1. Dispute over passenger tax on gratis transport provided to employees and children under the Himachal Pradesh Passengers and Goods Taxation Act, 1955, and its 1997 validating amendment. (Para 1 , 2 )
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2023 Supreme(SC) 841
SUPREME COURT OF INDIA
B.V. NAGARATHNA, UJJAL BHUYAN, JJ.
NHPC Ltd. - Appellants
Versus
State Of Himachal Pradesh Secretary & Ors. - Respondents
Civil Appeal No. 3948 of 2009
With
Chief Engineer, Bhakra Beas Management Board - Appellant
Versus
State Of Himachal Pradesh Through Its Secretary & Ors. - Respondents
Civil Appeal Nos. 4738-4743 of 2009
and
Resident Engineer, Dehar Power House Division, Bhakra Beas Management Board - Appellants
Versus
State Of Himachal Pradesh Through Its Secretary & Ors. - Respondents
Civil Appeal No. 6931 of 2009
Decided on : 06-09-2023
Important Points
The Court held that a legislature can retrospectively remove the basis of a judicial decision by curing the specific defects identified by the court. The 1997 Amendment and Validation Act validly cured deficiencies in the 1955 Act, rendering gratis transport facilities for employees a taxable activity.
Subject
Taxation - Passenger Tax
Act Referred
CONSTITUTION OF INDIA: Art.14, Art.142
Himachal Pradesh Passengers and Goods Amendment and Validation Act: S.3(1)(a), S.3(a), S.5, S.6, S.7, S.8, S.9, S.2(a)(a), S.2(c), S.3(1)
KERALA ELECTRICITY SURCHARGE LEVY AND COLLECTION ACT: S.11
Himachal Pradesh Passengers and Goods Amendment and Validation Act: S.3(1)(a), S.3(a), S.5, S.6, S.7, S.8, S.9, S.2(a)(a), S.2(c), S.3(1)
KERALA ELECTRICITY SURCHARGE LEVY AND COLLECTION ACT: S.11
Headnote
(A) Himachal Pradesh Passengers and Goods Taxation Act, 1955 - Amendment and Validation Act of 1997 - Validity of vires upheld - Tax on passengers and goods carried by road in motor vehicles is enforceable - Appellants provided free transport to employees; the High Court found them liable for passenger tax under the Act, despite appealing against previous judgment which declared the Act inapplicable to them. (Paras 16.1, 23.ii)
(B) Legislative Competence - Himachal Pradesh Legislative Assembly possesses power under Article 246, List II, Entry 56 of the Constitution to legislate on taxation of passengers and goods. The court confirms amendments effectively harnessed previous issues identified in case law - e.g., definitions of 'business', 'passenger', 'fare' expanded in accordance with legislative intent. (Paras 16.2, 21)
(C) Liability - The scientific analysis led to concluding that non-fare paying employees are considered passengers under restructured definitions, supporting the tax imposition retrospectively effective from 01 April 2023. (Paras 26, 22)
(D)
Result: Appeals dismissed.
(B) Legislative Competence - Himachal Pradesh Legislative Assembly possesses power under Article 246, List II, Entry 56 of the Constitution to legislate on taxation of passengers and goods. The court confirms amendments effectively harnessed previous issues identified in case law - e.g., definitions of 'business', 'passenger', 'fare' expanded in accordance with legislative intent. (Paras 16.2, 21)
(C) Liability - The scientific analysis led to concluding that non-fare paying employees are considered passengers under restructured definitions, supporting the tax imposition retrospectively effective from 01 April 2023. (Paras 26, 22)
(D)
Result: Appeals dismissed.
Legal Category Hierarchy
- constitutional law
- tax law
-
administrative law
-
statutory interpretation
- definition of business (Para 18)
- definition of passenger
-
statutory interpretation
Advocates appeared:
For the Appellant(s) : Mr. Yashraj Singh Deora, Adv. M/S. Mitter & Mitter Co., AOR Mr. Priyesh Mohan Srivastava, Adv. Mr. Abhishek Singh, Adv. Mr. Piyush Sharma, AOR
For the Respondent(s): Mr. Anup Kumar Rattan, Sr. Adv. Mr. Karan Kapur, Adv. Mr. Vivek Kumar, Adv. Mr. Abhishek Gautam, AOR Mr. Shubham Soni, Adv. Mr. Vineet Kumar, Adv. Mr. Abhinav Mukerji, AOR Mr. Anup Kumar Rattan, AG of HP/Sr. Adv. Mr. Kartikeya Rastogi, Adv. Ms. Inderdeep Kaur Raina, Adv. Ms. Radhika Gautam, AOR Mr. Puneet Rajta, Adv. Mr. Radhika Gautam, Adv. Mr. Karan Kapur, Adv. Mr. Vivek Kumar, Adv.
