Holding

The 1997 Amendment and Validation Act validly removed the foundation of the High Court's decision and makes the gratis transport activity taxable under Section 3(1‑A).

Summary

NHPC Ltd. provides free bus transport for its employees and their children in Himachal Pradesh. The State assessed passenger tax on this service under the Himachal Pradesh Passengers and Goods Taxation Act, 1955, which the High Court had held did not apply to gratis transport. The State later enacted the Himachal Pradesh Passengers and Goods (Amendment and Validation) Act, 1997, amending definitions of "business", "fare", "passenger" and inserting Section 3(1A) to bring non‑fare‑paying passengers within the tax net. The Supreme Court examined whether the 1997 amendment validly removed the basis of the High Court's judgment and whether the gratis transport became taxable. It held that the amendment cured the defects, was a valid exercise of legislative power, and that the transport activity is taxable under Section 3(1A). However, applying its equitable jurisdiction, the Court limited liability to tax payable from 1 April 2023 onward, dismissing the appeals.

Issues considered

Whether the Himachal Pradesh Passengers and Goods (Amendment and Validation) Act, 1997 validly removed the basis of the Division Bench High Court judgment of 27 March 1997.
Whether the provision of free transport to employees and their children constitutes a taxable activity under Section 3(1‑A) of the 1997 Amendment.
Whether the State Legislature had competence to enact the 1955 Act and its 1997 amendment under Article 246, Entry 56 of List II of the Constitution.
Whether retrospective validation of tax assessments is permissible under constitutional principles of separation of powers and rule of law.

Legislation cited

Constitution of Indias. Article 246, s. Entry 56 of List II (Seventh Schedule)
Himachal Pradesh Passengers and Goods (Amendment and Validation) Act, 1997s. 2(aa) (business), s. 2(c) (fare), s. 2(gb) (private service vehicle), s. 2(gc) (road), s. 2(ia) (transport vehicle), s. 3(1A) (charging provision), s. 9 (validation)
Himachal Pradesh Passengers and Goods Taxation Act, 1955s. 2(a) (business), s. 2(c) (fare), s. 2(g) (passenger), s. 3(1) (charging provision), s. 9 (validation)
Motor Vehicles Act, 1939
Motor Vehicles Act, 1988

Subjects

taxationretrospective legislationlegislative abrogationconstitutional lawseparation of powersrule of lawpassenger taxHimachal Pradeshvalidation actlegislative competence

Judgment

[2023] 12 S.C.R. 1 : 2023 INSC 810

CASE DETAILS

NHPC LTD.
V.
STATE OF HIMACHAL PRADESH SECRETARY & ORS.
(Civil Appeal No.3948 of 2009)
SEPTEMBER 06, 2023
[B. V. NAGARATHNA AND UJJAL BHUYAN, JJ.]
HEADNOTES
Issues for consideration: (i)Whether, by enacting the Himachal
Pradesh Passengers and Goods (Amendment and Validation) Act of 1997,
the Himachal Pradesh State Legislature had validly removed the basis of
the judgment of the Division Bench of the High Court dated 27.03.1997,
whereby the Himachal Pradesh Passengers and Goods Taxation Act, 1955
had been held not to include within its scope the activity of the appellants
of providing gratis transport facilities for their employees and their children.
(ii) Whether the activity of the appellants of providing gratis transport
facilities for their employees and their children, would now be a taxable
activity under Section 3(1-A) of the Amendment and Validation Act of 1997.
Himachal Pradesh Passengers and Goods Taxation Act, 1955 –
Himachal Pradesh Passengers and Goods (Amendment and Validation)
Act of 1997 – Validity of the Amendment and Validation Act, 1997
and taxability of transport facility provided by the appellant for their
employees and children:
Held: By enacting the Amendment and Validation Act of 1997, the
Himachal Pradesh State Legislature has validly removed the basis of the
judgment of the Division Bench of the High Court dated 27.03.1997,
inter-alia, by amending the deﬁnition of the term ‘business’; deﬁning the
terms ‘fare’, ‘freight’ and ‘road’; deleting the Explanation to Section 3(1);
and inserting Section 3(1A) which brought non-fare paying passengers at
par with fare-paying passengers for the purpose of levying tax under the
Act – Thus, the Amendment and Validation Act of 1997 is a valid piece of
Legislation – The activity of the appellant in providing gratis transportation
1
2 SUPREME COURT REPORTS [2023] 12 S.C.R.

to its employees, and their children, would be a taxable activity under Section
3(1-A) of the Amendment and Validation Act of 1997. [Para 23(ii), (iii)]
Himachal Pradesh Passengers and Goods Taxation Act, 1955 –
Himachal Pradesh Passengers and Goods (Amendment and Validation)
Act of 1997 – The Division Bench of the High Court passed a judgment
dated 27.03.1997 and pointed out lacunae in the Act of 1955 – By way of
the Amendment and Validation Act of 1997, amendments were brought
about to the Preamble and various provisions of the Act of 1955 with
retrospective eﬀect, viz. date of enforcement of the Act of 1955 – When
a competent legislature retrospectively removes the substratum or
foundation of a judgment to make it ineﬀective – Valid legislative
exercise or not:
Held: A legislature cannot directly set aside a judicial decision
– However, when a competent legislature retrospectively removes the
substratum or foundation of a judgment to make the decision ineﬀective, the
same is a valid legislative exercise provided it does not transgress on any
other constitutional limitation – Such a legislative device which removes
the vice in the previous legislation which has been declared unconstitutional
is not considered to be an encroachment on judicial power but an instance
of abrogation recognised under the Constitution of India – The various
decisions of the Supreme Court show that it is open to the legislature to
alter the law retrospectively, provided the alteration is made in such a
manner that it would no more be possible for the Court to arrive at the same
verdict – In other words, the very premise of the earlier judgment should be
removed, thereby resulting in a fundamental change of the circumstances
upon which it was founded – It would be permissible for the legislature to
remove a defect in an earlier legislation, as pointed out by a constitutional
court in exercise of its powers by way of judicial review – This defect can
be removed both prospectively and retrospectively by a legislative process
and previous actions can also be validated. [Paras 11 and 12]
Constitution of India – Alteration of law retrospectively –
Separation of powers between legislature, executive and the judiciary
– Power of Judicial Review – Power of Legislature – Rule of Law:
Held: The role of the judiciary in galvanising constitutional machinery
characterised by institutional checks and balances, lies in recognising that
NHPC LTD. v. STATE OF HIMACHAL PRADESH 3
SECRETARY & ORS.

while due deference must be shown to the powers and actions of the other
two branches of the government, the power of judicial review may be
exercised to restrain unconstitutional and arbitrary exercise of power by the
legislature and executive organs – The power of judicial review is a part
of the basic feature of Constitution which is premised on the rule of law –
Unless a judgment has been set aside by a competent court in an appropriate
proceeding, ﬁnality and binding nature of a judgment are essential facets
of the rule of law informing the power of judicial review – In that context,
while it may be open to the legislature to alter the law retrospectively, so
as to remove the basis of a judgment declaring such law to be invalid, it is
essential that the alteration is made only so as to bring the law in line with
the decision of the Court – Simply setting at naught a decision of a court
without removing the defects pointed out in the said decision, would sound
the death knell for the rule of law – The rule of law would cease to have
any meaning if the legislature is at liberty to defy a judgment of a court
by simply passing a validating legislation, without removing the defects
forming the substratum of the judgment by use of a non-obstante clause as
a technique to do so. [Para 13]
Constitution of India – Legislative device of abrogation –
Retrospective amendments – Permissibility of:
Held: The device of abrogation, by way of introducing retrospective
amendments to remove the basis of a judgment, may be employed when
a legislature is under the bonaﬁde belief that a defect that crept into the
legislation as it initially stood, may be remedied by abrogation – An act of
abrogation is permissible only in the interests of justice, eﬀectiveness and
good governance, and not to serve the oblique agenda of defying a court’s
order, or stripping it of its binding nature. [Para 14]
Constitution of India – The power of abrogation is to be exercised
following principles:
Held: (i) There is no legal impediment to enacting a law to validate a
legislation which has been held by a court to be invalid, provided, such a law
removes the basis of the judgment of the court, by curing the defects of the
legislation as it stood before the amendment; (ii) The validating legislation
may be retrospective – It must have the eﬀect that the judgment pointing
out the defect would not have been passed, if the altered position as sought
4 SUPREME COURT REPORTS [2023] 12 S.C.R.

to be brought in by the validating statute existed before the court at the
time of rendering its judgment; (iii) Retrospective amendment should be
reasonable and not arbitrary and must not be violative of any Constitutional
limitations; (iv) Setting at naught a decision of a court without removing
the defect pointed out in the said decision is opposed to the rule of law and
the scheme of separation of powers under the Constitution of India; (v)
Abrogation is not a device to circumvent an unfavourable judicial decision
– If enacted solely with the intention to defy a judicial pronouncement, an
Amendment and Validation Act of 1997 may be declared as ultra-vires.
[Para 15]
Himachal Pradesh Passengers and Goods Taxation Act, 1955 –
Himachal Pradesh Passengers and Goods (Amendment and Validation)
Act of 1997 – Import of the Act of 1955 Act as amended by the
Amendment and Validation act of 1997:
Held: The Preamble which provides that it has been enacted to
provide for levying a tax on passengers and goods carried by road in motor
vehicles – Such a tax falls within the legislative ﬁeld governed by Entry
56 of List II of the Seventh Schedule of the Constitution – Simply for the
reason that notices have been issued to the owners or assessment orders
have been passed against the owners of the vehicles, it cannot be said that
the tax is levied on the motor vehicles – If the persons carried happen to
be employees of the owners of the buses, such employees should pay the
tax – When the employer, i.e., the owner of the vehicle, does not collect
the tax from such employees, he should himself pay it, in discharge of
the employer’s statutory duty as an agent of the State to collect tax on the
basis of the amended provision – Whether to collect the tax payable from
the passengers (the employees and their children) or discharge the liability
itself is the prerogative of the appellants. [Para 22]

LIST OF CITATIONS AND OTHER REFERENCES

Shri Prithvi Cotton Mills Ltd. v. Broach Borough Municipality, A.I.R
1970 SC 192 : [1970] 1 SCR 388; State of Tamil Nadu v. Arooran Sugars
Ltd., (1997) 1 SCC 326 : [1996] 8 Suppl. SCR 193 – followed.
Indian Aluminium Company Co. v. State of Kerala, A.I.R 1996 SC
1431: [1996] 2 SCR 23; Bakhtawar Trust v. M.D. Narayan, (2003) 5 SCC
NHPC LTD. v. STATE OF HIMACHAL PRADESH 5
SECRETARY & ORS.

298 : [2003] 1 Suppl. SCR 1; Madras Bar Association v. Union of India,
(2022) 12 SCC 455; Dr. Jaya Thakur v. Union of India, 2023 SCC OnLine
SC 813 – relied on.
A.S. Karthikeyan v. State of Kerala, (1974) 1 SCC 258 : [1974] 2 SCR
321; M/s Tata Engineering and Locomotive Co. v. The Sales Tax Oﬃcer,
Poona A.I.R. 1979 SC 343 : [1979] 2 SCR 357; J. K. Jute Mills Co. Ltd.
v. State of Uttar Pradesh, A.I.R. 1961 SC 1534 : [1962] SCR 1; State of
Tamil Nadu v. Board of Trustees of the Port of Madras, (1999) 4 SCC 630
: [1999] 2 SCR 195; Commissioner of Sales Tax v. Sai Publication Fund,
(2002) 4 SCC 57 : [2002] 2 SCR 743; National Agricultural Cooperative
Marketing Federation of India Ltd. v. Union of India, (2003) 5 SCC 23:
[2003] 3 SCR 1; M/s West Ramnad Electric Distribution Co. v. State of
Madras, A.I.R. 1962 SC 1753 : [1963] SCR 747; Rai Ramkrishna v. State
of Bihar, A.I.R. 1963 SC 1667 : [1964] SCR 897; Lohia Machines Ltd. v.
Union of India, (1985) 2 SCC 197 : [1985] 2 SCR 686; State of Himachal
Pradesh v. Yash Pal Garg, (2003) 9 SCC 92 : [2003] 3 SCR 1056; Baharul
Islam v. Indian Medical Association, 2023 SCC OnLine SC 79; M/s. Tirath
Ram Rajendra Nath, Lucknow v. State of Uttar Pradesh, A.I.R. 1973 SC
405; Hindustan Gum and Chemicals Ltd. v. State of Haryana, (1985) 4
SCC 124 : [1985] 2 Suppl. SCR 630; Cheviti Venkanna Yadav v. State of
Telangana, (2017) 1 SCC 283 : [2016] 7 SCR 689 – referred to.

