On 6 November, the Rajasthan High Court dismissed a batch of writ petitions, including one filed by Honda Motorcycle and Scooter India Pvt. Ltd., challenging the validity of provisions of the Rajasthan Motor Vehicles Taxation Act, 1951, the Motor Vehicles Act, 1988 and the Central Motor Vehicles Rules, 1989.
A Bench of Justices Arun Monga and Ashutosh Kumar held that possession of motor vehicles by manufacturers at their factory premises in the course of business attracts motor vehicle tax under Section 4(1)(d) of the Rajasthan Motor Vehicles Taxation Act, irrespective of whether the vehicles are driven on public roads in the State. They said:
“It is declared that the taxable event under Section 4(1)(d) of the Act of 1951 is the possession of motor vehicles by a dealer or a manufacturer in the course of his business as such. Proof of the use of any road within this State by any particular vehicle is not an ingredient of the charge”.
The dispute arose after the Rajasthan Transport Department raised tax demands on vehicles manufactured and stocked at factory premises. The manufacturers argued that vehicles awaiting dispatch should not attract motor vehicle tax, particularly when they were not intended for use on roads in Rajasthan.
They contended that nearly 95% of their production was transported outside the State on trailers without using Rajasthan's roads. They also challenged the levy as effectively imposing a tax on manufacture.
Rejecting these arguments, the Court held that Section 4(1)(d) imposes a special charge on manufacturers and dealers in respect of vehicles held in their possession in the course of business. Actual use of public roads is not a requirement for attracting the levy.
It clarified that the expression “used or kept for use in the State” refers to the availability of vehicles for use rather than their actual use on roads. Vehicles adapted for road use and held within factory premises in Rajasthan therefore attract the levy, irrespective of the State to which they are subsequently dispatched. It stated:
“It is declared that the expression “used or kept for use in the State” in Section 4(1) of the Act of 1951 denotes availability for use and not actual use. Motor vehicles adapted for use on roads, held by a manufacturer within his premises in this State, answer that description, whatever the State to which they may later be despatched for sale”.
Further, the Bench held that Section 39 of the Motor Vehicles Act, 1988 extends to the movement of unregistered vehicles within private premises. Factory storage yards and internal roads fall within the expression “any other place” under the provision. It observed:
“It is declared that Section 39 of the Act of 1988 extends to the driving of an unregistered motor vehicle within private premises. The storage yard and the internal roads of a manufacturing unit fall within the expression “any other place” in that section.”
On the requirement of a trade certificate, the judges held that the obligation arises when possession of an unregistered vehicle is coupled with its movement. They rejected the challenge to Rule 33 of the Central Motor Vehicles Rules, 1989, observing that the rule provides an exemption from registration subject to obtaining a trade certificate.
They also rejected the argument that the levy amounted to an excise duty on manufacture. It held that the State Legislature was competent to impose the tax under Entry 57 of List II of the Seventh Schedule to the Constitution.
Moreover, the Court rejected the challenges based on double taxation and discrimination under Article 14, holding that the tax on manufacturers and the subsequent tax payable by or through dealers or registered owners arise from distinct taxable events.
However, the Bench allowed the manufacturers to challenge individual assessment orders before the statutory appellate authorities under Section 14 of the Rajasthan Motor Vehicles Taxation Act, 1951. They may raise grounds relating to denial of a hearing, the basis for calculating the number of vehicles, and the computation of interest, surcharge and penalty.
It directed that appeals filed within eight weeks would be entertained without any objection on limitation. Where manufacturers had already deposited 50% of the demand, no further pre-deposit would be required. Recovery of the balance demand would remain stayed until disposal of appeals filed within this period.
Accordingly, the High Court upheld the levy while preserving the manufacturers' right to challenge individual assessments before the appellate authorities.
For Petitioner: Senior Advocates Lakshami Kumaran and Sudhir Gupta, assisted by Advocates Umang Gupta, Shweta Chauhan, Vinay Kumar Jain, Priyavada Joshi, Sakshya Jain, Sanjay Kumar, Anshul Sehgal, Pranshu Paul, Pranav Pareek, Aman Lodiya, Rachit Somani, Madhusudan Purohit and Harshit Bansal.
For Respondent: Advocate General Rajendra Prasad, assisted by Advocates Dhrishti Laddha and Tanay Goyal. Additional Solicitor General Bharat Vyas appeared through video conferencing, assisted by Advocates Niti Jain Bhandari, Devesh Yadav and Rakesh.