Ms. Tata Motors Limited Vs State of Jharkhand And Others (Supreme Court)
Conclusion: Liability of tax was on the manufacturer for the chasis of the motor vehicles manufactured by them during the period these chasis were in their “possession”, i.e., before they were delivered to the dealers and/or the purchasers of the said vehicles as per section 6 of Bihar Motor Vehicles Taxation Act, 1994.
Held: In the present case, Bihar Government, under section 6 of the Bihar Motor Vehicles Taxation Act, 1994 imposed penalty on assessee-manufacturer on the chassis of the motor vehicles manufactured by them during the period this chassis were in their “possession”, i.e., before they were delivered to the dealers and/or the purchasers of the said vehicles. It was pointed out that after the manufacture of the vehicle when it remained with the manufacturer (or when it remained with the dealer after delivery thereof to the dealer by the manufacturer) and before it was sold to the ultimate consumer, the vehicle was brought on the road and was driven. It might be for the purpose of testing the technical suitability of such a vehicle or when it went for delivery from the manufacturer’s factory to the dealer’s showroom. Likewise, the dealer might also drive this vehicle for the limited purpose, say it wa driven by the customer etc. Thus, liability to pay tax under section 6 was linked with the incidence of manufacturer or the dealer possessing the vehicle which was suitable for use on road during the course of his business. Thus, the manufacturer or a dealer of a motor vehicle, in respect of the motor vehicle in his possession in the course of business as such a manufacturer or dealer should pay tax, was within the legislative competence of Entry 57.
FULL TEXT OF THE SUPREME COURT JUDGEMENT
A common question of law which arises in all these appeals pertains to levy of tax by the respondent No.1 State under Section 6 of the Bihar Motor Vehicles Taxation Act, 1994 (hereinafter referred to as the ‘Bihar Act’) on the chasis of the motor vehicles manufactured by the appellants during the period these chasis are in their “possession”, i.e., before they are delivered to the dealers and/or the purchasers of the said vehicles.
2) The Bihar Act envisages three kinds of taxes, namely:
(a) on registered vehicles under Section 5 of the Act;
(b) on vehicles held under trade certificates as per Section 6 of the Act; and
(c) in respect of vehicles registered, where the registration is temporary, a marginal tax under Section 7(4) of the Act.
3) As would be noticed, tax under Section 5 of the Bihar Act is paid by the ultimate buyers who, on purchase of vehicles and becoming owners thereof, get these vehicles registered in their names. After the manufacture of the vehicle and before it is sold to the ultimate buyer to use the said vehicle, a temporary registration is required by the manufacturer under Section 7 of the Bihar Act. Since this registration is temporary for a limited duration, a fractional tax is paid by the manufacturer or dealer under Section 7(4) of the Bihar Act. Section 6, on which the fulcrum of dispute revolves, deals with those vehicles which are in possession of a manufacturer or dealer in the course of his business and are held under trade certificates. Sections 5, 6 and 7 are reproduced below in order to have an idea of the payment of these three motor vehicle taxes:
“5. Levy of tax – (1) Subject to other provisions of this Act, on and from the date of commencement of this Act, every owner of a registered motor vehicle shall pay tax on such vehicle at the rate specified in Schedule I.
(2) Subject to other provisions of this Act, on and from the date of commencement of this Act, every owner of a registered motor vehicle shall pay Additional Motor Vehicles Tax on such vehicle at the rate specified in Schedule II.
(3) The State Government may, by notification from time to time, increase the rate of tax specified in the Schedules:
Provided that no such increase shall, during any year, exceed fifty percent of the rate of taxes prescribed in the Schedules.