OTHER CASE DETAILS INCLUDING IMPUGNED
ORDER AND APPEARANCES

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3948 of 2009.
From the Judgment and Order dated 11.12.2008 of the High Court of
Himachal Pradesh at Shimla in CWP No.725 of 1998.
With
Civil Appeal Nos. 4738-4743 and 6931 of 2009.
Appearances:
S.B. Upadhyay, Sr. Adv., Piyush Sharma, Anuj Sharma, Abhishek
Goyal, Shivesh Shrivastava, Yashraj Singh Deora, Priyesh Mohan Srivastava,
Abhishek Singh, M/s. Mitter & Mitter Co., Advs. for the Appellant.
6 SUPREME COURT REPORTS [2023] 12 S.C.R.

Anup Kumar Rattan, AG, Rupinder Singh Thakur, Addl. AG, Puneet
Rajta, Karan Kapur, Abhishek Gautam, Vivek Kumar, Baldev Singh, Ms.
Radhika Gautam, Kartikeya Rastogi, Ms. Inderdeep Kaur Raina, Abhinav
Mukerji, Advs. for the Respondents.

JUDGMENT / ORDER OF THE SUPREME COURT

JUDGMENT
NAGARATHNA, J.
These appeals have been ﬁled assailing the ﬁnal Orders of the High
Court of Himachal Pradesh dated 11 December, 2008 and 06 May, 2009,
whereby the vires of the Himachal Pradesh Passengers and Goods Taxation
Act, 1955 (hereinafter referred to as the “Act of 1955” for the sake of
brevity) as amended from time to time, particularly by the Himachal Pradesh
Passengers and Goods (Amendment and Validation), Act, 1997 (hereinafter
referred to as the “Amendment and Validation Act of 1997” for the sake
of brevity) has been upheld and the writ petitions ﬁled by the appellants
herein, i.e., Civil Writ Petition Nos. 725 of 1998, 422 of 1998, 401 of 2001,
464-467 of 2001 and 79 of 2007, have been dismissed.
Bird’s eye view of the controversy:
2. The controversy in these cases revolves around the question whether,
by enacting the Amendment and Validation Act of 1997, the Himachal
Pradesh State Legislature has validly removed the basis of the judgment
of the Division Bench of the High Court dated 27 March, 1997. In the said
judgment, the Act of 1955 had been held not to include within its scope,
the activity of the appellants in providing gratis transport facilities for their
employees and their children, as the charging provision contained therein,
namely, Section 3 (1) and the Explanation thereto were couched in very
ambiguous terms.
2.1. These appeals also call for consideration of ancillary arguments
in the matter such as legislative competence of the Himachal Pradesh
Legislative Assembly to enact the Act of 1955 and the Amendment and
Validation Act of 1997, which are stated to be enacted on the strength of
Article 246, read with Entry 56 of List II of the Seventh Schedule of the
Constitution of India.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 7
SECRETARY & ORS.[B. V. NAGARATHNA]

2.2 Further, these appeals also call for interpretation of certain provisions
of the Act of 1955, as amended by the Amendment and Validation Act of 1997,
so as to determine whether the activity of the appellants, would be a taxable
activity under Section 3(1-A) of the Amendment and Validation Act of 1997.
Brief facts of the case:
3. Since the controversy involved in these appeals is identical, the
appeals are being disposed of by way of this common judgment. For the
sake of convenience, the facts of the lead matter, i.e., Civil Appeal No. 3498
of 2009 shall be narrated as under:
3.1. The facts in a nutshell are that the Act of 1955 was enacted by
the Himachal Pradesh Legislative Assembly with a view to levy tax on
passengers and goods carried by road in certain motor vehicles in the State
of Himachal Pradesh. The said Act received Presidential assent on 25
November, 1955.
3.2. The appellant, NHPC Ltd. is engaged in the generation of
electricity and has various projects in the State of Himachal Pradesh. Many
project sites are situated at diﬀerent locations in the interiors of Himachal
Pradesh. These work sites are not properly serviced by any public transport
system or regular taxis. The residential colonies of the staﬀ employed at the
various project sites are located at far of distances from the project sites.
Therefore, as a welfare measure, the appellant, NHPC Ltd. provides transport
facilities to its employees in order to enable them to reach their respective
work sites from their residential colonies and for their children to travel to
and from their schools, comfortably. It is to be clariﬁed at this juncture that
the transport facilities were being provided free of cost, for the exclusive
use of the employees of the appellant and their children and members of
the public were not permitted to use the said transport facilities. The buses
utilized for such purpose were owned and operated by the appellant-NHPC
Ltd.
3.3. The Assessing Authority under the Act of 1955, Respondent No.
3 herein, assessed the liability of the appellant-NHPC Ltd. to pay passenger
tax under the Act for the years 1984-1985 to 1986-1987 and 1987-1988
to 1990-1991 in respect of the activity of providing transport facilities to
its employees and their children. Assessment Orders were passed on 01
8 SUPREME COURT REPORTS [2023] 12 S.C.R.

October, 1992 stipulating the liability of the appellant, NHPC Ltd. to pay
passenger tax under the Act of 1955, on the premise that its employees and
their children were passengers under the Act and therefore, the appellant was
liable to pay passenger tax for providing them with transport facilities as
described hereinabove. It is to be stated at this juncture that the Assessment
Orders were passed on the assumption that every bus of the appellant, NHPC
Ltd. was plying on every day of the relevant years; a passenger travelled
on every seat of every bus; and every employee travelled the full distance
shown in the logbook.
3.4. The appellant filed Revision Application before the
Commissioner, Excise and Taxation, Himachal Pradesh, Respondent
No. 2 herein, challenging the Assessment Orders dated 01 October,
1992. The same was dismissed on the ground that a revision application
would not be maintainable and it would be appropriate to instead, file
an appeal.
3.5. In the said background, the appellant, NHPC Ltd. ﬁled Writ
Petition No.1733 of 1995 before the High Court, challenging the vires of the
Act of 1955, and the assessments made in accordance with the provisions
thereof. The pertinent contentions raised by the appellant in the said Writ
Petition may be encapsulated as under:
i. That under the Act of 1955, no tax can be levied on the appellant
as its employees and their children were being carried in the
appellant’s buses, without any fare or consideration. That
passenger tax as contemplated under the Act of 1955 was to be
levied only on fare-paying passengers against tickets issued by
the owner of the motor vehicles, who is engaged in the business
of carrying passengers for hire and reward.
ii. That no rate or fare had been speciﬁed by the competent authority
under the Motor Vehicles Act, 1939 (hereinafter referred to as
“MV Act” for short) for the routes on which the appellant’s buses
plied, nor had any contractual rate been agreed upon between the
appellants and its employees. Therefore, the charging provision,
i.e., Section 3 (1) of the Act of 1955 and the Explanation thereto
would not be attracted.

8
NHPC LTD. v. STATE OF HIMACHAL PRADESH 9
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

iii. That in passing the Assessment Orders dated 01 October, 1992,
erroneous and baseless assumptions had been made to the eﬀect
that every bus of the appellant, NHPC Ltd. was plying on every
day of the relevant year; a passenger travelled on every seat of
every bus; every employee travelled the full distance shown in
the logbook; and every passenger was paying a fare of Rs. 1.15
per kilometer.
iv. That even if the assessee was liable to pay tax under the Act of
1955, they would not be liable to pay surcharge under Section
3A of the Act as the said provision would not be applicable
to the appellants. Further, Section 3A of the Act of 1955 was
unconstitutional and suﬀered from excessive delegation of powers
to the State Government to prescribe the rate of surcharge leviable,
without laying down any guideline on the basis of which surcharge
was to be prescribed.
3.6. By the Judgment and Order dated 27 March, 1997, the Division
Bench of the High Court allowed Civil Writ Petition No.1733 of 1995 ﬁled
by the appellant and directed the Respondents to refund the tax collected
under the provisions of the Act of 1955. The pertinent ﬁndings of the Division
Bench of the High Court are culled out hereinunder:
i. That the scheme of the Act of 1955 was to levy a tax on passengers
of certain motor vehicles only. Intention of the legislature could
be gathered from the various deﬁnitions contained in Section 2
of the Act, and the same was to make the Act applicable only to
persons who carried on the business of transport. The deﬁnition
of ‘owner’ would fortify such ﬁnding, as ‘owner’ was deﬁned to
mean a person holding a permit under the Motor Vehicles Act.
ii. That the liability of the assessee was to be determined for the years
1984-1985 to 1986-1987 and 1987-1988 to 1990-1991. Prior to 31
May, 1988, ‘motor vehicle’ was deﬁned to mean “a public service
vehicle or public carrier, or private carrier or a trailer attached to
any such vehicle.” Further, the deﬁnition of ‘passenger’ excluded
from its scope the driver, conductor and employee of the owner
of the motor vehicle. Therefore, the appellant’s buses would not
be covered under the deﬁnition of ‘motor vehicle’, as deﬁned
10 SUPREME COURT REPORTS [2023] 12 S.C.R.

at the relevant point of time. That on applying the deﬁnition of
the expressions, ‘motor vehicle’ and ‘passenger’ to the charging
provision, the appellant would not be liable for tax under the Act
of 1955.
iii. That as regards the period between 31 May, 1988 and 30
September, 1990, the scope of the definition was expanded
only to include any vehicle used in contravention of
the provisions of the Motor Vehicles Act for carriage of
passengers or goods or both, for hire and reward. Since the
appellant’s buses were not used for carriage of passengers
for hire or reward, appellant would not be liable to discharge
tax under the Act.
iv. That from 01 October, 1990, the deﬁnition of ‘motor vehicle’
was enlarged to include any ‘transport vehicle,’ which, as deﬁned
under the Motor Vehicles Act, 1988 (hereinafter, “MV Act, 1988”
for the sake of convenience) means “a public service vehicle, a
goods carriage, an educational institution bus or a private service
vehicle.” That although the said deﬁnition of ‘motor vehicle’
would cover the buses of the appellant, the Explanation to Section
3 (1) of the Act of 1955 would not permit such an application.
v. That the Explanation to Section 3 (1) of the Act of 1955 introduced
a legal ﬁction requiring assessments to be made on the assumption
that even passengers who did not actually pay a fare, were being
carried at the normal rate chargeable on the concerned route. That
there was no deﬁnition of ‘route’ for the purposes of the Act and
the deﬁnition of ‘route’ under the MV Act could not be referred
to as the routes on which the appellant’s buses plied were not
‘routes’ in the sense deﬁned under the MV Act. Hence, ‘route’
could not be equated to any ‘road’ so as to hold the appellant-
assessee liable to pay tax under the Act of 1955. That for charging
tax, by invoking the Explanation to Section 3(1), routes were
required to be prescribed, but since no routes had been prescribed,
the Explanation could not come to the rescue of the respondent
Authorities.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 11
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

vi. Further, in the absence of any prescription as to what the ‘normal
rate’ would be, the Respondent Authorities could not have levied
tax on the appellant based on artiﬁcial assumptions. That there
was no basis to warrant the Authorities from taking into account
the fare payable in the adjoining areas, in calculating the ‘normal
rate.’
vii. That the charging provision could not be given eﬀect to unless
the terms ‘route’ and ‘normal rate’ had been expressly and
unambiguously deﬁned.
3.7. A Special Leave Petition ﬁled by the Respondents before this
Court, assailing the judgment of the High Court dated 27 March, 1997 was
dismissed by an Order dated 28 July, 1997.
3.8. In that background, on 13 August, 1997, the Himachal Pradesh
Passengers and Goods (Amendment & Validation) Ordinance was
promulgated. The Himachal Pradesh Legislative Assembly passed the
Amendment and Validation Act of 1997 on 27 September, 1997 with a view
to remove the basis of the judgment of the Division Bench of the High Court
dated 27 March, 1997. By virtue of the Amendment and Validation Act of
1997, deﬁnitions of the terms ‘business’, ‘fare’, ‘freight’ and ‘passenger’
were amended. Further, deﬁnitions of terms such as ‘Private Service
Vehicle’, ‘road’, ‘Transport Vehicle’, came to be introduced. Explanation
(1) to Section 3 (1) of the Act of 1955, which was the charging provision in
the said Act, was omitted and Sub-section (1A) was inserted in Section 3,
which was to serve as a charging provision. The nuances of the amendments
introduced by the Amendment and Validation Act of 1997 shall be adverted
to at a later stage.
3.9. Accordingly, the Authorities constituted under the Act, issued
notices to the appellant for recovery of tax under the provisions of the
Amendment and Validation Act of 1997, in respect of the appellant’s activity
of providing transport facilities to its employees and their children.
3.10. The appellant challenged the vires of the Amendment and
Validation Act of 1997 and the assessments made thereunder, as also of the
Act of 1955 by ﬁling Civil Writ Petition No. 725 of 1998 before the High
Court. The primary grounds of challenge were as under:
12 SUPREME COURT REPORTS [2023] 12 S.C.R.

i. That the Act of 1955 as well as the Amendment and Validation
Act of 1997 are unconstitutional inasmuch as they seek to levy
tax on vehicles, which is contrary to Entry 56, List II of Seventh
Schedule of the Constitution of India.

ii. That the deﬁnitions of ‘passenger’, ‘business’, ‘fare’ and ‘road’
are artiﬁcial and unnatural, as also contrary to the purpose and
object of the Act and hence, ultra-vires.

iii. That employees of the appellant and their children would not
be covered by the deﬁnition of “passenger”, as appearing in the
Amendment and Validation Act of 1997, inasmuch as they are
carried free of charge.

