Sushree Automotives Vs State of Odisha and others (Orissa High Court)
Orissa High Court held that circular dated 29th March 2016 issued by the Transport Commissioner-cum-Chairman, State Transport Authority is ultra vires of Odisha Motor Vehicles Taxation Act, 1975 OMVT Act and liable to be quashed. The circular directed to collect tax from the dealers/manufacturers of motor vehicles on the basis of total number of vehicles possessed and registered during the entire year by the dealer.
Facts- These appeals are directed against a judgment dated 18th May 2017 passed by the learned Single Judge in a batch of writ petitions rejecting the challenge made therein to the validity of a circular dated 29th March, 2016 issued by the Transport Commissioner-cum-Chairman, State Transport Authority (STA), whereby all the Regional Transport Officer (RTOs) were directed to collect tax from the dealers/manufacturers of motor vehicles on the basis of total number of vehicles possessed and registered during the entire year by the dealer. The learned Single Judge also negatived the challenge to the consequential demand notices issued by the various RTOs.
Conclusion- Section 5 is both the charging Section as well as the ‘machinery provision’. It indicates that TC tax will become payable in respect of the vehicles possessed by the dealer under the TC certificate and also specifies what is the tax payable if the number of vehicles found in possession under the TC certificate exceeds that number. It also clearly specifies that the tax is to be collected at an annual rate and in advance.
The impugned instruction dated 29th March, 2016 changes the very basis of the above ‘taxable event’ as well as the portion of Section 5 of the OMVT Act in so far as it is also a “machinery provision”.
The change sought to be brought out under the impugned instruction dated 29th March, 2016 cannot be brought about by merely issuing an instruction under Rule 177 of the OMV Rules, but only by amending the statute itself.
The impugned instruction dated 29th March, 2016 is therefore ultra vires the OMVT Act and is hereby quashed. The effect of this is that collection of TC tax and TC fees will not be hereafter be made in terms of the impugned instruction, but only strictly in accordance with Section 5 of the OMVT Act read with Rule 81 of the MV Rules.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
In a major decision, the Orissa High Court Division Bench of Chief Justice S Muralidhar and Justice M S Raman has quashed the instruction of the Transport Commissioner-cum-Chariman, State Transport Authority dated 29.03.2016 that directed the Road Transport Officers (RTOs) to collect tax from the manufacturers/dealers of motor vehicles on the total number of vehicles possessed and registered during the year.
The appeal was filed against the judgment dated 18th May 2017 passed by the learned Single Judge in a batch of writ petitions rejecting the challenge made therein to the validity of the circular.
Section 4 of the Odisha Motor Vehicles Taxation (OMVT) Act, 1975 provides that the tax shall be paid in advance to the Taxing Officer “by the registered owner or person having possession or control of the vehicle.”
Section 5 of the OMVT Act specifically deals with a tax that shall be paid in advance at an annual rate “by a manufacturer or dealer in motor vehicles in respect of the vehicles in his possession in the course of his business as such manufacturer or dealer under the authorization of a TC granted under the MV Rules”.
It was observed by the court that the trigger point was the detection by the State Transport Authority that the number of vehicles mentioned in the Trade Certificate of the dealers “is not in conformity with the total number of registration of vehicles made by the dealers.”
Pravakar Behera, Counsel for the State Transport Authority submitted that once a vehicle is in possession in the course of business of a dealer under the authorization of a TC issued under the MV Rules and at the end of twelve months, it was ascertained that the dealer was in possession of vehicles in excess of the number indicated in the TC for which no advance tax had been collected, the dealer was liable to pay tax in consonance with the circular dated 29th March, 2016.
It was also submitted that, accordingly in respect of the balance number of vehicles, the demand notice for payment of tax under Section 5 of the OMVT Act was issued.
The constitutional validity of Section 5 of the Odisha Motor Vehicles Taxation Act, 1975 was also challenged in the appeal.
In the present case, the Division Bench said, “we are only concerned with the scope and ambit of one charging Section viz., Section 5 of the OMVT Act. The ‘taxable event’ in relation to the said charging section has to be ascertained.”
It was observed that, “Section 5 of the OMVT Act is a charging Section and in a taxing statute, it has to be strictly construed.”
