The national permit granted was for Chattisgarh, Maharashtra, Uttar Pradesh and Andhra Pradesh. Sukhpal was granted an authorization certificate on the basis of the national permit valid up to 14.2.2003.

3. On 26.2.2002, while carrying goods from Bhilai Steel Plant to Sonepat, the tanker in question entered the State of U.P. and after unloading the goods returned from Sonepat. While doing so, the tanker crossed the U.P. border at Masaura and when it was about 8 kms. in the State of M.P., the vehicle was seized by the Assistant Regional Transport Officer, Lalitpur on 4.3.2002.

4. On 5.3.2002, Sukhpal made an application for release of his vehicle on which the Assistant RTO passed an order directing Sukhpal to pay Rs. 5100/- as composite tax plus ten times penalty under section 10(3) of the said 1997 Act, as amended by U.P. Amending Act No.25 of 2001.

5. The order of penalty was challenged by Sukhpal vide writ petition in the High Court of Allahabad, in which the validity of section 10(3) was put in issue.

6. We have quoted the facts in the case of Sukhpal as a representative matter in the group of similar matters.

7. Smt. Shobha Dixit, learned senior counsel appearing on behalf of the appellant-State submitted that on account of huge evasion of tax, the legislature had to enact section 10(3) providing for a deterrent penalty as the State of U.P. has a vast boundary and the vehicles could enter from distant corners without payment of statutory dues at the entry point. Learned counsel pointed out that drivers would carry demand drafts in their pockets and they did not pay the taxes (including additional tax) till they were apprehended and when apprehended they made an excuse of paucity of collection centres. She contended that the aforestated defaults constituted tax evasion and, therefore, the State Legislature incorporated section 10(3) into existing section 10 by Amending Act No.25 of 2001 imposing ten times penalty. Learned counsel next contended that the vehicle in question was “goods carriage” operating under national permit granted under section 88(12) of the Motor Vehicles Act, 1988 (for short “the M.V. Act, 1988”) and, therefore, it was liable to pay additional tax at the rate applicable to such “goods carriage” under part `B’ of the third schedule [See: section 5(1)(b) of the 1997 Act]. Learned counsel submitted that under section 5, additional tax has been levied on goods carriage plying under permits granted by the authorities within UP, goods carriage operating under national permit granted under section 88(12) of the M.V. Act, 1988 and goods carriage plying under permits granted by authorities outside Uttar Pradesh for inter-State route partly lying in Uttar Pradesh and, therefore, there was no discrimination to the levy of additional tax. Learned counsel further contended that under section 9(1)(iii) of the 1997 Act, additional tax is payable on goods carriage under section 5(1)(a) in advance on or before the fifteenth day of January, April July and October in each year. Learned counsel urged that under section 9(3), in cases where breach occurs in payment of additional tax within the period specified under section 9(1), a penalty of twenty five per cent of the due amount has been prescribed for goods carriage plying under permits granted by authorities within UP, whereas a ten times penalty is imposed for the same offence on transport vehicles having national permit under section 10(3) as

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2005 Supreme(SC) 1139

Important pointProvision of Section 10(3) of U.P. Motor Vehicles Taxation Act providing for penalty of 10 times of tax in case of evasion of payment of additional tax for goods carriage vehicle under the Act is not violative of Article 14 or 19(1)(g) of Constitution of India.

Cases Referred (4)

Important point
Provision of Section 10(3) of U.P. Motor Vehicles Taxation Act providing for penalty of 10 times of tax in case of evasion of payment of additional tax for goods carriage vehicle under the Act is not violative of Article 14 or 19(1)(g) of Constitution of India.