IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN THURSDAY, THE 28TH OCTOBER 2010 / 6TH KARTHIKA 1932 WA.No. 1673 of 2010() --------------------- AGAINST THE JUDGEMENT/ORDER IN WPC.3691/2010 Dated 04/03/2010 .................... APPELLANT(S): PETITIONER IN THE WP ---------------------------------- SHIJU, S/O.KURIAN, H.NO.8/221, KOLLAMPADI HOUSE, MANNAMANGALAM, THRISSUR. BY ADV. SRI.K.V.GOPINATHAN NAIR RESPONDENT(S): RESPONDENT IN THE WP ----------------------------------- THE REGIONAL TRANSPORT OFFICER, (SECRETARY, REGIONAL TRANSPORT AUTHORITY), THRISSUR - 680 003. BY G.P. SRI. MOHAMMED RAFEEQ THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 28/10/2010, ALONG WITH WA NO. 1772 OF 2010 WA NO. 1774 OF 2010 WA NO. 1815 OF 2010 AND WA NO. 1766 OF 2010 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.R. C .N. RAMACHANDRAN NAIR, & K. SURENDRA MOHAN, JJ. -------------------------------------------- W.A. Nos. 1673, 1766, 1772, 1774 & 1815 of 2010 -------------------------------------------- Dated this the 28th day of October, 2010 JUDGMENT Ramachandran Nair, J. The question raised in the connected appeals is whether the learned single Judge was justified in upholding the additional demand of motor vehicle tax made under Section 26 of the Kerala Motor Vehicle Taxation Act, 1976, hereinafter called the "Act" in relation to additional seats permissible in terms of the seating capacity of the vehicle under Rule 269 of the Kerala Motor Vehicles Rules, hereinafter called the "Rules" over the actual number of seats for which registration and permit are granted under the Motor Vehicles Act. We have heard counsel appearing for the appellants in all the appeals and Government Pleader for the respondents. 2. There is no dispute on facts which led to the controversy inasmuch as appellants operating stage carriages were remitting tax in terms of the tax endorsement in the RC book which is consistent with WA 1673/2010 and connected cases 2 the details contained in the certificate of registration and the permit issued by the licensing authority. Respondents' case is that tax is payable based on seating capacity of the stage carriage and the escapement in payment of tax happened because of lower number of seating capacity recorded in the RC book and in the permit. Admittedly seating capacity is to be determined in respect of a stage carriage based on wheel base in terms of Rule 269 of the Rules. The Registering Authority however while issuing RC book for the vehicles involved in these cases recorded seating capacity less than the permissible capacity based on wheel base under Rule 269 of the Rules. In fact, when permits were issued for these vehicles the mistake contained in the RC book was repeated inasmuch as seating capacity recorded in the RC book was incorporated in the permits. In other words, the tax endorsement for the stage carriages was made in the RC book based on permitted seating capacity in terms of Section 3(1) read with Entry 7 (ii)(a) of the Schedule to the Act. Appellants have been remitting tax in terms of tax endorsement and there is no dispute on this. However, later, the taxation authority, which is the same as the registering authority under the M.V. Act, issued notice under Section WA 1673/2010 and connected cases 3 26 of the Act pointing out that seating capacity of the appellants' stage carriages is more than the seating capacity recorded in the RC book and in the permits issued to them. Consequently, alterations were proposed and appellants were simultaneously called upon to remit arrears of tax under Section 26 of the Act. It is against these orders that the appellants have filed Writ Petitions which have been dismissed by the learned single Judge upholding the demand of differential tax for the past period, which runs into a little over one year. 3. Before us counsel appearing for the appellants Sri. K. V. Gopinathan Nair and Sri. P. Deepak, contended that appellants have no liability to pay tax for the past period because they paid tax in terms of tax endorsement in the RC Book which again is made based on seating capacity recorded in the RC book as well as in the permits issued to them. Government Pleader on the other hand contended that short levy of tax could be made up in proceedings under Section 26 of the Act, irrespective of reasons which led to such short levy. According to him, in these cases, even though the mistake could have been committed by the taxation authority, which is also the registering authority,as well as Secretary of the RTA issuing permit, still arrears of short levy could be WA 1673/2010 and connected cases 4 recovered in proceedings under Section 26 because what is stated in the said Section is that if there is short levy of tax "for any reason" it could be made up in proceedings under Section 26 of the Act. Government Pleader has also relied on Full Bench decision of this Court in VISHWANATHA MENON V. ADDL. REGISTERING AUTHORITY, (1998) 2 KLT 112 (FB) and the earlier decision of the learned single Judge, who dismissed the present Writ Petitions, in A.K.C. VELAYUDHAN V. RTO, (2010) 1 KLT 565, for the proposition that tax for the stage carriage has to be recovered based on seating capacity which is to be determined based on wheel base in terms of Rule 269 of the Rules. 