2006 Supreme(SC) 1000

2006(9) Supreme 585
SUPREME COURT OF INDIA
(From Madhya Pradesh High Court)
S.B. Sinha and Dalveer Bhandari, JJ.
Hardev Motor Transport - Appellant
versus
State of M.P. & Ors. - Respondents
Civil Appeal No. 4557 of 2006
(Arising out of SLP (C) No. 22580 of 2005)
With
Civil Appeal No. 4558 of 2006
(Arising out of SLP (C) No. 24087 of 2005)
Decided on 19-10-2006
Counsel for the Parties :
For the Appellant : Mrs. Rani Chhabra, Advocate.
For the Respondents : S.K. Dubey, Sr. Advocate, B.S. Banthia and Naveen Sharma, Advocates.

IMPORTANT POINT
Clause (g) of Entry IV of the First Schedule of the Madhya Pradesh Motoryan Karadhan Adhiniyam 1991 as amended by Madhya Pradesh Motoryan Sanshodhan Adhiniyam, 2004 read with Explanation (7) of the First Schedule is declared unconstitutional.

Headnote:Motor Vehicles Act, 1988 - Sections 2(7), 2(40), 2(43), 63, 72, 74 and 192A - Madhya Pradesh Motoryan Karadhan Adhiniyam, 1991 - Section 3; Clause (g) of Entry IV of First Schedule as amended by Madhya Pradesh Motoryan Sanshodhan Adhiniyam 2004 read with Explanation (7) of the First Schedule - Constitutional validity - Appellants, holders of contract carriage permits - On allegations that they have been using their vehicles as stage carriage permits, vehicles were detained - They were asked to pay duty as if the vehicles were being plied without any permit - Rate of tax of a contract carriage permit is more than the stage carriage - Clause (g) of Entry IV specifies the rate of tax of motor vehicle plying without permit at the rate of Rs. 1500/- per seat per month - Explanation (7) of the First Schedule of the 1991 Act provides for an inclusive definition stating that the words ‘plying without permit’ in clause (g) shall include plying of a public service vehicle on an authorized route or making a trip not authorized by a permit granted under the 1988 Act - 1991 Act does not make any provision for compliance of principles of natural justice or for determination of a question as to whether the conditions of permit have been violated by an independent authority - Whether an owner of a vehicle having one kind of permit could be treated as having no permit at all - (No) - Clause (g) of Entry IV of the First Schedule of the 1991 Act as amended by 2004 Act read with Explanation (7) of the First Schedule held unconstitutional.

       Held : Section 3 of the 1991 Act is the charging section. It provides that the tax shall be levied on every motor vehicle used or kept for use in the State at the rates specified in the First Schedule. The levy of tax, therefore, is on the motor vehicles. Its rate may vary keeping in view its use or the nature thereof. However, the use of a motor vehicle so far as public service vehicles are concerned would depend upon the nature of permit held by it. It is not in dispute that Appellants herein have been granted permit for plying their buses as contract carriage. Allegation against this is that they have been violating the terms and conditions of the permit by plying their vehicles as stage carriage. It is, however, not in dispute that the rate of tax of a contract carriage permit is more than the stage carriage. Clause (g) of Entry IV specifies the rate of tax of motor vehicle plying without permit at the rate of Rs. 1500/- per seat per month. (Para 23)

       Explanation (7) of the First Schedule of the 1991 Act does not create any legal fiction. It provides for a inclusive definition stating that the words "plying without permit" in Clause (g) shall include plying of a public service vehicle on an authorized route or making a trip not authorized by a permit granted under the 1988 Act.(Para 24)

       The role of an explanation of a statute is well-known. By inserting an explanation in the Schedule of the Act, the main provisions of the Act cannot be defeated. By reason of an explanation, even otherwise, the scope and effect of a provision cannot be enlarged.(Para 25)

       We have noticed that the Constitution Bench categorically states that compensatory tax cannot be progressive. We have furthermore noticed that, according to the Constitution Bench, imposition of tax cannot be a term or condition of a licence. If a permit has been granted, the holder of a permit is liable to comply with the conditions of permit. If he violates the terms and conditions of permit, law will take its own course. A permit is granted under the 1988 Act. If there is violation of the terms of permit, the consequences, therefor, shall ensue as contained in Section 192A of the 1988 Act. A distinction must be borne in mind that a tax cannot be imposed by way of penalty although penalty can be imposed for non-payment of tax or evasion of tax. The State may make suitable legislations in this behalf. But the same would not mean that while specifying a rate of tax, the executive government of the State can indirectly levy a penalty which it cannot do directly. (Para 26)

       The transport authorities of the State indisputably have a power to check a vehicle so as to ascertain whether payment of tax is being evaded. They have been conferred with the power to detain a vehicle. They can release the vehicle only when tax as demanded is paid. Even the power of the court to release the vehicle has been taken away unless tax is paid and the court can satisfy itself as to whether a tax is paid or not only on the receipt of the certificate issued by the transport authorities of the State. The power of the transport authorities, therefore, is very wide. We, however, do not mean to suggest that only because a wide power has been conferred the same by itself would lead to a presumption that the same is capable of misuse or on that count alone the provisions of Article 14 of the Constitution of India would be attracted. But, when a statue confers a wide power upon a statutory authority, a closer scrutiny would be required.(Para 28)

       The 1991 Act also does not make any provision for compliance of the principles of natural justice or for determination of a question as to whether the conditions of permit have been violated by an independent authority. Appellants have paid tax. They have paid tax as specified for in permits granted in their favour as a contract carriage. The rate of tax payable by a contract carriage is higher than the rate of tax imposed on a stage carriage. For non-payment of tax or for payment of tax for a wrong purpose, a penalty can be imposed but it is difficult to conceive that a different rate of tax which is not contemplated under Section 3 of the 1991 Act can be imposed by way of penalty.(Paras 29 and 30)

       As a logical corollary the mode and manner in which the permits are granted must necessarily be considered to be part of the provisions of the 1991 Act. Article 254(2) of the Constitution of India as such may not be attracted but it is a trite law that the executive while fixing a rate of duty cannot be permitted to usurp the legislative power and make a provision which would be inconsistent with the substantive provision of the statute. In other words, the provisions contained in the Schedule must be in consonance with the substantive provisions in the main Act. It must be in conformity with the charging Section. As in terms of Section 3 of the 1991 Act, the legislature directed that the tax can be levied on motor vehicles subject to the rates fixed; by taking recourse to Explanation (7), firstly, no new definition could be introduced and, secondly, an owner of a vehicle having one kind of permit could not have been treated as having no permit at all only because the transport authorities have reasons to believe that the conditions of permit have been violated. (Para 33)