M.B.SHAH - (1.) THE High Court of Himachal Pradesh by judgment and order dated 10.12.1990 allowed civil writ petitions no. 58 of 1978 etc. filed by the respondents challenging the validity of the provisions of the Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1976 (no. 34 of 1976) (hereinafter referred to as "the 1976 Act") and held that the said provisions were un- constitutional and invalid. THE Court held thus :- "We have seen earlier that by the impugned provision, there is a direct levy upon the carriage of goods by road and water ways. It is not the case of the respondent State that the levy was compensatory or regulatory in character. In any case, we do not find any mention in the reply filed by the State of any facts which may bring the levy in either of the two categories. On the averments made in the petition, noticed by us earlier, which have not been effectively denied on behalf of the State, there is hardly any scope for saying that the levy does not amount to restriction within the meaning of Article 301 of the Constitution of India. THE levy could only have been saved, in case the restriction brought about by it purported to be in public interest, and that too, if the assent of the President had been obtained either by way of previous sanction or even by obtaining his assent to the Act subsequently to bring it within the four corners of Article 255. Admittedly, there is no sanction of the President at any stage."
(2.) THE High Court also directed that the amount deposited towards the tax be refunded in terms of interim orders. That judgment and order is challenged by the State of Himachal Pradesh by filing Civil Appeal Nos. 3545/91 and others. It appears that being aggrieved by the said judgment and order and in order to avoid delay in recovering the road tax, apart from filing appeals, the State enacted the Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1991 (Act no. 10 of 1991) (hereinafter referred to as "the 1991 Act"). The objects and reasons of the 1991 Act read thus :- 1. "The Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1976 was enacted under Entry 56, List II of the Seventh Schedule to the Constitution of India to levy a tax on certain goods which are carried by road within the State of Himachal Pradesh. The charging section 3 of this Act categorically declared the levy of tax to be in addition to the tax levied or leviable under the Himachal Pradesh Passengers and Goods Taxation Act, 1955. The conspicuous distinction between the taxes imposed by the Act of 1955 and Act of 1976 is that while under the former Act the tax is calculated with reference to the fare or freight charged or chargeable, whereas under the Act of 1976, it is calculated with reference to weight or volume of goods carried by road. Nevertheless in both these enactment there exists identity of inextricable nexus with the carriage of goods by road. 2. In various writ petitions, the Hon'ble High Court of Himachal Pradesh has held that the tax levied under the aforesaid Act is a direct levy upon the carriage of goods by road and waterways and it is constitutionally invalid being violative of Article 301 read with Article 304 (b) of the Constitution of India. The High Court has further ordered that the State government shall refund, along with interest, the amount of tax deposited towards tax by the petitioners. This judgment, therefore, went against the basic intention underlying the enactment of the Himachal Pradesh Taxation (On Certain Goods Carried by Road) Act, 1976, namely a compensation for the huge expenditure incurred each year by the government on construction, development and maintenance of roads and bridges within the State. 3. The Hon'ble Supreme Court in its various judgments has held that measures imposing compensatory taxes, do not come within the purview of restrictions contemplated by Article 301 and such measures need not comply with the requirements of the proviso to Article 304 (b) of the Constitution. The Court has also clearly declared that the tax imposed under Entry 56, ibid, is of a regulatory and compensatory character. The power to levy taxes on goods and passengers carried by road or inland waterways belongs exclusively to the State Legislature. 4. The invalidation of the Act is attributable principally to the unclear statement of objectives appended to its Bill and inadequate or feeble defence to prove that it was, in fact, a compensatory taxation measure. In the absence of effective reply the Hon'ble Court did not have the occasion to go to the compensatory character of this enactment. In the proposed Bill, the levy has been rationalized by making it chargeable on the slabs of mileage of roads actually used for carrying of goods within the State and the method or machinery of collection has also been suitably modified to remove the defects existing in the Himachal Pradesh Taxation (On Certain Goods Carried by Road)Act, 1976. 5. It is well known that the roads and bridges are life line in the hilly terrain of Himachal Pradesh and every year the State government has to devote a sizeable chunk of its budget exclusively to the construction, development, repair, upkeep and maintenance of roads and bridges, without which any development is unthinkable. Besides loss of a recurring income of revenue of nearly Rs. 9 crores each year, to the State Exchequer, the impending refund of tax will drain out not less than Rs.42 crores from the State Exchequer, which will mean absolute halt to the construction, maintenance and development of road and bridges for many years to come for want of funds. Hence, in order to ensure availability of sufficient funds for construction, development, upkeep and maintenance of roads and bridges in the State, it has become necessary to levy the tax on certain goods carried by road within the State. It is also essential to validate the tax imposed and collected by the State government right from the date of commencement of the aforesaid Act. 6. The Bill seeks to achieve the aforesaid objectives."
(3.) THE aforesaid Act was also challenged by filing Civil Writ Petition No. 377/91 etc. before the High Court. By judgment and order dated 13th December 1994, the writ petitions were allowed and the 1991 Act was also declared ultra vires and void ab initio. THE State government was directed to refund the tax already collected. THE court after considering various decisions' rendered by this Court held that the impugned Act would attract application of Article 301 and require compliance of Article 304 (b) of the Constitution of India. THE court also observed that the Act under consideration merely because it was referable to Entry 56 of State List in the Constitution would by itself not be sufficient to hold that it is regulatory or compensatory in nature and that the nature of the law is not what its Preamble states it to be. THE court thereafter referred to the earlier decision rendered by it in M/s Yashpal Garg's case and held that it was not permissible to the State Legislature to overrule the said decision pending appeal before the Supreme Court. THE court observed that the effect of court's judgment holding the 1976 Act constitutionally invalid was to obliterate the same from the statute book and hence, there was nothing to be repealed by the State Legislature. Hence, the writ petitions were allowed. SUBMISSIONS :- The learned counsel appearing for the appellant submitted that the High Court materially erred in arriving at the conclusion that the State has failed to prove that the impugned road tax was not regulatory or compensatory in nature. It is his contention that the State of Himachal Pradesh is entirely hilly state and the cost of construction of roads and bridges is many times high as compared to other places and that roads are the only mode of transport and, therefore, in order to provide roads, bridges and repair thereof, the State Legislature had levied the tax to mobilise additional sources for developmental purposes. The said tax is by exercise of its power under Entry 56 of List 11 of Seventh Schedule to the Constitution.;