4. After hearing both sides and after going through the judgments above referred, we are of the view that on the legal position with regard to tax liability on stage carriages, there can be no doubt that Rule 269 provides for determination of minimum seating capacity based on wheel base. However, the question to be considered is whether a mistake committed by the registering authority while issuing registration certificate of the stage carriages and the repetition of the same mistake by him while issuing permit and the consequent short WA 1673/2010 and connected cases 5 levy of tax could be made up in proceedings 26 of the Act. Section 3 (1) of the Act provides for levy and collection of tax at the rate specified for such vehicle in the Schedule. The Entry in the Schedule to the Act applicable to these cases is Entry 7(ii)(a) which is as follows: 7. Motor vehicles plying for hire and used for transport of passengers and in respect of which permits have been issued under the Motor Vehicles Act, 1988,- (i)....... (ii) Vehicles permitted to ply solely as Stage Carriages,- (a) Ordinary services for every seated passenger (other than driver and conductor) which the vehicle is permitted to carry Rs.400.00 ......... What is obvious from the above charging Entry is that tax payable for a stage carriage operating ordinary service is for every seated passenger which the vehicle is permitted to carry. Obviously tax liability as per the above Entry will depend upon the number of seated passengers which the vehicle is permitted to carry. Both the RC book issued for the stage carriage as well as permit issued to the appellants contain number of seated passengers which the vehicle was permitted to carry. WA 1673/2010 and connected cases 6 In fact tax endorsement is also made in the RC book to enable periodical payment of tax by the appellants. Admittedly appellants have remitted tax in terms of the tax endorsement. The only question to be considered is whether the mistake in the RC book which was carried in the permit and in the tax endorsement leading to short levy of tax will justify demand of tax for the past period in terms of Section 26 of the Act. Section 26 reads as follows: 26. Escaped assessment:- If, for any reason, the whole or any portion of the tax which would have been payable in respect of any motor vehicle under the Kerala Motor Vehicles Taxation Act, 1963 (24 of 1963) or under the Kerala Motor Vehicles (Taxation of Passengers and Goods) Act, 1963 (25 of 1963) or under this Act for ay period has escaped assessment, the Taxation Officer may, at any time within, but not beyond, ten years from the expiry of that period, assess the tax which has escaped assessment after issuing a notice to the registered owner or the person having possession or control of the motor vehicle and making such inquiry as he may consider necessary: Provided that in computing the period of limitation for the assessments of tax under this section, the periods if any, during which such assessment has been stayed by an order of any court shall be excluded. No doubt, Section 26 is widely worded to cover escapement of tax "for any reason", which according to the Government Pleader will take in WA 1673/2010 and connected cases 7 even mistakes committed by the Taxation Officer, or the Licensing Authority, while issuing permit as well as making tax endorsement in the RC book. Counsel for the appellants on the other hand contended that there can be no retrospective demand of tax from the appellants- registered owners on account of mistakes committed by the Taxation Officer which is the authority issuing permits under the Act. 5. Even though the argument of Government Pleader that Section 26 is widely worded providing for collection of tax escaped levy and collection "for any reason whatsoever" is correct, we feel, demand of differential tax in these cases is not permissible under the charging Entry above stated which provides for tax based on the seating capacity which the vehicle is "permitted to carry". In the first place, in our view, before demanding differential tax, endorsement of seating capacity in the RC book as well as in the permit and corresponding tax endorsement in the RC book have to be first made in line with Rule 269. What is to be considered next is the effect of these changes later ordered in the RC book and permit issued. A stage carriage operator has to necessarily limit the number of passengers in the vehicle in terms of permit. Therefore increase in seating capacity WA 1673/2010 and connected cases 8 granted later by amending the permit issued can have only prospective effect. When the tax payable under the charging Entry is geared to number of seated passengers permitted, tax becomes payable for the additional passengers permitted only after permit is modified increasing the seated capacity which cannot be done retrospectively. In other words, so far as retrospective enhancement of seating capacity in the permit issued is not possible, retrospective demand of tax for the enhanced seating capacity is also not possible under the charging Entry. So much so, in our view, Section 26 can apply for recovery of tax for increased seating capacity only from the date on which the RTO directed enhancement of seating capacity in the vehicles of the appellants and not before. The amendments to be carried in the RC book and permit and consequent endorsement of tax liability can be made effective only from the date on which the RTO makes the entries. In other words, recovery of tax for the enhanced seating capacity is possible after the tax endorsements are ordered to be changed by him consequent upon change in the permit and not for back periods. We therefore allow the appeals by vacating the judgment of the learned single Judge and dispose of the WPCs by vacating the orders of WA 1673/2010 and connected cases 9 demand of differential tax from the appellants for the back period with direction to the RTO to make corrections in the RC book, permit and tax endorsement in the RC book prospectively with effect from the date on which he found out the mistakes and appellants were informed about the same. Appellants will produce RC books and permits for making changes and for determining additional tax liability in terms of this judgment. Payments made by the appellants under the interim orders of this Court will be adjusted while demanding differential tax as per this judgment. (C.N.RAMACHANDRAN NAIR) Judge. (K. SURENDRA MOHAN) Judge. kk WA 1673/2010 and connected cases 10