3.11. By the impugned judgment dated 11 December, 2008, the High
Court of Himachal Pradesh dismissed Civil Writ Petition No. 725 of 1998
ﬁled by the appellant and upheld the vires of the Act of 1955 as amended
from time to time, particularly by the Amendment and Validation Act of
1997. The pertinent ﬁndings of the Division Bench of the High Court may
be epitomized as under:

i. The Court did not ﬁnd favour with the contention of the Petitioner
that the impugned legislations had the eﬀect of taxing the vehicles,
carrying passengers or goods and, hence, the State Legislature
does not have the competence to enact it. It was held that from
a reading of the Preamble of the Act and also various provisions
thereof, it was clear that the Act seeks to impose tax, not on motor
vehicles, but on the passengers and goods carried therein. That
the import of the Act could be gathered from the Preamble which
provides that it has been enacted to provide for levying a tax on
passengers and goods carried by road in motor vehicles. That
simply for the reason that notices have been issued to the owners
or assessment orders have been passed against the owners of the
vehicles, it could not be said that the tax is levied on the motor
vehicles.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 13
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

ii. That the Preamble of the Act of 1955 provided that the same
was an Act to provide for levying tax on passengers and goods
carried by road in ‘certain’ motor vehicles. The word ‘certain’ is
omitted by the Amendment and Validation Act of 1997. That this
change in no way suggests that the scope of the Act was amended
to include taxation on vehicles, instead of on the passengers and
goods carried therein.
iii. That the defect in the Explanation to Section 3(1) of the Act of
1955, which was noted by the Division Bench of the High Court
in passing the judgment dated 27 March, 1997, had also been
removed by omitting the said Explanation and inserting Section
3(1A) in the Amendment and Validation Act of 1997, which
seeks to bring non-fare paying passengers at par with fare paying
passengers. Further, the Competent Authority as well as Schedule
I to the Amendment and Validation Act of 1997 prescribe the
fare and freight for diﬀerent categories of motor vehicles and for
diﬀerent roads and the higher of the two would apply.
iv. That Section 3(1A) of the Amendment and Validation Act of 1997,
when read with the amended deﬁnition of the term ‘business’
would leave no scope for doubt that all kinds of passengers and
goods carried in private service vehicles are subject to taxation,
under the Act, irrespective of whether such passengers or goods
were being carried for hire or reward. Therefore, the Amendment
and Validation Act of 1997, covers non-fare paying passengers
(such as the appellant’s employees and their children) as also
goods and material belonging to the appellant themselves.
Aggrieved by the aforesaid judgment of the High Court, which has
been followed by the High Court in its subsequent Order dated 21 July, 2009
in CWP 79 of 2007, the present appeals have been ﬁled.
Submissions:
4. We have heard Sri S.B. Upadhyay, learned Senior Counsel along
with instructing counsel for the appellant(s) in Civil Appeal No. 3948 of
2009; Sri Yashraj Singh Deora, learned counsel for the appellant(s) in Civil
Appeal Nos. 4738-4743 of 2009 and Civil Appela No. 6931 of 2009 and Sri
14 SUPREME COURT REPORTS [2023] 12 S.C.R.

Anup Kumar Rattan, learned Advocate General for the State of Himachal
Pradesh along with instructing counsel. We have perused the material on
record.
4.1. Learned Senior Counsel Sri Upadhyay, appearing on behalf of the
appellant(s) in Civil Appeal No. 3948 of 2009 submitted as under:
i. That the impugned judgment of the High Court of Himachal
Pradesh has not properly appreciated the import of the
Amendments made to the Act of 1955 by way of the Amendment
and Validation Act of 1997 inasmuch as the High Court has upheld
the said Act of 1997, by losing sight of the fact that the said Act
does not remove the basis of the judgment passed by the High
Court earlier, by which, the Explanation to Section 3 (1) of the
Act of 1955 was deleted and the further amendments were made
by inclusion of Section 3 (1A) and certain other provisions. That
the High Court has proceeded on a misplaced interpretation of
the Act of 1955, as amended by the Amendment and Validation
Act of 1997 to hold that the latter Act, seeks to impose tax on
passengers and not motor vehicles and that the said Act covers
non-fare paying passengers as well which it cannot do so.
ii. Elaborating the aforesaid contention, learned senior counsel
submitted that the Amendments made to the Act of 1955 do not
take into consideration the fact that the buses and other motor
vehicles of the appellants herein which are used to ferry their
employees to work sites and children of their employees to
schools are free of charge and without collecting any fare from
the passengers. They travel gratis and therefore, in that sense, are
not passengers at all. Nevertheless, the incidence of tax are on the
appellants who are the owners of the buses and other vehicle who
have been levied the tax despite the fact that they are not collecting
any tax or any fare from their “passengers” who are none other
than their employees and children of their employees. Therefore,
the Act itself does not apply to the appellants and hence, they are
not liable to pay any tax under the Act.
iii. It was further submitted that the High Court has failed to
understand the import of the amendments made to the Act of
NHPC LTD. v. STATE OF HIMACHAL PRADESH 15
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

1955 as the said amendments in no way can mulct any liability
to pay tax on the appellants herein. That the true import of the
Act of 1955, as amended by the Amendment and Validation Act
of 1997 is to levy and collect tax on motor vehicles, transgressing
Article 246, read with Entry 56 of List II of the Seventh Schedule
of the Constitution of India. The said legislative Entry pertains
to “taxes on goods and passengers carried by road and inland
water ways.” The said Entry therefore authorises the State
Legislatures to levy, inter-alia, passenger tax. That the incidence
of a passenger tax levied on the strength of Entry 56 of List II of
the Seventh Schedule, must be on the passengers and not on the
vehicles in which passengers are carried or on the owners of such
vehicles. That it is open to the Legislature to provide a convenient
machinery or method for collection of such tax. Therefore, the
tax can be recovered from the owner or operator of the vehicle,
only when, such owner or operator can pass on the burden of the
tax to the passengers but not otherwise. In this regard, reliance
was placed on A.S. Karthikeyan vs. State of Kerala, (1974) 1
SCC 258 with a view to bring out the diﬀerences between a tax
on the income of the operators vis-à-vis passenger tax. That in
the present case the incidence of the tax is on the appellants
who are the owners of the buses, and not on the passengers. The
appellants’ role in the present case cannot be to collect the tax
from the passengers and deposit the same with the Respondent
Authorities as no fare is collected from the passengers, but to still
discharge the tax liability out of their own coﬀers.
iv. That fundamentally, ‘passenger’ means a person who travels
by paying a fare to the owner or operator of the vehicle, vide
M/s Tata Engineering and Locomotive Co. vs. The Sales Tax
Oﬃcer, Poona, A.I.R. 1979 SC 343. Therefore, a non-fare
paying employee of the operator, or a school-going child of
such employee, is not a passenger within the meaning of the
constitutional entry.
v. That the Amendment and Validation Act of 1997 had introduced
sub-clauses (ii) and (iii) to Section 2 (aa) of the Act which deﬁnes
16 SUPREME COURT REPORTS [2023] 12 S.C.R.

‘business’. That the said sub-clauses are brought within the scope
of the term ‘business’:
a) any trade, commerce, or manufacture, or any adventure or
concern in the nature of trade, commerce, or manufacture,
whether or not such trade, commerce, manufacture, adventure
or concern is carried on with a motive to make gain of proﬁt
and whether or not any gain or proﬁt actually accrues from
such trade, commerce, manufacture, adventure or concern vide
Section 2 (aa) (ii); and,
b) any transaction in connection with or incidental or ancillary
to such trade, commerce, manufacture, adventure or concern
vide Section 2 (aa) (iii).
That notwithstanding the fact that the scope of the term
‘business’ has been widened, sub-clauses (ii) and (iii) to
Section 2 (aa) are to be read in harmony with sub-clause (i)
thereof, which provides that ‘business’ includes the business
of carrying passengers and goods by motor vehicles. That
if ‘business’ is held to mean just any trade, commerce,
manufacture, adventure or concern, sub-clause (i) of Section
2 (aa), which speciﬁes the nature of business, would become
redundant.
vi. That if sub-clauses (ii) and (iii) to Section 2 (aa) are interpreted
to include even businesses other than the business of carrying
passengers, the said sub-clauses would be violative of Article
14 of the Constitution on two counts. First, a person or entity
who/which does not carry the business of carrying passengers
and goods by motor vehicles, would be treated at par with a
person or entity who/which carries on such business. Second,
a person or entity who/which does not carry on a business with
a proﬁt motive, would be treated at par with a person or entity
who/which carries on a business with a proﬁt motive. In both
the circumstances, unequals would be treated equally and this
is opposed to the Constitutional mandate of equality under the
law.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 17
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

vii. That the deﬁnitions of ‘business’, ‘passenger’, ‘road’, ‘fare’ and
‘freight’ under the Amendment and Validation Act of 1997 are
artiﬁcial and insertion/substitution of such deﬁnitions is an illegal
attempt to bring the Amendment and Validation Act of 1997
within the scope of Entry 56 of List II of the Seventh Schedule
to the Constitution.
viii. Reliance was placed on J.K. Jute Mills Co. Ltd. vs. State of Uttar
Pradesh, A.I.R. 1961 SC 1534 to contend that when a statute has
been enacted by a State Legislature, outside the permissible ﬁeld
of legislation, merely using artiﬁcial terminology so as to bring the
legislation within the scope of a particular legislative Entry would
not save the same from being declared to be unconstitutional.
ix. That the Amendment and Validation Act of 1997 did not remove
the basis of the judgment of the Division Bench of the High Court
dated 27 March, 1997, by curing the defects and plugging the
lacunae in the Act of 1955. Rather, it has been enacted with the
oblique motive of destroying the ﬁnality, force and eﬀect of the
said judgment of the High Court, which has been aﬃrmed by this
Court.
4.2. Sri Yashraj Singh Deora, learned counsel for the appellants in
Civil Appeal Nos. 4738-4743 of 2009 and Civil Appeal No. 6931 of 2009
adopted the submissions of learned Senior Counsel Sri Upadhyay and further
contended as under:
i. That in order to be covered under the deﬁnition of ‘business’
provided under the Amendment and Validation Act of 1997,
the trade, commerce, manufacture of the assessee, or the
transactions connected therewith or incidental thereto must have
some connection with the business of carrying passengers and
goods by road. When the term ‘business’ is construed in such a
manner, the main activities of the respective appellants, would
not amount to carrying on business, as the same do not relate to
the activity of carrying passengers and goods by road. That in a
case where the main activity does not amount to ‘business’, then
the connected, incidental or ancillary activities would also not
amount to ‘business’ unless an independent intention to conduct
18 SUPREME COURT REPORTS [2023] 12 S.C.R.