In regard to taxability, the court observed that, “the taxable event under Section 5 of the OMVT Act is the possession of vehicles by the dealer under the Trade certificate issued under the MV Rules.”
With the impugned instruction to levy tax in view, it was further observed that, the impugned instruction is ultra vires of the OMVT Act itself. Resultantly, the collection of TC tax and TC fees were directed not to be made in terms of the impugned instruction, but only strictly in accordance with Section 5 of the OMVT Act read with Rule 81 of the MV Rules.
Resultantly, the impugned instruction/circular was set aside.
Considering the plea for refund of the collected fees and taxes, it was held that since there is lack of clarity about whether the burden of tax has shifted to the customers, no refund was to be made by the Motor Vehicles Department.
FULL TEXT OF THE JUDGMENT/ORDER OF ORISSA HIGH COURT
1. These appeals are directed against a judgment dated 18th May 2017 passed by the learned Single Judge in a batch of writ petitions rejecting the challenge made therein to the validity of a circular dated 29th March, 2016 issued by the Transport Commissioner-cum-Chairman, State Transport Authority (STA), whereby all the Regional Transport Officer (RTOs) were directed to collect tax from the dealers/manufacturers of motor vehicles on the basis of total number of vehicles possessed and registered during the entire year by the dealer. The learned Single Judge also negatived the challenge to the consequential demand notices issued by the various RTOs.
2. The learned Single Judge in the impugned judgment, which was common to the batch of writ petitions, chose to consider W.P.(C) No.5648 of 2017 by the Odisha Automobiles Dealers Association (OADA) as the lead petition. It was noted by the learned Single Judge, as far as the said petition was concerned, that OADA was a trust, the members of which were engaged in a business of hypothecation, leasing or hire-purchase of motor vehicles. As far as the Petitioners in the remaining writ petitions before the learned Single Judge were concerned, they were themselves dealers in motor vehicles and engaged in the business of selling of motor vehicles. It is not in dispute that all of them answered the description of the expression ‘dealer’ within the meaning of Section 2 (8) of the Motor Vehicles Act, 1988 (MV Act).
Relevant provisions
3. As far as the MV Act is concerned, it is an Act made by Parliament and it is therefore a ‘Central Act’. It has been enacted with reference to Entry-35 of List-III of the Schedule-VII of the Constitution which reads as under:
“Mechanically propelled vehicles including the principles on which taxes on such vehicles are to be levied.”
4. In terms of Section 39 of the MV Act, registration of a motor vehicle is compulsory. Section 39 of the MV Act reads as under:
“39. Necessity for registration
No person shall drive any motor vehicle and no owner of a motor vehicle shall cause or permit the vehicle to be driven in any public place or in any other place unless the vehicle is registered in accordance with this Chapter and the certificate of registration of the vehicle has not been suspended or cancelled and the vehicle carries a registration mark displayed in the prescribed manner:
Provided that nothing in this section shall apply to a motor vehicle in possession of a dealer subject to such conditions as may be prescribed by the Central Government.”
5. As far as the proviso to Section 39 of the MV Act is concerned, reference is required to be made to Rule 33 of the Central Motor Vehicles Rules, 1989 (MV Rules) which reads as under:
“33. Condition for exemption from registration.
For the purpose of the proviso to section 39, a motor vehicle in the possession of a dealer or manufacturer of automobile or automobiles ancillaries or a test agency specified in rule 126 shall be exempted from the necessity of registration subject to the condition that he obtains a trade certificate from the registering authority having jurisdiction in the area in which the dealer or manufacturer of automobiles or automobile ancillaries or a test agency specified in rule 126 has his place of business in accordance with the provisions of this Chapter.”
6. Rule 33 of the MV Rules, therefore, exempts “a dealer of automobiles or automobile ancillaries or a test agency in terms of Rules 126” from the necessity of registration, subject to obtaining “a trade certificate from the registering authority”.
7. Rules 34 and 35 of the MV Rules provide the procedure for application, grant or renewal of the trade certificate (TC). The application has to be made in Form-16 appended to the MV Rules and has to be accompanied with an appropriate fee as specified in Rule 81 of the MV Rules.
