{"id":158388,"date":"2009-11-10T00:00:00","date_gmt":"2009-11-09T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-of-rajasthan-ors-vs-heritage-crafts-on-10-november-2009"},"modified":"2017-05-04T13:32:16","modified_gmt":"2017-05-04T08:02:16","slug":"state-of-rajasthan-ors-vs-heritage-crafts-on-10-november-2009","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-of-rajasthan-ors-vs-heritage-crafts-on-10-november-2009","title":{"rendered":"State Of Rajasthan &amp; Ors vs Heritage Crafts on 10 November, 2009"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">State Of Rajasthan &amp; Ors vs Heritage Crafts on 10 November, 2009<\/div>\n<div class=\"doc_author\">Author: &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.J.<\/div>\n<div class=\"doc_bench\">Bench: S.H. Kapadia, Aftab Alam<\/div>\n<pre>                            IN THE SUPREME COURT OF INDIA\n\n                     CIVIL APPELLATE JURISDICTION\n\n                     CIVIL APPEAL NO.1210 OF 2004\n\n\nState of Rajasthan &amp; Ors.                                      ...Appellant(s)\n\n\n                                     Versus\n\n\nHeritage Crafts                                               ...Respondent(s)<\/pre>\n<p>With Civil Appeal Nos.1211\/2004, 1212\/2004, 1213\/2004,<br \/>\n1214\/2004, 1215\/2004, 1216\/2004 and 1217\/2004.\n<\/p>\n<pre>                                O    R     D    E    R\n\n\n         Delay condoned.\n<\/pre>\n<p>         In this batch of civil appeals, the question which<br \/>\ncalls    for    consideration              is       whether     imposition       of<br \/>\nadditional tax on transfer of ownership of a vehicle under<br \/>\nthe second proviso to Section 4(1)(b) of the Rajasthan<br \/>\nMotor   Vehicles       Taxation            Act,       1951     is    beyond     the<br \/>\nlegislative    competence           of   the        State    being   outside    the<br \/>\nscope   of   Entry    57   of       List       II   of   Schedule    VII   of   the<br \/>\nConstitution of India.\n<\/p>\n<p>         The relevant part of Section 4 (charging section)<br \/>\nof the 1951 Act, as amended by Rajasthan Finance Act,<br \/>\n2000, is extracted hereinbelow:\n<\/p>\n<blockquote><p>         &#8220;4. Imposition of Tax &#8211; (1) Save as<br \/>\n         otherwise provided by this Act or by the<br \/>\n         Rules made thereunder or any other law for<br \/>\n         the time being in force, there shall be<br \/>\n         levied and collected on all motor vehicles<br \/>\n         used or kept for use in the State, &#8211;\n<\/p><\/blockquote>\n<blockquote><p>                                              &#8230;2\/-\n<\/p><\/blockquote>\n<blockquote><p>                  &#8211; 2 &#8211;\n<\/p><\/blockquote>\n<p>(a)     a tax, in respect of such vehicles,<br \/>\nwhich are not covered by clause (b), (c) or\n<\/p>\n<p>(d), at such rates as may be specified in<br \/>\nthe State Government by notification in<br \/>\nofficial gazette which shall not exceed 10%<br \/>\nof the cost of the chassis\/ vehicle per<br \/>\nannum:\n<\/p>\n<p>Provided that where the rates are not<br \/>\nspecified, on quarterly or monthly basis,<br \/>\nby the State Government, by notification in<br \/>\nthe official gazette, and if the tax is<br \/>\npermissible    to   be   paid  quarterly or<br \/>\nmonthly,   the    amount  payable  shall be<br \/>\nequivalent to the one fourth or one twelfth<br \/>\nrespectively of the annual rate of tax;\n<\/p>\n<p>(b)     a One Time Tax in the case of non<br \/>\ntransport vehicles at such rates as may be<br \/>\nnotified   by  the   State  Government  by<br \/>\nnotification in the official gazette which<br \/>\nshall not exceed 10% of the cost of the<br \/>\nvehicle:\n<\/p>\n<p>Provided that in addition to One Time Tax<br \/>\nthere shall be paid by the owner or person<br \/>\nhaving possession or control of a motor<br \/>\nvehicle on which one time tax is payable,<br \/>\nany tax or penalty as was payable under<br \/>\nthis Act for any period prior to the coming<br \/>\ninto force of the provisions of Chapter V<br \/>\nof   the   Rajasthan   Finance  Act,   1997<br \/>\n(Rajasthan Act No. 9 of 1997) at such rates<br \/>\nas were applicable to such vehicles from<br \/>\ntime to time.\n<\/p>\n<p>Provided further that on every transfer of<br \/>\nownership of motor vehicle mentioned above,<br \/>\nan additional one time tax shall be payable<br \/>\nat such rates as may be notified by the<br \/>\nState Government in the Official Gazette.&#8221;\n<\/p>\n<p>                      [Emphasis supplied]<br \/>\n                                     &#8230;3\/-\n<\/p>\n<p>                             &#8211; 3 &#8211;\n<\/p>\n<p>          According to the Statement of Objects and Reasons,<br \/>\ninsertion of the said proviso by the said Finance Act, 2000<br \/>\nwas to check frequent transfers of the vehicles.              The said<br \/>\nproviso      was   added    to   Section   4(1)(b)    which   makes    a<br \/>\nprovision for payment of additional one time tax.                  It is<br \/>\nthe   levy    of   this    additional   one   time   tax   which   stood<br \/>\nchallenged before the High Court.              It is this levy of<br \/>\nadditional one time tax which has been struck down by the<br \/>\nHigh Court.        Hence, these civil appeals are filed by the<br \/>\nState of Rajasthan.\n<\/p>\n<p>          The reason for striking down the impugned proviso<br \/>\nby the High Court is given in para 13 of the impugned<br \/>\njudgment, which we quote hereinbelow:\n<\/p>\n<blockquote><p>      &#8220;13. In the instant case, the compensation for<br \/>\n      use of roads etc. by the vehicle was already<br \/>\n      paid by the vendor under Section 4(1)(b) of the<br \/>\n      Act of 1951. He paid the OTT for the life time<br \/>\n      of the vehicle.   Keeping this in mind, each of<br \/>\n      the petitioners purchased vehicle from the<br \/>\n      vendor. Obviously, it carried element of tax in<br \/>\n      the purchase consideration of vehicle.     Thus,<br \/>\n      the petitioner has already paid off his share of<br \/>\n      tax in the form of purchase price paid to the<br \/>\n      vendor. The object for insertion of the second<br \/>\n      proviso to Section 4(1)(b) as stated is to<br \/>\n      discourage the transfer of vehicle. We have not<br \/>\n      been able to understand the nexus between the<br \/>\n      transfer of ownership and the object of levy<br \/>\n      i.e. compensatory tax.   Thus, in our view, the<br \/>\n      impugned additional tax under proviso second to<br \/>\n      Section 4(1)(b) of the Act is arbitrary inasmuch<br \/>\n      as it amounts to tax a person merely on the<br \/>\n      incidence of transfer of vehicle, which is<br \/>\n      clearly beyond the legislative competence being<br \/>\n      outside the scope of Entry 57 of List II of<br \/>\n      Schedule VII of the Constitution of India. The<br \/>\n                                                &#8230;4\/-\n<\/p><\/blockquote>\n<p>                                  &#8211; 4 &#8211;\n<\/p>\n<blockquote><p>      ratio laid down by the Division Bench of this<br \/>\n      Court in East India Hotels Ltd.&#8217;s case (supra)<br \/>\n      equally applies to the facts of the instant<br \/>\n      cases.    Thus, the second proviso to Section<br \/>\n      4(1)(b) of the Act is violative of the Article<br \/>\n      265 of the Constitution of India and is,<br \/>\n      therefore, liable to be struck down.&#8221;\n<\/p><\/blockquote>\n<blockquote><p>          On   reading   the     reasoning    of    the    High   Court      for<br \/>\nstriking down the impugned proviso, as quoted above, it<br \/>\nshows that according to the High Court the second proviso<br \/>\nto Section 4(1)(b) violated Article 265 of the Constitution<br \/>\nand, therefore, was liable to be struck down.<\/p><\/blockquote>\n<p>          In the case of <a href=\"\/doc\/128161\/\">Atiabari Tea Company Limited vs.<br \/>\nState of Assam and Ors.<\/a> reported in AIR 1961 SC 232, the<br \/>\nconstitutional validity of Assam Taxation (on Goods Carried<br \/>\nby Roads or Inland Waterways) Act, 1954 was challenged as<br \/>\nviolating      Article   301.      The    Majority,       speaking    through<br \/>\nJustice    Gajendragadkar,       rejected     the    contention       of     the<br \/>\nState that the taxation laws are governed only by Part XII<br \/>\nby   saying    that   &#8220;Article    265     itself    inevitably       takes    in<br \/>\nArticle 245 of the Constitution when in substance it says<br \/>\nthat a tax shall be levied by authority of law&#8221;.                       