business in these connected, incidental or ancillary activities
is established by the revenue, vide State of Tamil Nadu vs.
Board of Trustees of the Port of Madras, (1999) 4 SCC 630;
Commissioner of Sales Tax vs. Sai Publication Fund, (2002) 4
SCC 57. That in the present case, there is no material to establish
that the ancillary activity of providing transport facilities to their
employees and their children is conducted with an independent
intention to conduct business through such activity. Therefore,
in the present case, neither the main activity of the appellants,
nor the ancillary activity of providing transport facilities to their
employees and their children, would amount to ‘business’ as
deﬁned under the Amendment and Validation Act of 1997.
ii. Referring to the various amendments brought about by the
Amendment and Validation Act of 1997 and contrasting them with
the unamended provisions, it was contended that the said Act has
not removed the basis of the judgment of the Division Bench of the
High Court dated 27 March, 1997, nor has it cured the defects in
the Act of 1955. That such an enactment is simply contradictory to
the decision of the High Court, without addressing the underlying
reasoning of the Court.
iii. That the retrospective eﬀect of forty-two years, given to the
Amendment and Validation Act of 1997 is totally unreasonable
and arbitrary. That particularly in relation to taxation statutes,
retrospectivity cannot be excessive or harsh, vide National
Agricultural Cooperative Marketing Federation of India Ltd.
vs. Union of India, (2003) 5 SCC 23. That on this ground alone,
the Amendment and Validation Act of 1997 may be struck down
as being unconstitutional.
With the aforesaid submissions, learned Senior Counsel and learned
counsel for the appellants prayed that the impugned judgments be set aside
and the Act of 1955, as amended by the Amendment and Validation Act of
1997, be struck down as being arbitrary, illegal and unconstitutional.
5. Per contra, Sri Anup Kumar Rattan, learned Advocate General
for the State of Himachal Pradesh supported the impugned judgment and
submitted that the High Court had proceeded to pass the impugned orders
NHPC LTD. v. STATE OF HIMACHAL PRADESH 19
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

on a sound appreciation of the facts of the matter and the applicable law and
the same would not call for any interference by this Court. It was further
contended as under:
i. That the Amendment and Validation Act of 1997 has validly
addressed the deﬁciencies in various provisions of the Act of
1955 and has therefore removed the basis of the judgment of
the Division Bench of the High Court dated 27 March, 1997
in accordance with law. That it is trite that if a law passed by a
Legislature is struck down or rendered inoperative by a Court, the
competent Legislature can correct the inﬁrmities which formed
the basis of the Court’s decision to strike down the law and
make such amended law eﬀective retrospectively, vide M/s West
Ramnad Electric Distribution Co. vs. State of Madras, A.I.R.
1962 SC 1753; Rai Ramkrishna vs. State of Bihar, A.I.R. 1963
SC 1667; Lohia Machines Ltd. vs. Union of India, (1985) 2 SCC
197; State of Himachal Pradesh vs. Yash Pal Garg, (2003) 9
SCC 92; Baharul Islam vs. Indian Medical Association, 2023
SCC OnLine SC 79.
ii. That Section 3 (1A) as incorporated by the Amendment and
Validation Act of 1997, provides that notwithstanding anything
contained in sub-section (1) of Section 3, when passengers are
carried and goods are transported by a motor vehicle and no fare
or freight, whether chargeable or not, has been charged or fare or
freight has been charged at a concessional rate, the tax at the rates
directed by a Notiﬁcation by the Government under sub-section
(1), shall be levied, charged and paid as if the passengers were
carried or goods were transported, either on fares or freights ﬁxed
by the competent authority, under the MV Act, for diﬀerent classes
of roads and motor vehicles in the State, or on fares and freights
speciﬁed in Schedule I to the Act for diﬀerent classes of roads
and motor vehicles, whichever is higher. That previously, under
the Act of 1955, Explanation to Section 3(1), which provided that
when passengers are carried and goods are transported by a motor
vehicle and no fare or freight, whether chargeable or not, had been
charged, the tax was levied and paid, as if such passengers were
carried or goods transported, at the normal rate prevalent on the
20 SUPREME COURT REPORTS [2023] 12 S.C.R.

route. The ambiguity in the charging provision, i.e., Section 3
(1) of the Act of 1955 arose on account of the fact that the terms
‘normal rate’ and ‘route’ had not been deﬁned under the said Act.
Owing to such a defect/lacuna, the charging provision could not be
given eﬀect to as noted by the Division Bench of the High Court
in the judgment dated 27 March, 1997. That by the Amendment
and Validation Act of 1997, Explanation to Section 3(1) has
been deleted and Section 3 (1A) has been inserted, prescribing
two alternate methods to notionally determine fares or freights,
when the same has not been charged, i.e. by taking into account:
(a) fares or freights ﬁxed by the competent authority, under the
MV Act, or (b) fares and freights speciﬁed in Schedule I to the
Act for diﬀerent classes of roads and motor vehicles: the higher
of the two fares is to be adopted in every case. Further, the terms
‘fares’, ‘freights’ and ‘roads’ have been deﬁned, thereby removing
the defects/deﬁciencies in the Act of 1955.
iii. That another reason given by the Division Bench in the judgment
dated 27 March, 1997 for holding that employees of the appellants
and their children were not covered by the Explanation (now
deleted by way of the Amendment and Validation Act of 1997)
was in relation to the deﬁnition of ‘business’. ‘The term ‘business’
was deﬁned in a narrow manner in the Act of 1955 and meant the
business of carriage of passengers and goods. Therefore, when
the deﬁnitions of the terms ‘motor vehicle’ and ‘business’ were
read into the charging provision, the inference was, only those
who were not in the business of carrying passengers and goods,
would not be covered by the charging provision. This loophole
has also been plugged by way of the Amendment and Validation
Act of 1997, inasmuch as the deﬁnition of ‘business’ has been
enlarged and it now includes, besides the business of carrying
passengers and goods by motor vehicles, any trade, commerce
or manufacture, or any adventure or concern, whether or not the
same is carried on with a proﬁt motive; and any transaction in
connection with, incidental or ancillary to such trade, commerce
or manufacture. That ‘business’ now means just any business,
carried on with or without a proﬁt motive, or any ancillary
NHPC LTD. v. STATE OF HIMACHAL PRADESH 21
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

transactions in connection with such business. The said expression
having being widened, a macro meaning and interpretation must
be given to the same, was the submission.
iv. That simply for the reason that notices had been issued to the
owners or assessment orders had been passed against the owners
of the vehicles, it could not be said that the tax was being levied
on the motor vehicles. The tax sought to be imposed was on the
passengers and goods carried by road and the operators/owners
of the motor vehicles were simply required to facilitate payment
of tax by collecting the same from the passengers and depositing
it with the Respondent Authorities. That the Act of 1955, as
amended by the Amendment and Validation Act of 1997, was
enacted on the strength of Entry 56 of List II of the Seventh
Schedule of the Constitution of India, which pertains to “taxes
on goods and passengers carried by road and inland water ways.”
With the aforesaid submissions, it was prayed that the present appeals
be dismissed as being devoid of merit and the impugned orders of the High
Court, be aﬃrmed.
Points for Consideration:
6. Having heard learned counsel for the respective parties and on
perusal of the material on record, the following points would emerge for
our consideration:
i. Whether, by enacting the Amendment and Validation Act of 1997,
the Himachal Pradesh State Legislature had validly removed the
basis of the judgment of the Division Bench of the High Court
dated 27 March, 1997, whereby the Act of 1955 had been held
not to include within its scope the activity of the appellants of
providing gratis transport facilities for their employees and their
children?
ii. Whether the activity of the appellants of providing gratis transport
facilities for their employees and their children, would now be
a taxable activity under Section 3(1-A) of the Amendment and
Validation Act of 1997?
22 SUPREME COURT REPORTS [2023] 12 S.C.R.

iii. Whether the impugned judgment of the High Court calls for any
interference?
iv. What order?
Legal Framework:
7. Before proceeding further, it would be useful to refer to the legal
framework relevant to the issues which arise in these appeals. Entry 56 List
II of the Seventh Schedule of the Constitution of India reads thus:
“56. Taxes on goods and passengers carried by road or on inland
waterways.”
7.1. The preamble of the Act of 1955 indicates that it is an Act to
provide for levying a tax on passengers and goods carried by road in ‘certain’
motor vehicles. Section 2(e) deﬁned ‘motor vehicle’ as any transport vehicle,
including a motor vehicle used for carrying passengers or goods, for hire
or reward even in contravention of the provisions of the MV Act. Section 2
(aa) of the Act of 1955 deﬁned ‘business’ to mean the business of carrying
passengers and goods by motor vehicles. Section 2 (g) deﬁned ‘passenger’
to mean any person travelling in a motor vehicle, but did not include the
driver or conductor or any employee of the owner of the vehicle travelling
in bona ﬁde discharge of his duties in connection with the vehicle. The term
‘owner’ was deﬁned under Section 2 (f) to mean the owner of the motor
vehicle in respect of which a permit had been granted or countersigned
under the provisions of the Motor Vehicles Act, 1939.
7.2. Section 3 (1) which was and still is the charging provision provided
that a tax shall be levied and charged by the State Government on all fares
and freights in respect of all passengers carried and goods transported by
motor vehicles, at such rates not exceeding one-sixth of the value of the
fare or freight, as the Government may, by notiﬁcation, direct. The charging
provision contained an Explanation which read as under:
“When passengers are carried and goods are transported by a motor
vehicle, and no fare or freight, whether chargeable or not, has been
charged the tax shall be leviable and paid as if such passengers were
carried or goods were transported at the normal rate prevalent on the
route.”
NHPC LTD. v. STATE OF HIMACHAL PRADESH 23
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

7.3. Section 2(c) provided an inclusive deﬁnition of the term ‘fare’
which would include sums payable for a season ticket or in respect of a
contract carriage.
7.4. It was primarily the aforesaid provisions of the Act of 1955 that
formed the subject of interpretation by the Division Bench of the High Court
in Writ Petition No.1733 of 1995, which was allowed by the judgment dated
27 March, 1997 as per the reasons indicated above.
8. With a view to bring the employees of the appellants and their
children, travelling in the buses of the appellants without payment of fare
within the tax net under the Act of 1955 and also to validate the collection
of tax already made thereunder, the Amendment and Validation Act of 1997
was enacted by the Himachal Pradesh Legislative Assembly. By way of the
Amendment and Validation Act of 1997, amendments were brought about to
the Preamble and various provisions of the Act of 1955 with retrospective
eﬀect, viz. date of enforcement of the Act of 1955. The amendments brought
about, which are relevant for the purpose of deciding these appeals are as
under:
i. The preamble, as amended states that it is an Act to provide for
levying a tax on passengers and goods carried by road in motor
vehicles. The word ‘certain’ which earlier preceded the term
‘motor vehicle’ has been deleted by way of the Amendment and
Validation Act of 1997.
ii. The deﬁnition of ‘business’ has been amended and it now includes,
besides the business of carrying passengers and goods by motor
vehicles, any trade, commerce or manufacture, or any adventure
or concern whether or not the same is carried on with a proﬁt
motive; and any transaction in connection with, incidental or
ancillary to such trade, commerce or manufacture.
iii. The deﬁnition of ‘fare’ was amended to include sums ﬁxed by the
competent authority under the MV Act for hire of motor vehicle
for carriage of passengers and transport of goods; sums payable
for a season ticket; and where no such fare has been paid, includes
the sums speciﬁed under Schedule I.
24 SUPREME COURT REPORTS [2023] 12 S.C.R.

iv. The term ‘owner’ has been deﬁned to mean owner of the motor
vehicle used for carrying passengers or transporting goods in or
through the territory of the State of Himachal Pradesh.
v. The following provisions deﬁning the terms ‘private service
vehicle’, ‘road’, and ‘transport vehicle’ were introduced by way
of the Amendment and Validation Act of 1997:
“2(gb) “private service vehicle” means a motor vehicle constructed
or adapted to carry more than six persons excluding the driver and
ordinarily used by or on behalf of the owner of such vehicle for the
purpose of carrying persons for, or in connection with his trade or
business;”
“2(gc) “road” means a track for travel or transportation to and fro,
serving as a means of communication, between two places;”
“2(ia) “transport vehicle” means a public service vehicle, a goods
carriage, an educational institution bus or a private service vehicle;”
vi. Sub-section (IA) has been added to Section 3 of the Act of 1955
and the Explanation to Section 3 (1) has been deleted. Section
3(1A) provides that notwithstanding anything contained in sub-
section (1) of Section 3, when passengers are carried and goods
are transported by a motor vehicle and no fare or freight, whether
chargeable or not, has been charged or fare or freight has been
charged at a concessional rate, the tax at the rates directed by
Notiﬁcation issued by the Government under sub-section (1), shall
be levied, charged and paid as if the passengers were carried or
goods were transported, either on fares or freights ﬁxed by the
competent authority, under the MV Act, for diﬀerent classes of
roads and motor vehicles in the State; or on fares and freights
speciﬁed in Schedule I to the Act for diﬀerent classes of roads
and motor vehicles, whichever is higher.
vii. Section 9 has been inserted, which provides for validation of
assessments made under the Act of 1955.
viii. Schedule I has been added to the Act, which stipulates the fares
on which tax would be leviable, for diﬀerent categories of motor
vehicles and class of roads.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 25
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

9. For easy reference, as submitted by Sri Yashraj Singh Deora, learned
counsel, a comparative table of the relevant provisions of the Act of 1955 and
the amendments introduced to such provisions, by way of the Amendment
and Validation Act of 1997, is provided hereinunder:
Parameters The Himachal The Himachal Pradesh
Pradesh Passengers Passengers and Goods Taxation
and Goods Taxation (Amendment and Validation)
Act, 1955 Act, 1997
Preamble An Act to pr ovide An Act to provide for levying a tax
for levying a tax on on passengers and goods carried
passengers and goods by road in motor vehicles.
carried by road in
certain motor vehicles.

Deﬁnition 2(a) “business” 2[(aa) “business” includes:-
of the term means the business of i. The business of carrying
‘business’ carrying passengers passengers and goods by motor
and goods by motor vehicles;
vehicles. ii. Any trade, commerce or
manufacture, or any adventure
or concern in the nature of trade,
commerce, or manufacture
whether or not such trade,
commerce m an uf actu re,
adventure or concern is carried
on with a motive to make gain
or proﬁt and whether or not any
gain or proﬁt accrues from such
trade, commerce, manufacture,
adventure or concern; and
iii. Any transaction in connection
with, or incidental or ancillary
to, such trade, Commerce,
manufacture, adventure or
concern.
26 SUPREME COURT REPORTS [2023] 12 S.C.R.

Deﬁnition 2(c) “fare” includes 2(c) “fare” or “freight includes
of the term sums payable for a sums fixed by the competent
‘fare’ season ticket or in authority under the Motor
Vehicles Act for the hire of
respect of the hire of a
contract carriage; motor vehicles for carriage of
passengers and the transport of
goods therein and includes the
sum payable for a season ticket,
and where no such fare or freight
has been ﬁxed, also includes such
sum as speciﬁed in Schedule-1:
Deﬁnition 2(e) “motor vehicle” 2(d) “motor vehicle” means
of the term means a public any transport vehicle, which
‘motor service vehicle or is mechanically propelled and
vehicle’ public carrier, or adapted for use upon roads
private carrier or a whether the power of propulsion
trailer when attached is transmitted thereto from an
to any such vehicle; external or internal source, or a
trailer when attached to any such
vehicle and includes-
(i) A motor vehicle used for
carriage of passengers or goods
or both for hire or reward in
contravention of the provisions of
the Motor Vehicles Act; and
( i i ) A m ax i ca b , w hi ch i s
constructed or adapted to carry
more than six passengers, but not
more than twelve passengers;]
(ea) Motor Vehicles Act” means
the Motor Vehicle Act, 1939 (4
of 1939) and the Motor Vehicles
Act, 1988 (59 of 1988), as the case
may be:]
NHPC LTD. v. STATE OF HIMACHAL PRADESH 27
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

Deﬁnition 2(f) “owner” means 2 ( f ) “ o w n e r m e a n s ” t h e
of the term the owner of the motor owner of the motor vehicle
‘owner’ vehicle in resp ect used for carrying passengers
of which a permit or transporting goods in or
has been granted or through the territory of the
countersigned under State of Himachal Pradesh, and
the provisions of the includes, -
Motor Vehicles Act, (a) The de-facto and de-jure
1939 (4 of 1939) and owners;
includes (a) the holder (b) Any person for the time being
of a permit in respect incharge of such vehicle;
of such vehicle, (b) (c) any person responsible for
any person for the the management of the place of
time being in charge of business of such owners;
such vehicle, (c) any ( d ) T h e G o v e r n m e n t o r
person responsible for Corporation constituted under the
the management of road Transport Corporation Act,
the place of business 1950 (64 of 1950):
of such owner, (d)
Government or a
Corporation constituted
under the Road
Transport Corporations
Act, 1950;
Deﬁnition (gb) “Private service vehicle”
of the term means a motor vehicle constructed
‘Private or adopted to carry more than six
service persons excluding the driver, and
vehicle’ - ordinarily used by or on behalf of
the owner of such vehicle for the
purpose of carrying persons for,
or in connection with, his trade or
business;
28 SUPREME COURT REPORTS [2023] 12 S.C.R.

Deﬁnition (ge) “road” means a track for
of the term travel or transportation to and
‘road’ - fro, serving as a means of
communication, between two
places;
Deﬁnition (ia) “transport vehicle” means a
of the term public service vehicle, a goods
‘transport - carriage, an educational institution
vehicle’ bus or a private service vehicle;
Charging 3. Levy of Tax. – (1) 3. Levy of Tax.- (1) There shall
provision: There shall be levied, be levied, charged and paid to the
charged and paid to State Government a tax,-
the State Government (i) On all fares in respect of
a tax on all fares and all passengers carried by motor
freights in respect of all vehicles at such rates not exceeding
passengers carried and ﬁfty percent of the value of freight,
goods transported by and
motor vehicles at such (ii) on all freights in respect of
rates not exceeding one all goods transported by motor
sixth of the value of the vehicles at such rates not exceeding
fare or freight, as the ﬁve percent of the value of freight,
case may be, and as As the Government may, by
the Government may, notiﬁ cation, direct, subject to a
by notiﬁcation, direct, minimum of five paise in any
subject to a minimum one case, the amount of tax being
of ﬁve paise in any one calculated to the nearest multiple
case, the amount of of ﬁve paise by ignoring two paise
tax being calculated to or less and counting more than two
the nearest multiple of paise as ﬁve paise.]
ﬁve paise by ignoring
two paise or less and
counting more than two
paise as ﬁve paise.]
NHPC LTD. v. STATE OF HIMACHAL PRADESH 29
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

Explanation:- When (1A) Notwithstanding anything
passengers are contained in sub-section (1),
carried and goods when passengers are carried
are transported by and goods are transported by a
a motor vehicle and motor vehicle and-
no fare or freight, i. No fare or freight, whether
whether chargeable chargeable or not has been
or not has been charged, or
charged the tax shall ii. fare or freight has been
be levied and paid charged at a concessional rate,
as if such passengers The tax at the rates as directed by
were carried or good notiﬁcation by the Government
transported at the under sub-section (1), shall be
normal rate prevalent levied, charged and paid as if
on the route. the passengers were carried or
(2) Where any fare or goods were transported either
freight charged is a lump on fares and frights ﬁxed by the
sum paid by a person on competent authority under the
account of a season Motor Vehicles Act for diﬀerent
ticket or as subscription classes of roads and motor
or contribution for vehicles in the State or on the
any privilege, right fares and freights, for diﬀerent
or facility which is classes of roads and motor
combined with the vehicles, speciﬁed in Schedule- I
right of such person to this Act, whichever is higher:
being carried or his Provided that the State Government
goods transported by a may, by notification, amend
motor vehicle, without Schedule-I, and thereupon the
any further payment Schedule-1, shall stand amended
or at a reduced charge, accordingly:
the tax shall be levied Provided further that every
on the amount of such notiﬁcation amending Schedule-1,
lump sum or on such shall be laid on the Table of the
amount as appears to Legislative Assembly.]
the prescribed authority (2) Where any fare or fright
to be fair and equitable charged is a lump sum paid by
30 SUPREME COURT REPORTS [2023] 12 S.C.R.

having regard to the a person on account of a season
fare or freight ﬁxed by ticket or as subscription or
a competent authority contribution for any privilege,
under the Motor right or facility which is combined
Vehicles Act, 1939. with the right of such person being
(3) Where passengers carried or his goods transported
are carried or goods by a motor vehicle, without any
transported by a motor further payment or at a reduced
vehicle from any place charge, the tax shall be levied on
outside the State [or the amount of such lump sum or
from any place outside on such amount as appears to the
the State to any place prescribed authority to be fair and
outside the State but equitable having regard to the fare
through the State or or frieght ﬁxed by a competent
from any place within authority under the Motor Vehicles
the State to any other Act, 4 [1988].
place within the (2-A) Where a motor vehicle plies
State but through the for hire or reward in contravention
intervening territory of the provisions of the Motor
of another State] to Vehicles Act, 1988 the owner
any place within the of such vehicle shall, without,
State, or from any prejudice to any action which
place within the State is or may be taken under that
to any place outside Act, be liable to pay tax at the
the State the tax shall rate speciﬁed in sub-section (1)
be payable in respect or such amount of fares and
of the distance covered freights as may be determined
within the State at the in the prescribed manner by the
rate laid down in sub- prescribed authority.]
section (1) and shall (3) Where passengers are carried
be calculated on such or goods transported by a motor
amount as bears the vehicle from any place outside the
same proportion to the State but through the intervening
total fare and freight as territory of another State] to any
the distance covered in place
the State bears to the
NHPC LTD. v. STATE OF HIMACHAL PRADESH 31
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

total distance of the outside the State the tax shall be
journey. payble in respect of the distance
covered within the State at the rate
laid down in sub-section (1) and
shall be calculated on such amount
as bears the same proportion to the
total fare and fright as the distance
covered in the state bears to the
total distance of the journey.

(Underlining by us)
9.1. Apart from the above, the salient Sections to be noticed are
Sections 5 to 9 of the Amendment and Validation Act of 1997 which read
as under:
“5. In Section 3A, of the Principal Act, for the words “stage/contract
carriage”, the words “transport vehicle, excluding a goods vehicle/
carriage”, shall be substituted.
6. In Section 3B and 21A of the Principal Act, the word “Schedule”,
wherever it occurs, the word “Schedule-II” shall be substituted.
7. The existing “SCHEDULE” to the Principal Act shall be re-
numbered as “SCHEDULE-II and before the “SCHEDULE-II” so
re-numbered, the following “SCHEDULE-I” shall be inserted namely:-
(not typed in the Paperbook)
* * * * * * * *
8. The amendments to the Principal Act, made by Sections 2, 3, 4, 5, 6
and 7 of the Act shall and shall always be deemed to have been made
retrospectively from the date of the commencement of the Principal
Act.
9. (1) Notwithstanding anything contained in any judgment,
decree, or order of any court or other authority to the contrary, any
assessment, levy, charge or payment of any tax on passengers and
goods carried to have been made or any action taken or anything
done under the provisions of the Principal Act at any time on or after
32 SUPREME COURT REPORTS [2023] 12 S.C.R.

the commencement of the Act, but before the commencement of the
Himachal Pradesh Passengers and Goods Taxation (Amendment and
Validation) Act, 1997 (hereinafter referred to as this ‘Act’), shall be
deemed to be a valid action or thing had been made, taken or done under
the provisions of the said Act as amended by this Act and accordingly-
i) the aforesaid tax assessed, levied, charged, paid or collected
or purporting to have been assessed, levied, charged, paid
or collected under the provisions of the said Act, before the
commencement of this Act shall be deemed to be and always be
deemed to have been validly assessed, levied, charged, paid or
collected in accordance with law:
(ii) no suit or other proceeding shall be maintained or continued
in any court or before any authority for the refund of, and no
enforcement shall be made by any court or authority of any
decree or order directing the refund of any such aforesaid tax,
which has been collected;
(iii) recoveries, if any, shall be made in accordance with the
provision of the said act of all amounts which would have been
collected thereunder as such aforesaid tax if this Act had been
in force at all material times; and
(iv) anything done or any action taken (including any rule or order
made, notiﬁcation issued or direction given or exemption granted
or penalty imposed) under the said Act before the commencement
of this Act shall be deemed always to have been validly done or
taken in accordance with this Act.
(2) For the removal of doubts, it is hereby declared that-
(a) nothing in sub-section (1) shall be construed in preventing any
person-
(i) from questioning, in accordance with the provisions of this
Act, the assessment, levy, charge, payment or collection of the
aforesaid tax; or
(ii) from claiming refund of the aforesaid tax paid by him in
excess of the amount due from him under this act; and
NHPC LTD. v. STATE OF HIMACHAL PRADESH 33
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

(b) no act or omission on the part of any person, before the
commencement of this act, shall be punishable as an oﬀence which
would not have been so punishable as if this Act had not come into
force.”
Analysis:
“It is when things go wrong that the retroactive validating statute
often becomes indispensable as a curative measure; though the proper
movement of law is forward in time, we sometimes have to stop and
turn about and pick up the pieces.”
- Lon Fuller, The Morality of Law (1960).
10. Since these appeals concern, inter-alia, the issue, as to, whether,
by enacting the Amendment and Validation Act of 1997, the Himachal
Pradesh State Legislature has validly removed the basis of the judgment
of the Division Bench of the High Court dated 27 March, 1997, it would
be useful to discuss the law on the adoption of the legislative device of
abrogation, to remove the basis of a judgment of a Court in a legislation.
10.1. In the following decisions, this Court has laid down the law
with regard to the permissible extent and manner of removing the material
basis of a judgment, by correcting the anomalies pointed out by a Court in
a legislation:
i. In M/s. Tirath Ram Rajendra Nath, Lucknow vs. State of
Uttar Pradesh, A.I.R. 1973 SC 405, this Court held that there is
a distinction between encroachment on the judicial power and
nulliﬁcation of the eﬀect of a judicial decision by changing the
law retrospectively. The former is outside the competence of the
legislature but the latter is within its permissible limits. In that
case, the U.P. Sales Tax Act (Amendment and Validation) Act,
1970 was upheld by this Court.
ii. In Hindustan Gum and Chemicals Ltd. vs. State of Haryana,
(1985) 4 SCC 124, this Court held that it is permissible for a
competent legislature to overcome the eﬀect of a decision of a
court setting aside the imposition of a tax by passing a suitable
Legislation, by amending the relevant provisions of the statute
34 SUPREME COURT REPORTS [2023] 12 S.C.R.