8. The purposes for which a motor vehicle with a TC may be used is specified in Rule 41 of the MV Rules which reads as under:
“41. Purposes for which motor vehicle with trade certificate may be used:-
The holder of a trade certificate shall not use any vehicle in a public place under that certificate for any purpose other than the following:
(a) for test, by or on behalf of the holder of a trade certificate during the course of, or after completion of, construction or repair; or
(b) for proceeding to or returning from a weigh bridge for or after weighment, or to and from any place for its registration; or
(c) for a reasonable trial or demonstration by or for the benefit of a prospective purchaser and for proceeding to or returning from the place where such person intends to keep it; or
(d) for proceeding to or returning from the premises of the dealer or of the purchaser or of any other dealer for the purpose of delivery; or
(e) for proceeding to or returning from a workshop with the objective of fitting a body to the vehicle or painting or for repairs; or
(f) for proceeding to and returning from airport, railway station, wharf for or after being transported; or
(g) for proceeding to or returning from an exhibition of motor vehicles or any place at which the vehicle is to be or has been offered for sale; or
(h) for removing the vehicle after it has been taken possession of by or on behalf of the financier due to any default on the part of the other party under the provisions of an agreement of hire-purchase, lease or hypothecation.”
9. It is not in dispute that all of the Appellants herein have applied for or obtained TC. Rule 39 of the MV Rules states that a trade registration mark that has been assigned in respect of each TC granted or renewed under Rule 35 of the MV Rules shall not be used upon more than one vehicle at a time or upon any vehicle other than a vehicle “bona fide in possession of the dealer or manufacturer of automobile or automobile ancillaries” in the course of his business or any type of vehicle other than the one for which the TC is issued. Rule 39 (2) requires a TC to be carried on a motor vehicle in a weatherproof circular folder and the trade registration mark is required to be exhibited in a conspicuous place in the vehicle. The contention of the Appellants has been that the same TC can be used in multiple types and multiple vehicles, subject to the condition that it cannot be used simultaneously on two vehicles.
10. The scheme of grant of a TC is a legislative acknowledgement of the fact that there is a time period between the manufacturer delivering to the dealer a certain number of vehicles meant for sale which then a dealer keeps in his possession at a given point in time, and the ultimate sale of such vehicles. When the dealer applies for a TC, he is expected to specify the number of vehicles for which he is applying for a TC. A perusal of the Form-16 appended to the MV Rules reveals that the dealer is expected to specify in column 5 “number of certificates required” and in column 6 “class of motor vehicles in respect of which certificate is required”. A declaration is appended to such form where the applicant declares that the TC is required by him “for bona fide trade purpose”.
11. Form 17 appended to the MV Rules sets out the form of the TC and which sets out the trade number assigned in respect of the certificate. This is the trade registration mark referred to in Rule 39 of the MV Rules.
12. The MV Act is obviously not an Act which levies any taxes on motor vehicles. The taxation statute as far as Odisha is concerned, is the Odisha Motor Vehicles Taxation Act, 1975 (OMVT Act). The OMVT Act is traceable to Entry-57 of List-II of Schedule-VII of the Constitution, which reads as follows:
“Taxes on vehicles, whether mechanically propelled or not, suitable for use on roads, including tramcars subject to the provisions of Entry-35 of List-III”
13. Section 3 of the OMVT Act states that there shall be levied on every motor vehicle used or kept for use within the State, a tax at the rate specified in Schedule-I and Schedule-III. Section 3-A talks of the levy of an additional tax which is applicable on every public service vehicle and goods carriage “used or kept of use within the State”. Section 4 provides that the tax shall be paid in advance to the Taxing Officer “by the registered owner or person having possession or control of the vehicle.” Section 4-A talks of one-time tax in respect of every vehicle of the description specified in Schedule I, “which is used personally or kept for personal use”.
14. Section 5 of the OMVT Act specifically deals with a tax that shall be paid in advance at an annual rate “by a manufacturer or dealer in motor vehicles in respect of the vehicles in his possession in the course of his business as such manufacturer or dealer under the authorization of a TC granted under the MV Rules”. Section 5 reads as under:
5. Tax payable by Manufacturers and Dealers
Notwithstanding the provisions contained in Sections 3, 3A, 4 or 4-A, a tax at the annual rate specified below shall be paid in advance by a manufacturer or dealer in motor vehicles in respect of the vehicles in his possession in the course of his business as such manufacturer or dealer under the authorization of trade certificate granted under the Motor Vehicles Rules:
