Holding

The amendment to Section 4 is beyond the scope of the Himachal Pradesh Passengers and Goods Taxation Act, 1955; therefore the provision and tax collected under it are invalid, and the High Court’s prospective overruling is set aside.

Summary

The State of Himachal Pradesh amended the proviso to Section 4 of the Himachal Pradesh Passengers and Goods Taxation Act, 1955 to permit a lump‑sum tax assessment based only on a vehicle’s registered capacity and distance travelled. Bus operators challenged this amendment, arguing that Section 3 requires tax to be levied on all fares of all passengers actually carried, making the lump‑sum provision ultra vires. The High Court held the amendment invalid but, invoking the doctrine of prospective overruling, saved tax collections made before the judgment. The Supreme Court reversed the High Court’s prospective overruling, declaring the amendment beyond the scope of the Act and invalidating the tax collected under it. Consequently, the State’s appeal was dismissed and the assessees’ appeal was allowed, with the High Court’s order set aside for the period April 1991 to September 1992.

Issues considered

The amendment to the proviso of Section 4 of the Himachal Pradesh Passengers and Goods Taxation Act, 1955 is within the legislative competence of the Act.
Whether a lump‑sum tax assessment based solely on vehicle capacity and distance complies with the levy provision of Section 3 which mandates tax on all fares of all passengers carried.
Whether the doctrine of prospective overruling can be applied by a High Court to preserve tax collections made under a provision later held invalid.
Whether tax collected under an invalid provision must be declared invalid.

Legislation cited

Himachal Pradesh Passengers and Goods Taxation Act, 1955s. 3, s. 4

Subjects

taxationpassenger taxlump sum assessmentstatutory interpretationprospective overrulingconstitutional validitymotor vehicle tax

Judgment

A STATE OF HIMACHAL PRADESH AND ORS. ETC. ETC.
v.
NURPUR PRIVATE BUS OPERATORS UNION
AND ORS. ETC. ETC.

OCTOBER 6, 1999
B
[S.P. BHARUCHA, B.N. KIRPAL, V.N. KHARE, D.P.
MOHAPATRA AND N. SANTOSH HEGDE, JJ.)

Taxation :
c
Himachal Pradesh Passengers and Goods Taxation Act, 1955--Ss.3
and, proviso to 4 (as amendedrPassengers tax-Levy of-Mode of pay-
ment-Lump sum collection of tax by taking into consideration the registered
capacity of the vehicle and the distance travelled or to be travelled-Validity
of-Held, tax can be levied with regard to all fares in respect of all passengers
D carried-No hypothetical assumption can be made regarding number of pas-
sengers carried-Amended proviso to S.4 is beyond the scope of the
Act-Himachal Pradesh Passengers and Goods Taxation Rules, 1957-Rule
9.

E Doctrines :

Doctrine of prospective over-rulin15Applicability of-Held, once the
taxing provision is held invalid, the collections made thereunder also stands
invalidated-Himachal Pradesh Passengers and Goods Taxation Act, 1955.

F Respondent-bus operators challenged the amended proviso to S. 4
of the Himachal Pradesh Passengers and Goods Taxation Act, 1955 and
the Rules framed thereunder. Under the amended proviso to S. 4 of the
Act, the State Government may assess the tax at lump sum taking into
consideration the registered capacity of the vehicle and the distance
G travelled or to be travelled by such vehicle. High Court held that the said
amendment was inyalid. However, High Court by applying the doctrine
of prospective over-ruling held that the tax which had already been col-
lected, will not stand invalidated. Hence, the present appeals.

Dismissing the Revenue's appeal and allowing that of Assessees',
H the Court ·
430
STATE v. NURPUR PRIVATE BUS OPERATORS UNION 431

HELD : 1.1. Amendment of Section 4 of the Himachal Pradesh A
Passengers and Goods Taxation Act, 1955 by the inclusion of the proviso
is beyond the scope of the said Act. It is, therefore, unnecessary to con·
sider Rule 9, as amended, whose terms also, in fact, leave the matter in
no doubt. However, the State may make assessments of passengers tax as
provided for in S. 3 of the Act. [433-G-H]
B
1.2. It is plain from Section 3 of the Act, that the levy of the tax is
on "all fares ..... in respect of all passengers carried ..........". However, the
proviso to Section 4 takes into account for the purpose of assessment of
the lump sum tax only "the registered capacity of the vehicle and the
distance· travelled or to be travelled .........". It takes no account of "all C
fares...... in respect of all passengers carried..... ", and .it makes it
obligatory for the operator to pay such lump sum tax. There can be no
generalisation of tax that can be levied under S. 3 of the Act. It can be
levied with due regard to all fares in respect of all passengers carried by
the particular operator. No hypothetical assumption can be made about
how many passengers an operator has carried. [433-D; E; F; G] D
Mis. Sainik Motors, Jodhpur and Ors. v. 171e State of Rajasthan,
[1962] 1 SCR 517, referred to.

2. Once the High Court came to the conclusion, rightly, that the
concerned provisions were invalid, it was obliged to so declare and, con· E
sequently, the collections made thereunder stood invalidated. Thus, .the
direction of the High Court insofar as it relates to prospective over-ruling
is set aside. [434-C; 434-D]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6466· p
6476 of 1995.

From the Judgment and Order dated 1.10.92 of the Himachal
Pradesh High Court in C.W.P. Nos. 664, 744/91, 754/91, 225, 229, 230, 371,
429, 448, 704 and 677 of 1992.
G
WITH

Civil Appeal Nos. 6477 and 6480 of 1995.