concerned with retrospective eﬀect, thus taking away the basis on
which the decision of the court has been rendered and by enacting
an appropriate provision validating the levy and collection of
tax made before the decision in question was rendered. In that
decision, reliance was placed on Shri Prithvi Cotton Mills
Ltd. vs. Broach Borough Municipality, A.I.R 1970 SC 192,
a Constitution Bench decision of this Court, which has laid
down the requirements which a validating law should satisfy in
order to validate the levy and collection of a tax which has been
declared earlier by a court as illegal. The relevant portion of the
said judgment reads as under:
“When a Legislature sets out to validate a tax declared by a
court to be illegally collected under an ineﬀective or an invalid
law, the cause for ineﬀectiveness or invalidity must be removed
before validation can be said to take place eﬀectively. The
most important condition, of course, is that the Legislature
must possess the power to impose the tax, for, if it does not,
the action must ever remain ineﬀective and illegal. Granted
legislative competence, it is not suﬃcient to declare merely that
the decision of the court shall not bind for that is tantamount
to reversing the decision in exercise of judicial power which
the Legislature does not possess or exercise. A court’s decision
must always bind unless the conditions on which it is based are
so fundamentally altered that the decision could not have been
given in the altered circumstances. Ordinarily, a court holds a tax
to be invalidly imposed because the power to tax is wanting or
the statute or the rules or both are invalid or do not suﬃciently
create the jurisdiction. Validation of a tax so declared illegal may
be done only if the grounds of illegality or invalidity are capable
of being removed and are in fact removed and the tax thus made
legal. Sometimes this is done by providing for jurisdiction where
jurisdiction had not been properly invested before. Sometimes
this is done by re-enacting retrospectively a valid and legal taxing
provision and then by ﬁction making the tax already collected to
stand under the re-enacted law. Sometimes the Legislature gives
its own meaning and interpretation of the law under which the
NHPC LTD. v. STATE OF HIMACHAL PRADESH 35
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

tax was collected and by legislative ﬁat makes the new meaning
binding upon courts. The Legislature may follow any one method
or all of them and while it does so it may neutralize the eﬀect of
the earlier decision of the court which becomes ineﬀective after
the change of the law. Whichever method is adopted it must be
within the competence of the Legislature and legal and adequate
to attain the object of validation. If the Legislature has the power
over the subject-matter and competence to make a valid law, it can
at any time make such a valid law and make it retrospectively so
as to bind even past transactions. The validity of a validating law,
therefore, depends upon whether the Legislature possesses the
competence which it claims over the subject-matter and whether
in making the validation it removes the defect which the courts
had found in the existing law and makes adequate provisions in
the validating law for a valid imposition of the tax.”
iii. In the case of Indian Aluminium Company Co. vs. State of
Kerala, A.I.R 1996 SC 1431, the principles regarding the
abrogation of a judgment of a court of law by a subsequent
legislation were culled out in the following words:
“56. From a resume of the above decisions the following salient
principles would emerge:
(1) The adjudication of the rights of the parties is the essential judicial
function. Legislature has to lay down the norms of conduct or rules
which will govern the parties and the transaction and require the court
to give eﬀect to them;
(2) The Constitution has delineated delicate balance in the exercise
of the sovereign power by the Legislature, Executive and Judiciary;
(3) In a democracy governed by rule of law, the Legislature exercises
the power under Articles 245 and 246 and other companion Articles
read with the entries in the respective Lists in the Seventh Schedule
to make the law which includes power to amend the law.
(4) The Court, therefore, need to carefully scan the law to ﬁnd out:
(a) whether the vice pointed out by the Court and invalidity suﬀered
by previous law is cured complying with the legal and constitutional
36 SUPREME COURT REPORTS [2023] 12 S.C.R.

requirements; (b) whether the Legislature has competence to validate
the law; (c) whether such validation is consistent with the rights
guaranteed in Part III of the Constitution.
(5) The Court does not have the power to validate an invalid law or
to legalise impost of tax illegally made and collected or to remove
the norm of invalidation or provide a remedy. These are not judicial
functions but the exclusive province of the Legislature. Therefore,
they are not the encroachment on judicial power.
(6) In exercising legislative power, the Legislature by mere declaration,
without anything more, cannot directly overrule, revise or override a
judicial decision. It can render judicial decision ineﬀective by enacting
valid law on the topic within its legislative ﬁeld fundamentally altering
or changing its character retrospectively. The changed or altered
conditions are such that the previous decision would not have been
rendered by the Court, if those conditions had existed at the time of
declaring the law as invalid. It is also empowered to give eﬀect to
retrospective legislation with a deeming date or with eﬀect from a
particular date.
(7) The consistent thread that runs through all the decisions of this
Court is that the legislature cannot directly overrule the decision or
make a direction as not binding on it but has power to make the decision
ineﬀective by removing the base on which the decision was rendered,
consistent with the law of the Constitution and the Legislature must
have competence to do the same.”
In the aforesaid case, the issue that arose for consideration was
as to the vires of Section 11 of the Kerala Electricity Surcharge (Levy
and Collection) Act, 1989. It was observed that the said provision was
valid and not an incursion on judicial power, notwithstanding the fact
that the eﬀect of Section 11 was to validate collection of tax made under
an invalid law.
iv. A Constitution Bench of this Court in State of Tamil Nadu vs.
Arooran Sugars Ltd., (1997) 1 SCC 326, summarised the law
on the legislative device of abrogation, to remove the basis of a
judicial pronouncement in the following words:
NHPC LTD. v. STATE OF HIMACHAL PRADESH 37
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

“30. From the aforesaid authorities, it is settled that there is a
demarcation between legislative and judicial functions predicated
on the theory of separation of powers. The legislature has the
power to enact laws including the power to retrospectively
amend laws and thereby remove causes of ineﬀectiveness or
invalidity. When a law is enacted with retrospective eﬀect, it is
not considered as an encroachment upon judicial power when
the legislature does not directly overrule or reverse a judicial
dictum. The legislature cannot, by way of an enactment, declare
a decision of the court as erroneous or a nullity, but can amend
the statute or the provision so as to make it applicable to the past.
The legislature has the power to rectify, through an amendment,
a defect in law noticed in the enactment and even highlighted in
the decision of the court. This plenary power to bring the statute
in conformity with the legislative intent and correct the ﬂaw
pointed out by the court can have a curative and neutralizing
eﬀect. When such a correction is made, the purpose behind the
same is not to overrule the decision of the court or encroach upon
the judicial turf, but simply enact a fresh law with retrospective
eﬀect to alter the foundation and meaning of the legislation and
to remove the base on which the judgment is founded. This does
not amount to statutory overruling by the legislature. In this
manner, the earlier decision of the court becomes non-existent
and unenforceable for interpretation of the new legislation. No
doubt, the new legislation can be tested and challenged on its
own merits and on the question whether the legislature possesses
the competence to legislate on the subject matter in question,
but not on the ground of over-reach or colourable legislation.”
v. In Bakhtawar Trust vs. M.D. Narayan, (2003) 5 SCC 298, this
Court observed as under while laying down a three-pronged test
to determine the vires of a validating Act:
“14. The validity of any statute may be assailed on the ground
that it is ultra vires the legislative competence of the legislature
which enacted it or it is violative of Part III or any other provision
of the Constitution. It is well settled that Parliament and State
38 SUPREME COURT REPORTS [2023] 12 S.C.R.

Legislatures have plenary powers of legislation within the ﬁelds
assigned to them and subject to some constitutional limitations,
can legislate prospectively as well as retrospectively. This power to
make retrospective legislation enables the legislature to validate prior
executive and legislative Acts retrospectively after curing the defects
that led to their invalidation and thus makes ineﬀective judgments of
competent courts declaring the invalidity. It is also well settled that a
validating Act may even make ineﬀective judgments and orders of
competent courts provided it, by retrospective legislation, removes
the cause of invalidity or the basis that had led to those decisions.
15. The test of judging the validity of the amending and validating
Act is, whether the legislature enacting the validating Act has
competence over the subject-matter; whether by validation, the said
legislature has removed the defect which the court had found in the
previous laws; and whether the validating law is consistent with the
provisions of Part III of the Constitution.”
vi. In Cheviti Venkanna Yadav vs. State of Telangana, (2017) 1 SCC
283, this Court considered a question relating to the validity of an
amendment with retrospective eﬀect after a provision of the Act
was struck down by the Court- When does it not amount to the
statutory overruling of a judgment by the legislature? This Court
held that the legislature has the power to legislate including the
power to retrospectively amend laws, thereby removing causes of
ineﬀectiveness or invalidity of laws. Further, when such correction is
made, the purpose behind the same is not to overrule the decision of
the court or encroach upon the judicial turf, but simply enact a fresh
law with retrospective eﬀect to alter the foundation and meaning
of the legislation and to remove the base on which the judgment is
founded. The order of the High Court, inter alia, holding that the
amended provisions did not usurp the judicial power was upheld.
vii. In Madras Bar Association vs. Union of India, (2022) 12 SCC 455,
L. Nageswara Rao J., speaking for the majority (2:1) laid down the
following principles, as regards the permissibility of abrogation, to
remove the basis of a judgment:
NHPC LTD. v. STATE OF HIMACHAL PRADESH 39
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

“43. The permissibility of a legislative override in this country should
be in accordance with the principles laid down by this Court in the
aforementioned as well as other judgments, which have been culled
out as under:
a) The eﬀect of the judgments of the Court can be nulliﬁed by a
legislative act removing the basis of the judgment. Such law can be
retrospective. Retrospective amendment should be reasonable and not
arbitrary and must not be violative of the fundamental rights guaranteed
under the Constitution. (Lohia Machines Ltd. and Anr. v. Union of
India and Ors., (1985) 2 SCC 1987).
b) The test for determining the validity of a validating legislation is that
the judgment pointing out the defect would not have been passed, if
the altered position as sought to be brought in by the validating statute
existed before the Court at the time of rendering its judgment. In other
words, the defect pointed out should have been cured such that the
basis of the judgment pointing out the defect is removed.
c) Nulliﬁcation of mandamus by an enactment would be impermissible
legislative exercise (See: S.R. Bhagwat and Ors. v. State of Mysore,
(1995) 6 SCC 16). Even interim directions cannot be reversed by a
legislative veto (See: Cauvery Water Disputes Tribunal, 1993 Supp
(1) SCC 96 and Medical Council of India v. State of Kerala and Ors.,
(2019) 13 SCC 185).
d) Transgression of constitutional limitations and intrusion into
the judicial power by the legislature is violative of the principle
of separation of powers, the Rule of law and of Article 14 of the
Constitution of India.”
viii. In a recent judgment of this Court in the case of Dr. Jaya
Thakur vs. Union of India, 2023 SCC OnLine SC 813, this
Court held that a writ of mandamus could not be nulliﬁed by
a subsequent legislation made by the legislator. That a binding
judicial pronouncement between the parties cannot be made
ineﬀective with the aid of any legislative power by enacting
a provision which in substance simply overrules a judgment
unless the foundation of the judgment is removed. Referring to
40 SUPREME COURT REPORTS [2023] 12 S.C.R.

several judgments of this court on the Doctrine of Abrogation,
the following principles as to the manner in which the device of
abrogation could be employed, were identiﬁed as under:
“It could, thus, clearly be seen that this Court has held
that the eﬀect of the judgments of this Court can nulliﬁed by a
legislative act removing the basis of the judgment. It has further
been held that such law can be retrospective. It has, however,
been held that retrospective amendment should be reasonable
and not arbitrary and must not be violative of the fundamental
rights guaranteed under the Constitution. It has been held that
the defect pointed out should have been cured such that the
basis of the judgment pointing out the defect is removed. This
Court has, however, clearly held that nulliﬁcation of mandamus
by an enactment would be impermissible legislative exercise.
This Court has further held that transgression of constitutional
limitations and intrusion into the judicial power by the legislature
is violative of the principle of separation of powers, the rule of
law and of Article 14 of the Constitution of India.”
11. What follows from the aforesaid judicial precedent is, a legislature
cannot directly set aside a judicial decision. However, when a competent
legislature retrospectively removes the substratum or foundation of a
judgment to make the decision ineﬀective, the same is a valid legislative
exercise provided it does not transgress on any other constitutional limitation.
Such a legislative device which removes the vice in the previous legislation
which has been declared unconstitutional is not considered to be an
encroachment on judicial power but an instance of abrogation recognised
under the Constitution of India. The decisions referred to above, manifestly
show that it is open to the legislature to alter the law retrospectively, provided
the alteration is made in such a manner that it would no more be possible for
the Court to arrive at the same verdict. In other words, the very premise of
the earlier judgment should be removed, thereby resulting in a fundamental
change of the circumstances upon which it was founded.
12. The power of a legislature to legislate within its ﬁ eld, both
prospectively and to a permissible extent, retrospectively, cannot be
interfered with by Courts provided it is in accordance with the Constitution.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 41
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

