The tax imposed under Section 3A(3) of the 1972 Act is regulatory in character and is not a penalty.

JUDGMENT :

Vikram Nath, J.

1. The above set of appeals were referred to larger Bench of three Judges in terms of the order dated 05.03.2020 which reads as follows:

“Considering the fact that the issue raised in these appeals was referred to a larger Bench of three Judges in terms of order dated 27.02.1998 in Civil Appeal No. 10457/1995 and other connected cases [reported in (1998) 9 SCC 676] but which appeals later on repealed by Rajasthan Act, 1951, which is on similar lines with the provision involved in the present appeals.

Hence, we deem it appropriate to refer these appeals to a larger Bench of three Judges for an authoritative pronouncement on the questions involved.

Registry is directed to place the matters before Hon’ble the Chief Justice of India for constituting the appropriate Bench for hearing these appeal(s).”

2. The above referred order dated 27.02.1998 passed in Civil Appeal No. 10457 of 1995 and connected matters reported in State of Rajasthan Vs. Khalsa Travels, (1998) 9 SCC 676 is reproduced below:

“1. These appeals filed by the State of Rajasthan raise questions relating to the constitutional validity of Section 4-B(3) of the Rajasthan Motor Vehicles Taxation Act, 1951 (hereinafter referred to as “the Act”) and Rule 4-CC of the Rajasthan Motor Vehicles Taxation Rules, 1951 (hereinafter referred to as “the Rules”) which make provision of levy of special road tax on a transport vehicle which is used without a valid permit or in any manner not authorized by the permit. By the impugned judgments the High Court has held that Section 4-B(3) is ultra vires the rule-making powers conferred on the State Government under the Act.

2. According to the High Court the imposition, though described as a tax, is, in substance, a fine for an alleged offence of plying the vehicle without a valid permit or in contravention of the conditions of permit and such a penalty cannot be treated as a part of regulatory or compensatory tax. On that view, The High Court has declared that Section 4-B(3) of the Act is ultra vires the powers conferred on the State Legislature under Entry 56 of List II of the Seventh Schedule to the Constitution of India. The question that falls for consideration in these appeals is whether the imposition under Section 4-B(3) is not a tax but a penalty and is ultra vires the legislative powers of the State Legislature under Entry 56 and Entry 57 of List II.

3. Having regard to the importance of the question, we consider it appropriate that these matters are considered by a Bench of three Judges. The matter may, therefore, be placed before the Hon’ble Chief Justice for necessary directions.”

A careful perusal of the above orders confines the question for consideration to be whether the imposition of additional special road tax levied on transport vehicle used without a valid permit is not a tax but a penalty and is ultra vires the legislative powers of the State Legislature under Entries 56 and 57 of List II (the State List) of the Seventh Schedule to the Constitution.

3. Civil Appeal No.10457 of 1995 was dismissed vide order dated 15.04.1998 for the reason that similar provisions enacted in the State of Rajasthan were repealed by the Rajasthan Finance Act, 1977 and, as such, the question raised was held to be no longer a live issue. The said appeals along with connected appeals were accordingly dismissed, however, the question was left open. The said order dated 15.04.1998 is reproduced hereunder: -

“These appeals involve the question regarding the validity of Section 4 (B) (3) of the Rajasthan Motor Vehicles Act, 1951 and Rule 4 CC of the Rajasthan Motor Vehicles Taxation Rules. While the matters were pending in this Court the State legislature has enacted Rajasthan Finance Act, 1977 whereby Section 4 (B) (3) has been repealed and since Rule 4 CC was made to give effect to the provisions contained in Section 4 (B) (3) the said rule also has ceased to apply. In view of the aforesaid amendment that has been made b