For the Appellant(s) : Mr. Yashraj Singh Deora, Adv. M/S. Mitter & Mitter Co., AOR Mr. Priyesh Mohan Srivastava, Adv. Mr. Abhishek Singh, Adv. Mr. Piyush Sharma, AOR
For the Respondent(s): Mr. Anup Kumar Rattan, Sr. Adv. Mr. Karan Kapur, Adv. Mr. Vivek Kumar, Adv. Mr. Abhishek Gautam, AOR Mr. Shubham Soni, Adv. Mr. Vineet Kumar, Adv. Mr. Abhinav Mukerji, AOR Mr. Anup Kumar Rattan, AG of HP/Sr. Adv. Mr. Kartikeya Rastogi, Adv. Ms. Inderdeep Kaur Raina, Adv. Ms. Radhika Gautam, AOR Mr. Puneet Rajta, Adv. Mr. Radhika Gautam, Adv. Mr. Karan Kapur, Adv. Mr. Vivek Kumar, Adv.
Table of Contents
2. The 1997 Amendment cured defects regarding definitions of route, normal rate, and business, effectively removing the basis of the earlier judgment while remaining within legislative competence. (Para 16 , 18 , 22 )
3. A competent legislature may retrospectively remove the basis of a court judgment by curing the specific legal defects that led to the original decision. (Para 11 , 12 , 15 )
4. Appeals dismissed and the Act's vires upheld, but tax liability limited to start from 01.04.2023 under Article 142 of the Constitution. (Para 26 , 27 )
5. Can a legislature nullify the effect of a judicial decision through subsequent legislation?
Yes, a competent legislature can render a judicial decision ineffective by retrospectively amending the law to remove the basis or substratum on which the judgment was founded, provided it does not directly overrule the court or violate constitutional limitations. (Para 11 , 12 , 15 )
6. Does a tax levied on passengers carried in vehicles owned by the employer fall under Entry 56, List II of the Seventh Schedule?
Yes. The tax is on the passengers and goods, not the motor vehicles. The owner's liability to pay the tax when no fare is collected does not change the nature of the tax from a passenger tax to a vehicle tax. (Para 21 , 22 )
JUDGMENT :
NAGARATHNA, J.
These appeals have been filed assailing the final Orders of the High Court of Himachal Pradesh dated 11 December, 2008 and 06 May, 2009, whereby the vires of the Himachal Pradesh Passengers and Goods Taxation Act, 1955 (hereinafter referred to as the “Act of 1955” for the sake of brevity) as amended from time to time, particularly by the Himachal Pradesh Passengers and Goods (Amendment and Validation), Act, 1997 (hereinafter referred to as the “Amendment and Validation Act of 1997” for the sake of brevity) has been upheld and the writ petitions filed by the appellants herein, i.e., Civil Writ Petition Nos. 725 of 1998, 422 of 1998, 401 of 2001, 464-467 of 2001 and 79 of 2007, have been dismissed.
Bird’s eye view of the controversy:
2. The controversy in these cases revolves around the question whether, by enacting the Amendment and Validation Act of 1997, the Himachal Pradesh State Legislature has validly removed the basis of the judgment of the Division Bench of the High Court dated 27 March, 1997. In the said judgment, the Act of 1955 had been held not to include within its scope, the activity of the appellants in providing gratis transport facilities for their employees and their children, as the charging provision contained therein, namely, Section 3 (1) and the Explanation thereto were couched in very ambiguous terms.
2.1. These appeals also call for consideration of ancillary arguments in the matter such as legislative competence of the Himachal Pradesh Legislative Assembly to enact the Act of 1955 and the Amendment and Validation Act of 1997, which are stated to be enacted on the strength of Article 246, read with Entry 56 of List II of the Seventh Schedule of the Constitution of India.
2.2 Further, these appeals also call for interpretation of certain provisions of the Act of 1955, as amended by the Amendment and Validation Act of 1997, so as to determine whether the activity of the appellants, would be a taxable activity under Section 3(1-A) of the Amendment and Validation Act of 1997.
Brief facts of the case:
3. Since the controversy involved in these appeals is identical, the appeals are being disposed of by way of this common judgment. For the sake of convenience, the facts of the lead matter, i.e., Civil Appeal No. 3498 of 2009 shall be narrated as under:
3.1. The facts in a nutshell are that the Act of 1955 was enacted by the Himachal Pradesh Legislative Assembly with a view to levy tax on passengers and goods carried by road in certain motor vehicles in the State of Himachal Pradesh. The said Act received Presidential assent on 25 November, 1955.
3.2. The appellant, NHPC Ltd. is engaged in the generation of electricity and has various projects in the State of Himachal Pradesh. Many project sites are situated at different locations in the interiors of Himachal Pradesh. These work sites are not properly serviced by any public transport system or regular taxis. The residential colonies of the staff employed at the various project sites are located at far of distances from the project sites. Therefore, as a welfare measure, the appellant, NHPC Ltd. provides transport facilities to its employees in order to enable them to reach their respective work sites from their residential colonies and for their children to travel to and from their schools, comfortably. It is to be clarified at this juncture that the transport facilities were being provided free of cost, for the exclusive use of the employees of the appellant and their children and members of the public were not permitted to use the said transport facilities. The buses utilized for such purpose were owned and operated by the appellant-NHPC Ltd.
3.3. The Assessing Authority under the Act of 1955, Respondent No. 3 herein, assessed the liability of the appellant-NHPC Ltd. to pay passenger tax under the Act for the years 1984-1985 to 1986-1987 and 1987-1988 to 1990-1991 in respect of the activity of providing transport facilities to its employees an