It would be permissible for the legislature to remove a defect in an earlier
legislation, as pointed out by a constitutional court in exercise of its powers
by way of judicial review. This defect can be removed both prospectively
and retrospectively by a legislative process and previous actions can also
be validated. However, where a legislature merely seeks to validate the
acts carried out under a previous legislation which has been struck down
or rendered inoperative by a Court, by a subsequent legislation without
curing the defects in such legislation, the subsequent legislation would also
be ultra-vires. Such instances would amount to an attempt to ‘legislatively
overrule’ a Court’s judgment by a legislative ﬁat, and would therefore be
illegal and a colourable legislation.
13. At this juncture, we must highlight that separation of powers, as
crystalised under the Indian Constitution, is characterised by division of
power and functions between the legislature, executive and the judiciary,
which are the three co-equal organs of the State. The doctrine also necessarily
postulates that each institution has some power to regulate the functions
of the others; this is in the form of the ancillary principle of “checks and
balances.” The role of the judiciary in galvanising our constitutional
machinery characterised by institutional checks and balances, lies in
recognising that while due deference must be shown to the powers and
actions of the other two branches of the government, the power of judicial
review may be exercised to restrain unconstitutional and arbitrary exercise
of power by the legislature and executive organs. The power of judicial
review is a part of the basic feature of our Constitution which is premised on
the rule of law. Unless a judgment has been set aside by a competent court
in an appropriate proceeding, ﬁnality and binding nature of a judgment are
essential facets of the rule of law informing the power of judicial review. In
that context, we observe that while it may be open to the legislature to alter
the law retrospectively, so as to remove the basis of a judgment declaring
such law to be invalid, it is essential that the alteration is made only so as
to bring the law in line with the decision of the Court. The defects in the
legislation, as it stood before the Amendment and Validation Act of 1997 was
enacted, must be cured by way of the amendments introduced retrospectively.
Simply setting at naught a decision of a court without removing the defects
pointed out in the said decision, would sound the death knell for the rule
of law. The rule of law would cease to have any meaning if the legislature
42 SUPREME COURT REPORTS [2023] 12 S.C.R.

is at liberty to defy a judgment of a court by simply passing a validating
legislation, without removing the defects forming the substratum of the
judgment by use of a non-obstante clause as a technique to do so.
14. The legislative device of abrogation by enacting retrospective
amendments to a legislation, as a means to remove the basis of a judgment
and validate the legislation set aside or declared inoperative by a Court,
must be employed only with a view to bring the law in line with the
judicial pronouncement. Abrogation is not a device to circumvent any and
all unfavourable judicial decisions. If enacted solely with the intention to
defy judicial pronouncement, such an amendment Act may be declared
to be ultra-vires and as a piece of ‘colourable legislation.’ The device of
abrogation, by way of introducing retrospective amendments to remove
the basis of a judgment, may be employed when a legislature is under the
bonaﬁde belief that a defect that crept into the legislation as it initially
stood, may be remedied by abrogation. An act of abrogation is permissible
only in the interests of justice, eﬀectiveness and good governance, and not
to serve the oblique agenda of defying a court’s order, or stripping it of its
binding nature.
15. The Constitution of India precludes any interference by the
legislature with the administration of justice and judicial determination
of the validity of a legislation. The power of abrogation is to be exercised
in the light of the said Constitutional mandate. The legislative device of
abrogation must be in accordance with the following principles which are
not exhaustive:
i. There is no legal impediment to enacting a law to validate
a legislation which has been held by a court to be invalid,
provided, such a law removes the basis of the judgment of the
court, by curing the defects of the legislation as it stood before
the amendment.
ii. The validating legislation may be retrospective. It must have the
eﬀect that the judgment pointing out the defect would not have
been passed, if the altered position as sought to be brought in
by the validating statute existed before the court at the time of
rendering its judgment.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 43
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

iii. Retrospective amendment should be reasonable and not arbitrary
and must not be violative of any Constitutional limitations.
iv. Setting at naught a decision of a court without removing the
defect pointed out in the said decision is opposed to the rule
of law and the scheme of separation of powers under the
Constitution of India.
v. Abrogation is not a device to circumvent an unfavourable judicial
decision. If enacted solely with the intention to defy a judicial
pronouncement, an Amendment and Validation Act of 1997 may
be declared as ultra-vires.
Validity of the Act of 1955 as amended by the Amendment and
Validation Act of 1997:
16. We shall now proceed to consider the issue as to validity of the
Act of 1955 as amended by the Amendment and Validation Act of 1997, in
light of the principles and case law discussed hereinabove. For the purpose
of carrying out such an exercise, it is necessary to ﬁrst, identify the defects
pointed out by the High Court in its judgment dated 27 March, 1997, whereby
the Act of 1955 had been held not to include within its scope the activity of
the appellants of providing transport facilities for their employees and their
children, as the charging provision contained therein, i.e., Section 3 (1) and
the Explanation thereto was crouched in ambiguous terms.
16.1. The defects identiﬁed by the High Court in its judgment dated
27 March, 1997 are as under:
i. The High Court observed that the levy of tax on passengers was
only on certain motor vehicles and the provisions of the Act were
not applicable to entities, such as, appellants herein. This was on
a reading of a deﬁnition of ‘motor vehicle’ and ‘owner’ as found
in the Act of 1955. Further, the deﬁnitions of ‘motor vehicle’ as
well as the deﬁnition of ‘passenger’ were restricted as a result, the
buses owned by the appellants used for carriage of the appellant’s
employees and their children gratis were not covered within the
charging section. Also, the deﬁnition of ‘transport vehicle’ was
restricted.
44 SUPREME COURT REPORTS [2023] 12 S.C.R.

ii. Explanation to Section 3 (1) of the Act of 1955 introduced a legal
ﬁction requiring assessments to be made on the assumption that
even passengers who did not pay a fare, were being carried at the
‘normal rate’ chargeable on the concerned route. There was no
deﬁnition of ‘route’ for the purposes of the Act and the deﬁnition
of ‘route’ under the MV Act could not be referred to as the routes
on which the appellant’s buses plied were not ‘routes’ in the sense
deﬁned under the MV Act. Hence, ‘route’ could not be equated
to any ‘road’ so as to hold the appellant-assessee liable to pay
tax under the Act of 1955. That for charging tax, by invoking the
Explanation to Section 3(1), routes were required to be prescribed,
but since no routes had been prescribed, the Explanation could
not come to the rescue of the respondent Authorities.
iii. In the absence of any prescription as to what the ‘normal rate’
would be, the Respondent Authorities could not have levied tax
on the appellant based on artiﬁcial assumptions. There was no
basis to warrant the Authorities from taking into account the fare
payable in the adjoining areas, in calculating the ‘normal rate.’
iv. The charging provision could not be given eﬀect to unless the terms
‘route’ and ‘normal rate’ had been expressly and unambiguously
deﬁned.
v. The term ‘business’ was deﬁned in a narrow manner in the Act of
1955 and meant the business of carriage of passengers and goods.
Therefore, when the deﬁnition of the term ‘business’ was read into
the charging provision, the inference was that those who were not
in the business of carrying passengers and goods, would not be
covered by the charging provision.
vi. Intention of the legislature was to make the Act of 1955 applicable
only to persons who carried on the business of transport. The
deﬁnition of ‘owner’ would fortify such ﬁnding, as ‘owner’ was
deﬁned to be a person holding a permit under the Motor Vehicles
Act.
16.2. Having identiﬁed the basis for the ﬁnding of the Division
Bench of the High Court that the Act of 1955 was inapplicable to the
NHPC LTD. v. STATE OF HIMACHAL PRADESH 45
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

appellants herein, we shall now proceed to determine whether such basis
has been removed by curing the defects listed hereinabove, by introducing
the Amendment and Validation Act of 1997. For this purpose, a tabular
representation of the defects pointed out by the High Court and details of
the corresponding provision(s) enacted/amendment introduced to remove
the defects, is as hereinunder:

Sl. No. Defects identified in Details of the corresponding
the Act of 1955 by provision(s) enacted/amendment
the Division Bench introduced by the Amendment and
of the High Court in Validation Act to remove the defects.
the judgment dated 27
March, 1997.
1. The term ‘business’ The deﬁnition of ‘business’ has been
was deﬁned in a narrow enlarged by way of the Amendment
manner in the Act of and Validation Act and it now
1955 and meant the includes, besides the business of
business of carriage of carrying passengers and goods by
passengers and goods. motor vehicles, any trade, commerce
or manufacture, or any adventure or
concern whether or not the same is
carried on with a proﬁt motive; and
any transaction in connection with,
incidental or ancillary to such trade,
commerce or manufacture.
2. The expression ‘fare’ In Section 2(c) of the Amendment
included sums payable and Validation Act, fare or freight
for a season ticket in has been defined to include sums
respect of the hire of fixed by the competent authority
contract carriage. It under the Motor Vehicles Act for the
did not include a case hirer of motor vehicles for carriage of
where no fare or freight passengers and the transport of goods
was charged from a therein and includes sum payable for a
passenger. season ticket and where no such fare
or freight has been ﬁxed, also includes
such sum as speciﬁed in Schedule I.
46 SUPREME COURT REPORTS [2023] 12 S.C.R.

3. The meaning of the The scope of the expression “Motor
word “Motor Vehicle” Vehicle” has been extended to mean
meant a public service any transport vehicle, which is
vehicle or public carrier,mechanically propelled and adapted
or private carrier or a for use upon roads whether the power
trailer when attached to of propulsion is transmitted thereto
any such vehicle; from an external or internal source,
or a trailer when attached to any such
vehicle and includes a motor vehicle
used for carriage of passengers or
goods or both for hire or reward in
contravention of the provisions of the
Motor Vehicles Act.
4. The meaning of ‘owner’ The scope of term ‘owner’ has been
was restricted to those enlarged to mean the owner of the
per so n s h ol di n g a motor vehicle used for carrying
permit under the Motor passengers or transporting goods in
Vehicles Act. or through the territory of the State
of Himachal Pradesh.
5. As per the Explanation i. Explanation to Section 3(1)
to Section 3(1) of the has been deleted and Section 3
Act of 1955, where no (1A) has been inserted, prescribing
fare or freight had been two alternate methods to notionally
charged, tax was to be determine fares or freights, when
levied on the ‘normal the same has not been charged, i.e.
rate’ chargeable on a by taking into account: (a) fares
given ‘route.’ However, or freights ﬁxed by the competent
there was lack of clarity authority, under the MV Act, or
as to the meaning of the (b) fares and freights specified in
terms ‘normal rate’ and Schedule I to the Act for diﬀerent
‘route’, as appearing in classes of roads and motor vehicles.
the charging provision, The higher of the two fares is to be
i.e. Section 3(1) and the adopted in every case.
Explanation thereto, in ii. Schedule I to the Amendment and
the absence of Validation Act prescribes the fare
NHPC LTD. v. STATE OF HIMACHAL PRADESH 47
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

deﬁ nitions in the Act and freight for diﬀerent categories of
of 1955. motor vehicles, for diﬀerent roads.
iii. Section (2gc) defining the
term ‘road’ has been introduced.

16.3. It is evident from the table presented hereinabove that the defects
identiﬁed by the Division Bench of the High Court in the judgment dated
27 March, 1997, forming the basis for its decision to the eﬀect that the
provisions of the Act would not be applicable to the assessees-appellants
herein, have been cured by the Amendment and Validation Act of 1997. The
manner in which the defects have been cured, may be explained as follows:
i. The High Court had observed that for charging tax, by invoking
the Explanation to Section 3(1) of the Act of 1955, the ‘normal
rate’ and ‘routes’ were required to be prescribed, but since no
normal rate or routes had been prescribed, the Explanation
could not come to the rescue of the respondent Authorities. This
defect has been cured by introducing Section 3(1A) by way of
the Amendment and Validation Act of 1997 and omitting the
Explanation to Section 3(1). Section 3(1A) seeks to bring non-
fare paying passengers at par with fare paying passengers, by
prescribing two alternate methods to notionally determine fares
or freights, when the same has not been charged, i.e. by taking
into account: (a) fares or freights ﬁxed by the competent authority,
under the MV Act, or (b) fares and freights speciﬁed in Schedule
I to the Act for diﬀerent classes of roads and motor vehicles, the
higher of the two fares has to be taken into account in every case.
Further, Schedule I introduced by way of the Amendment and
Validation Act of 1997 stipulates the freights and fares which
would be applicable for diﬀerent classes of roads and motor
vehicles. Section (2gc) deﬁning the term ‘road’ has also been
introduced. Therefore, the vacuum identiﬁed by the High Court,
which was making the charging provision inoperative qua the
appellants, has been removed.
ii. Another reason given by the Division Bench in the judgment dated
27 March, 1997 for holding that employees of the appellants and
48 SUPREME COURT REPORTS [2023] 12 S.C.R.