From the Judgment and Order dated 1.10.92 of the Himachal
Pradesh High Court in C.W.P. No. 371 and 229 of 1992. H
432 SUPREME COURT REPORTS (1999] SUPP. 3 S.C.R.

A N.C. Kochhar, Naresh K. Sharma, Uma Dutta, Ashok Kr. Sharma
and Pradeep Kumar Bakshi for the appearing parties.

The Judgment of the Court was delivered by

BHARUCHA, J. Civil Appeal Nos. 6466-6476 of 1995 :
B
Under challenge by the State of Himachal Pradesh is the judgment
of a Division Bench of the High Court of Himachal Pradesh delivered on
writ petitions filed under Article 226 of the Constitution to challenge
amendments to the Himachal Pradesh Passengers and Goods Taxation
Act, 1955 and the Rules framed thereunder. The High Court a!Jowed the
C writ petitions, coming to the conclusion that confining the payment of tax
under the said Act to the mode of payment by lump sum made the
· provision invalid.

. Section 3 of the said Act is the charging secion. It provides, in so far
D as is relevant :

"3. Levy of Tax. - (1) There shall be levied, charged and paid to
the State Government a tax on all fares and freights in respect of
all passengers carried and goods transported by motor vehicles at
such rates not exceeding ....... as the Government may, by notifica-
E tion, direct." (Emphasis supplied.)

Section 4 lays down the method of collection of the tax and states
that the tax shall be collected by the owner of the motor vehicle and paid
to the State Government in the prescribed manner. The proviso thereto,
which is under chdlenge, reads :
F
"Provided further that in case of motor vehicles (including the
stage or contract carriages), other than those specified in the first
proviso, in which the passengers are carried, the State Government
may assess the tax ...... . at lump sum in the manner prescribed,
taking into consideration the registered capacity_ of the vehicle and
G
the distance travelled or to be travelled by such motor vehicles
under a permit issued to such vehicles." (Emphasis supplied.)

The Rule made to effectuate the said proviso, which was also the
subject matter of challenge, laid down the formula for such assessment of
H the lump sum tax. The formula was this :
STATE v. NURPURPRIVATE BUS OPERATORS UNION [BHARUCHA, J.] 433

"Number of seats x number of scheduled kilometers x 3/5 x rate of A
passengers tax x rate per kilometer.

Explanation : In this formula, 3/5 represents average occupancy
taken at sixty per cent of the 1mmber of seats.'' (Emphasis supplied)
B
It may be mentioned that, earlier, the relevant proviso had provided
that in case of contract carriage the State Government "may accept a lump
sum in lieu of the tax chargeable on fare in the manner prescribed". This
proviso was challenged. This Court, in Mis. Sainik Motors, Jodhpur and Ors.
v. The State of Rajasthan, (1962] 1 SCR 517, upheld the proviso for the
reason that "payment to lump sum is not obligatory, and a person can elect c
to pay tax calculated on actual fares and freights .... There is no compulsion
for any operator to elect to pay a lump sum if he does not choose to do
so."

As far as the said Act, as it now stands, is concerned it is plain from D
Section 3 thereof that the levy of the tax is on "all fares ...... .in respect of
all passengers carried ....... ". The proviso to Section 4 that is under challenge
takes into account for the purpose of assessment of the lump sum tax only
"the registered capacity of the vehicle and the distance travelled or to be

-
travelled ........". It takes no account of "all fares ..... in respect of all pas-
sengers carried ....... ", and it makes it obligatory for the operator to pay such E
lump sum tax.

Learned counsel for the appellant-State submitted that the said
Section 4 and Rule had been so amended having regard to surveys made
and data collected by the State Government and with a view to prevent tax F
evasion. This may be so, but there can be no generalisation of tax that can
be levied under Section 3. It can only be levied with due regard to all fares
in respect of all passengers carried by the particular operator. No
hypothetical assumption can be made about how many passengers an
operator has carried. The amendment of the said Section 4, by the inclusion
of the proviso quoted above, is .beyond the scope of the said Act. It is, G
therefore, unnecessary to consider Rule 9, as amended, whose terms also,
in facts, leave the matter in no doubt.

The State may now make assessments of passenger tax on the basis
that is provided for in Section 3 of the Act. H
434 SUPREME COURT REPORTS [1999) SUPP. 3 S.C.R.

A The Civil appeals are dismissed with costs.

Civil Appeals Nos. fJ47711995 and 6480/1995 :

The High Court, in the judgment afore-mentioned, held that the levy
and realisation of tax on the basis which had been held to be invalid by it
B "for the period between 1st April, 1991 andf 30th Septemper, 1992 shall
not stand invalidated......... We. propose to direct that the declaration made
by us today shall be applicable prospectively and with effect from October
1, 1992 alone." Some operators challenge the correctness of this. They are
right, for the doctrine of prospective over-ruling cannot be utilised by the
High Court. Once the High Court came to the conclusion, rightly, that the
C concerned provisions were invalid, it was obliged to so declare and, con-
sequently, the collections made thereunder stood invalidated.

These civil appeals are, therefore, allowed and the direction of the
High Court insofar as it relates to prospective over-ruling is set aside. The
D judgment and order of the High Court shall also operate for the period
between 1st April, 1991 and 30st September, 1992.

No order as to costs.

S.V.K. Appeals dismissed/allowed.

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