Hence,<br \/>\npower of Parliament and the Legislatures of the States to<br \/>\nmake laws including laws imposing taxes is subject to the<br \/>\nprovisions of the Constitution and hence it will come under<br \/>\nthe purview of Article 301.                The Majority rejected the<br \/>\nconclusion &#8220;Taxes may and do amount to restrictions; but it<br \/>\nis only such taxes as directly and immediately restrict<br \/>\ntrade that would fall within the purview of Article 301&#8221;.<br \/>\nTherefore, in each case the court has to find out whether<br \/>\nthe impugned      law puts      a restraint in the form of taxation<br \/>\n                                                                       &#8230;5\/-\n<\/p>\n<p>                                    &#8211; 5 &#8211;\n<\/p>\n<p>on the movement of trade and if so, only then, such law<br \/>\nfalls under Article 301 and it is only in such an event<br \/>\nthat State can take the plea as to the nature of impugned<br \/>\nlevy,   viz.,     that   the   levy   is    compensatory\/regulatory       in<br \/>\nnature and therefore falls outside scheme of Part XIII.\n<\/p>\n<p>          It is the doctrine of &#8220;direct and immediate effect&#8221;<br \/>\nwhich constitutes the working test propounded vide para 19<br \/>\nof the judgment of this Court in the case of <a href=\"\/doc\/304499\/\">Automobile<br \/>\nTransport (Rajasthan) Limited vs. State of Rajasthan, AIR<\/a><br \/>\n1962 SC 1406.          Therefore, whenever the law is impugned as<br \/>\nviolative of Article 301, the courts have to examine the<br \/>\neffect of the operation of the impugned law on the inter-<br \/>\nState and the intra-State movement of goods which has not<br \/>\nbeen done in the present case.\n<\/p>\n<p>          In     the   circumstances,      we   set   aside   the   impugned<br \/>\njudgment of the High Court and remit the cases back to it<br \/>\nfor de novo consideration in accordance with law.                         We,<br \/>\nhowever, grant liberty to each of the assessees to amend<br \/>\nthe writ petition, if so advised, within a period of four<br \/>\nweeks     from    today.       If   the     assessee    carries     out   the<br \/>\namendment within the said period, the High Court shall then<br \/>\nconsider the matter in accordance with law.                   If any of the<br \/>\nassessee failed to do so within the time so fixed, in that<br \/>\nevent, it would not be open to the assessee to amend the<br \/>\nwrit petition and, in such a case, the consequences have to<br \/>\nfollow.\n<\/p>\n<p>          Accordingly, civil appeals stand disposed of with no<br \/>\norder as to costs.\n<\/p>\n<p>                                                                      &#8230;6\/-\n<\/p>\n<p>                            &#8211; 6 &#8211;\n<\/p>\n<p>       All issues are expressly kept open, subject to the<br \/>\nassessees   making   appropriate    averment   with   regard   to<br \/>\nviolation of Article 301 of the Constitution.\n<\/p>\n<p>                                       &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.J.\n<\/p>\n<p>                                      [S.H. KAPADIA]<\/p>\n<p>                                       &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.J.\n<\/p>\n<p>                                      [AFTAB ALAM]<br \/>\nNew Delhi,<br \/>\nNovember 10, 2009.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India State Of Rajasthan &amp; Ors vs Heritage Crafts on 10 November, 2009 Author: &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;.J. Bench: S.H. Kapadia, Aftab Alam IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1210 OF 2004 State of Rajasthan &amp; Ors. &#8230;Appellant(s) Versus Heritage Crafts &#8230;Respondent(s) With Civil Appeal Nos.1211\/2004, 1212\/2004, 1213\/2004, 1214\/2004, 1215\/2004, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-158388","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>State Of Rajasthan &amp; Ors vs Heritage Crafts on 10 November, 2009 - Free Judgements of Supreme Court &amp; High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/state-of-rajasthan-ors-vs-heritage-crafts-on-10-november-2009\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Of Rajasthan &amp; 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