their children were not covered by the Explanation (now deleted
by way of the Amendment and Validation Act of 1997) was in
relation to the deﬁnition of ‘business’. ‘The term ‘business’ was
deﬁned in a narrow manner in the Act of 1955 and meant the
business of carriage of passengers and goods. Therefore, when
the deﬁnitions of the terms ‘motor vehicle’ and ‘business’ were
read into the charging provision, the inference would be that those
who were not in the business of carrying passengers and goods,
would not be covered by the charging provision. This loophole
has also been plugged by way of the Amendment and Validation
Act of 1997, inasmuch as the deﬁnition of ‘business’ has been
enlarged and it now includes, besides the business of carrying
passengers and goods by motor vehicles, any trade, commerce
or manufacture, or any adventure or concern whether or not the
same is carried on with a proﬁt motive; and any transaction in
connection with, incidental or ancillary to such trade, commerce
or manufacture. ‘Business’ now means any business, carried on
with or without a proﬁt motive, or any ancillary transactions in
connection with such business.
iii. The High Court had further held that the intention of the State
legislature was to make the Act of 1955 applicable only to persons
who carried on the business of transport. That the deﬁnition
of ‘owner’ would fortify such ﬁnding, as ‘owner’ was deﬁned
to be a person holding a permit under the Motor Vehicles Act.
However, the scope of term ‘owner’ has been enlarged by way of
the Amendment and Validation Act of 1997, to mean the owner
of the motor vehicle used for carrying passengers or transporting
goods in or through the territory of the State of Himachal Pradesh.
Therefore, this defect has also been cured.
16.4. In light of the aforesaid discussion, we hold that by enacting
the Amendment and Validation Act of 1997, the Himachal Pradesh State
Legislature has validly removed the basis of the judgment of the Division
Bench of the High Court dated 27 March, 1997.
17. Sri Yashraj Singh Deora, learned counsel for the appellants in
Civil Appeal Nos. 4738-4743 of 2009 and Civil Appeal No. 6931 of 2009
NHPC LTD. v. STATE OF HIMACHAL PRADESH 49
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

submitted that in order to fall within the meaning of the term ‘business’ as
deﬁned under Section 2 (aa) of the Amendment and Validation Act of 1997,
the trade, commerce, or manufacture of the assessee, or, the transactions
connected therewith or incidental thereto must have some connection with
the business of carrying passengers and goods by road. The main activity of
the assessees would not amount to carrying on business, as the same does
not relate to the activity of carrying passengers and goods by road. In a case
where the main activity does not amount to ‘business’, then the connected,
incidental or ancillary activities would also not amount to ‘business’ unless
an independent intention to conduct business in these connected, incidental
or ancillary activities is established by the revenue. In the present case, there
is no material to establish that the ancillary activity of providing transport
facilities to the employees and the children of the assessees-appellants herein
is conducted with an independent intention to conduct business through
such activity. Therefore, in the present case, neither the main activity of
the appellants, nor the ancillary activity of providing transport facilities to
their employees and their children, would amount to ‘business’ as deﬁned
under the Amendment and Validation Act of 1997.
18. We do not ﬁnd the said argument is acceptable. As observed
hereinabove, the amended deﬁnition of the term ‘business’ includes within
the scope of the term, not only the business of carrying passengers and
goods, but also any other trade, commerce, manufacture or concern, whether
or not the same is carried on with a motive to earn proﬁt. Further activities
incidental and ancillary to such trade, commerce, manufacture or concern are
also included within the ambit of ‘business’. As per the amended deﬁnition,
it is not necessary for either the primary business, trade or manufacture, or
the ancillary activity to be related to the business of carrying passengers
and goods. That is the very purpose of the amendment. The deﬁnition of
‘business’ as amended has the widest amplitude and includes any trade,
commerce, manufacture, adventure or concern.
19. Learned counsel for the appellants have contended that deﬁnitions
of ‘passenger’, ‘business’, ‘fare’ and ‘road’ are artiﬁcial and unnatural, as
also contrary to the purpose and object of the Act and hence, ultra-vires.
However, no reasons have been cited to demonstrate how the said deﬁnitions
are artiﬁcial. Therefore, we ﬁnd no merit in the said contention.
50 SUPREME COURT REPORTS [2023] 12 S.C.R.

20. It is also submitted, with respect to the term ‘passenger’ that
fundamentally, ‘passenger’ means a person who travels by paying a fare
to the owner or operator of the vehicle, vide M/s Tata Engineering and
Locomotive Co. (supra). Therefore, a non-fare paying employee of the
operator, or a school going child of such employee, is not a passenger.
The said submission would also not come to the aid of the appellants.
The meaning of the term ‘passenger’ would have to be gathered in every
case, having regard to the deﬁnition of the said term in the relevant statute.
The decision of this Court in M/s Tata Engineering and Locomotive Co.
(supra) would be of no assistance to the appellants in this regard, as the
said judgment turns on its own facts. In the said case, this Court while
referring to the charging provision contained in the Bombay Motor Vehicles
(Taxation of Passengers) Act, held that non-fare paying passengers would
not fall within the purview of the said Act. The said decision would not be
relevant in the facts of the present case, as an interpretation of the charging
provision in the Act of 1955 as amended, would not give rise to a conclusion
that a non-fare paying employee of the operator, or a school going child
of such employee, is not a passenger. The term ‘passenger’, in the present
case, has been deﬁned under Section 2(g) of the Act in a broad sense to
mean any person travelling in a motor vehicle, but shall not include the
driver, conductor, or any employee of the owner of the vehicle travelling
in the bonaﬁde discharge of his duties in connection with the vehicle. The
only three categories of persons who are excluded from the deﬁnition of
‘passenger’ are: (a) driver of the motor vehicle; (b) conductor; and (c) any
employee of the owner of the vehicle travelling in the bonaﬁde discharge
of his duties in connection with the vehicle. The non-fare paying employees
of the appellants and their children, would not fall under any of the said
exceptions. Although, some of them are employees of the appellants, they
are not travelling in the motor vehicle in discharge of duties “in connection
with the vehicle”, their duties may be in connection with various aﬀairs of
the appellants, but not “in connection with the vehicle” of the appellants.
Hence, ‘passengers’ in this case would include non-fare paying employees
of the appellant, or school going children of such employees.
21. We shall now proceed to consider and determine the next aspect
argued by learned counsel, i.e., with respect to legislative competence of
the Himachal Pradesh Legislative Assembly to enact the Act of 1955 and
NHPC LTD. v. STATE OF HIMACHAL PRADESH 51
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

the Amendment and Validation Act of 1997, which are stated to be enacted
on the strength of Article 246, read with Entry 56 of List II of the Seventh
Schedule of the Constitution of India. This argument appears to be a formal
one as the High Court did not have an occasion to consider the aspect of
legislative competence vis-à-vis the impugned Act.
22. The import of the Act of 1955, as amended by the Amendment
and Validation Act of 1997, could be gathered from the Preamble which
provides that it has been enacted to provide for levying a tax on passengers
and goods carried by road in motor vehicles. It is therefore clear that tax is
sought to be imposed on passengers and goods, carried by road in motor
vehicles. It is a no brainer that such a tax falls within the legislative ﬁeld
governed by Entry 56 of List II of the Seventh Schedule of the Constitution,
which pertains to “taxes on goods and passengers carried by road and inland
water ways.” Simply for the reason that notices have been issued to the
owners or assessment orders have been passed against the owners of the
vehicles, it cannot be said that the tax is levied on the motor vehicles. If the
persons carried happen to be employees of the owners of the buses, such
employees should pay the tax. When the employer, i.e., the owner of the
vehicle, does not collect the tax from such employees, he should himself pay
it, in discharge of the employer’s statutory duty as an agent of the State to
collect tax on the basis of the amended provision. Whether to collect the tax
payable from the passengers (the employees and their children) or discharge
the liability itself is the prerogative of the appellants. The incidence of the tax
continues to be on the passengers who travel in the buses or other vehicles
of the appellants irrespective of whether they travel gratis or are paying
any fare. The impact or burden of the tax however, has been assumed by
the appellants-employers owing to the fact that they wish to provide free
transportation to the employees and their children as a welfare measure.
Therefore, we do not ﬁnd any substance in the contention of the appellants
that the tax was sought to be imposed on ‘motor vehicles’ and therefore,
the same is outside the legislative competence of the State Legislature for
Himachal Pradesh. It is clariﬁed that the tax is on passengers and goods
and the same has to be paid by the owners of the motor vehicles whose
responsibility it is to pay. Therefore, there is no substance in the argument
concerning legislative competence of the State Legislature in enacting the
Act of 1955 or the Amendment and Validation Act of 1997.
52 SUPREME COURT REPORTS [2023] 12 S.C.R.

Summary of conclusions:
23. In the result we arrive at the following conclusions:
i. The Act of 1955, as amended by the Amendment and Validation Act
of 1997, is valid. The said Act seeks to impose tax on passengers
and goods carried by road in motor vehicles and the Himachal
Pradesh Legislative Assembly possessed the legislative competence
under Article 246, read with Entry 56 of List II of the Seventh
Schedule of the Constitution of India, to enact the Act of 1955 and
the Amendment and Validation Act of 1997.
ii. By enacting the Amendment and Validation Act of 1997, the
Himachal Pradesh State Legislature has validly removed the
basis of the judgment of the Division Bench of the High Court
dated 27 March, 1997, inter-alia, by amending the deﬁnition of
the term ‘business’; deﬁning the terms ‘fare’, ‘freight’ and ‘road’;
deleting the Explanation to Section 3(1); and inserting Section 3
(1A) which brought non-fare paying passengers at par with fare-
paying passengers for the purpose of levying tax under the Act.
Thus, the Amendment and Validation Act of 1997 is a valid piece
of Legislation.
iii. The activity of the appellant in providing gratis transportation to
its employees, and their children, would be a taxable activity under
Section 3(1-A) of the Amendment and Validation Act of 1997.
24. The next question is with regard to the liability of the appellants
to pay the tax under the Act of 1955 as amended by the Amendment and
Validation Act of 1997. The Act of 1955 was assailed in W.P.(C)No.1733
of 1995 by the appellants herein. The High Court of Himachal Pradesh
by judgment dated 27.03.1997 struck down certain provisions of the Act
and held that the Act did not apply to the appellants herein. The Special
Leave Petition ﬁled against the said judgment was also dismissed by this
Court on 28th July, 1997. Thereafter, the Amendment and Validation Act
of 1997 was enacted by the legislature of the State of Himachal Pradesh.
The amendments were unsuccessfully challenged by the appellants herein
by ﬁling writ petitions before the High Court. The impugned orders of the
High Court of Himachal Pradesh were passed in December 2008 and July,
NHPC LTD. v. STATE OF HIMACHAL PRADESH 53
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

2009. The Special Leave Petitions ﬁled before this Court were converted
to Civil Appeals as leave was granted in them. This Court has now upheld
the Amendments made to the Act of 1955 by virtue of the Amendment
and Validation Act of 1997 and aﬃrmed the judgment of the High Court
of Himachal Pradesh. Therefore, the question is from when the appellants
herein would have to pay the tax as prior to 1997 they were successful in
assailing the Act of 1955 and it was only thereafter that the Amendment
and Validation Act of 1997 was passed by the legislature of the State of
Himachal Pradesh. That was also challenged by the appellants herein and
the controversy has now ﬁnally been set at rest. Therefore, the question is,
whether, the appellants herein would be liable to pay the tax from the date
when the Amendment and Validation Act of 1997 was passed or from any
future date?
25. We have considered this question in the light of the fact that the
appellants are public sector organisations (and not private operators) who are
engaged in transporting their employees and their children to the work sites
and to the school and back gratis as a facility being provided to them having
regard to the location of the work sites in remote hilly terrain and to ensure
the safety of the children of the employees of the appellant organisations.
26. As there has been a long passage of time since the enactment of the
Amendment and Validation Act of 1997, that is about twenty-six years till
date and by now there would have been replacement of the motor vehicles
or buses by the appellants and their liability to pay the said taxes, being at
large, and now set at rest, we think that, in exercise of our powers under
Article 142 of the Constitution, the appellants should be made liable to pay
the tax w.e.f. 01.04.2023, the current ﬁnancial year onwards and not for
the period prior thereto. One of the reasons for directing so is by bearing
in mind that the aﬀected appellants herein are not private bus operators or
stage carriage operators but are public sector units engaged in hydro-power
projects and irrigation projects and as a convenience or facility, owning
buses for transporting their employees and children of the employees to
the work sites and to schools and return to their homes as a facility being
provided to them for the reasons narrated above. That apart, we have now
held that by enacting the Amendment and Validation Act of 1997, the
lacunae pointed out by the High Court vide the judgment and order dated
54 SUPREME COURT REPORTS [2023] 12 S.C.R.

27 March, 1997 have been removed. Therefore, saddling the appellants with
any anterior demand would not be just and proper. We order accordingly.
Therefore, while moulding the relief to be given to the appellants herein,
only with regard to the period from which the liability to pay tax under the
Act of 1955 as amended by the Amendment and Validation Act of 1997,
the appeals stand dismissed.
27. In the result, these appeals are dismissed and the ﬁnal Orders
of the Division Bench of the High Court of Himachal Pradesh, dated 11
December, 2008 and 06 May, 2009 whereby the vires of the Act of 1955 as
amended from time to time, particularly by the Amendment and Validation
Act of 1997 has been upheld and the writ petitions ﬁled by the appellants
herein, i.e., Civil Writ Petition Nos. 725 of 1998, 422 of 1998, 401 of 2001,
464-467 of 2001 and 79 of 2007, have been dismissed, are hereby aﬃrmed,
subject to what has been clariﬁed in Paragraph 26 above.
Parties to bear their respective costs.
Pending applications, if any, stand disposed of in the aforesaid terms.

Headnotes prepared by: Appeals dismissed.
Ankit Gyan