► Date : Jan 13, 2023

The Supreme Court (SC) ruled on Friday that a state government can levy a lump sum road tax on all public transportation vehicles to supplement infrastructure facilities, and that such a levy is regulatory and compensatory in nature, falling within the purview of a state legislature. It ruled that state legislatures not only have the authority to pass laws imposing motor vehicle taxes, but also to establish the principles under which such taxes are to be levied.

While ruling in favour of the state of Himachal Pradesh, a bench comprised of justices Sanjay K Kaul, Abhay S Oka, and Vikram Nath overturned the state high court's decision. The high court had quashed the state government's notifications for the levy of lumpsum taxes issued in 2000, ruling that it could not be levied on general assessment but only on actual default.

The HC also ruled that imposing an additional special road tax on transport vehicles used without a valid permit is a penalty, not a tax, and is a violation of the state legislature's legislative powers under Entries 56 and 57 of List II (the State List) of the Seventh Schedule to the Constitution.

While holding that such levy is not “manifestly unjust or glaringly unconstitutional,” the apex court said in the absence of any principles having been laid down by the Parliament, no fault could be found in the law enacted by legislature.

According to the bench, the objects and reasons for bringing in the amendment was clearly compensatory in nature as it was “to augment funds and finance for construction, maintenance, repair and upkeep of the roads of Himachal Pradesh, which has a totally hilly terrain.”

“Imposition of such additional special road tax was only to keep a check or a discipline on the transport vehicle operators… This could work as a deterrent for the transport operators to commit any breach and to follow the mandate of the law. Such additional special road tax could be termed as regulatory in nature to regulate other statutory provisions being implemented and strictly followed,” it added.

Stating that there is no repugnancy with the provisions in the Central enactment, the judges said state legislatures have the power to levy taxes not only under Entries 56 and 57 but also to lay down the principles under Entry 35 of List III. No repugnancy of any kind could be alleged or pleaded or proved in the absence of there being any central law laying down principles of levy of tax, the judgement stated.