M/S. TATA MOTORS LIMITED versus STATE OF JHARKHAND AND OTHERS
[2018] 14 S.C.R. 1241, Supreme Court of India, 2018
Outcome: Dismissed (Dismissed)
Segment: Arguments
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1241
M/S. TATA MOTORS LIMITED
v.
STATE OF JHARKHAND AND OTHERS
(Civil Appeal Nos. 5299-5304 of 2003)
DECEMBER 14, 2018
[A. K. SIKRI AND M. R. SHAH, JJ.]
Bihar Motor Vehicles Taxation Act, 1994: s. 6 – Tax payable
by a manufacturer or a dealer – Manufacturer/dealer of the motor
vehicles – Liability to pay tax u/s. 6, during the period the chassis
are in their possession-before they are delivered to the dealers and/
or the purchasers of the said vehicles – Held: Manufacturer/dealer-
appellants are liable to pay tax u/s. 6 – Liability to pay tax u/s. 6 is
linked with the incidence of manufacturer or the dealer possessing
the vehicle which is suitable for use on road during the course of
his business – Sections 5 and 6 operate in altogether different
contexts – Under s. 5 tax is payable at the time of registration of the
vehicle, which is payable by the registered owner – In contrast, s. 6
is the stage before that as it is on the event of the vehicle being
possessed by the manufacturer or dealer – Entry 57 of List II, VII
Schedule empowers the State Legislature to impose tax on vehicle
merely on possession – Furthermore, for the delayed payment,
penalty was rightly imposed – Constitution of India – Entry 57, List
II VII Schedule.
Dismissing the appeals, the Court
HELD: 1.1 The High Court rejected the submission that
the Bihar Act was enacted by the State Legislature under
Entry 57 of List II (State List) of the VIIth Schedule to the
Constitution , which entry
does not empower the State Legislature
to impose tax on vehicle merely on possession, with the reason
that under this entry, taxes on vehicles which are suitable for use
on roads can be imposed and it was undisputed case of the parties
that the vehicles manufactured by the appellants are suitable for
use on roads. Therefore, section 6 of the Bihar Motor Vehicles
Taxation Act, 1994 which stipulates the manufacturer or a dealer
of a motor vehicle, in respect of the motor vehicle in his
possession in the course of business as such a manufacturer or
dealer shall pay tax, is within the legislative competence of
[2018] 14 S.C.R. 1241
1241
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Entry 57. The reasoning given by the High Court is the correct
analysis of Entry 57 of List II of VIIth Schedule to the Constitution.
[Paras 19, 20][1251-A-E]
1.2 The High Court rightly concluded that amendment in
Motor Vehicles Act (Central Act) 1988 would have no relevance
to the provisions contained in the Bihar Act. Whether the
definition of a dealer includes manufacturer or not would be
immaterial inasmuch as under Section 6 of the Bihar Act, the
Legislature has made provision to tax both the dealer as well as
the manufacturer. [Para 21][1251-D-F]
1.3 The submission that the tax was in respect of motor
vehicles in possession of the manufacturer in the course of his
business as a manufacturer, or in possession of the dealer in the
course of his business as a dealer under the authorization of trade
certificate granted under the Central Motor Vehicle Rules, 1989,
is accepted. The manufacturer comes in the possession of the
motor vehicle after the vehicle is manufactured and is suitable
for use on roads. The dealer in the course of his business of
getting the Motor Vehicle from the manufacturer and selling it to
a customer comes in the possession of the Motor Vehicle on the
basis of a trade certificate granted under the Central Motor
Vehicle Rules, 1989. Neither earlier nor now there is any
obligations in a manufacturer to obtain a trade certificate under
the 1989 Rules for carrying on
the business of a manufacturer.
[Para 22][1252-B-E]
1.4 A challenge to the constitutionality of Section 6 laid by
the appellants in the earlier round of litigation, in regard to the
same Assessment Years, was repelled and constitutional validity
of Section 6 was upheld in Telco case. Once Section 6 is held to
be valid, it is only the interpretation thereof which was to be gone
into by the High Court in this round, in order to find out whether
the assessment orders passed in respect of these appeals were
valid or not. On interpreting this provision, liability to pay tax
under Section 6 is linked with the incidence of manufacturer or
the dealer possessing the vehicle which is suitable for use on
road during the the course of his business. [Para 23][1252-E-G]
Tata Engineering and Locomotive Company Ltd. v. State
of Jharkhand (TELCO case) AIR 1999 Patna 62 –
approved.
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Bolani Ores Ltd. v. State of Orissa (1974) 2 SCC 777 ;
Travancore Tea Estates Co. Ltd. & Ors. v. State of Kerala
& Ors. (1980) 3 SCC 619 ; M/s Central Coal Fields
Ltd. v. State of Orissa & Ors. 1992 Supp. (3) SCC 133
– referred to.
1.5 It was submitted that Section 6 uses the expression ‘in
lieu of the rates specified in Schedule I’; that the tax which is to
be paid is either as per Schedule I i.e. in accordance with Section
5 of the Bihar Act or at the annual rates specified in Schedule III;
and that the words ‘in lieu of’ cannot be read as ‘in addition to’,
cannot be accepted. Sections 5 and 6 operate in altogether
different contexts. Under Section 5, tax is payable at the time of
registration of the vehicle, which is payable by the registered
owner. In contrast, Section 6 is the stage before that as it is on
the event of the vehicle being possessed by the manufacturer or
dealer. Therefore, the appellants are liable to pay tax under
Section 6 of the Bihar Act. May be, Section 6 is not happily
worded. But the intent is to convey that tax will not be payable as
per Schedule I which is payable under Section 5 but in place
thereof it would be payable as per Schedule III. [Para 24]
[1253-A-D]
2.1 Section 23, in no uncertain terms, lays down that any
person who does not pay the tax during the prescribed period
shall pay a penalty at the rate prescribed by the State Government
together with arrears of tax. Therefore, for non-payment of the
tax within the
prescribed period, penalty becomes payable at the
rates specified in Rule 4. The vires of Section 6 were challenged
in the High Court in earlier proceedings and this challenge was
repelled. Further, since Rule 4 uses the expression ‘may’, on
that basis it was also argued that this rule gives discretion to the
Assessing Officer. That argument was also repelled in Telco case.
This position in law has attained finality. [Para 29][1255-E-G]
2.2 While upholding the validity of Section 23 of the Act in
Telco, insofar as penalty is concerned, the Court had set aside
the same on the ground that before imposing the penalty, no show
cause notice was issued. Permission was given to the tax
authorities to take fresh decision after giving the show cause
notice. Show cause notices were issued and after hearing the
appellants, the penalty was imposed. In view thereof, the High
M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND
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Court rightly repelled the challenge against imposition of penalty.
[Para 31][1256-B-D]
Hindustan Steel Ltd. v. State of Orissa (1969) 2 SCC
627 – held inapplicable.
State of U.P. & Ors. v. Sukhpal Singh Bal (2005) 7 SCC
615 – referred to.
Case Law Reference
AIR 1999 Patna 62
approved
Para 16
(1974) 2 SCC 777
referred to
Para 23
(1980) 3 SCC 619
referred to
Para 23
1992 Supp. (3) SCC 133
referred to
Para 23
(1969) 2 SCC 627
held inapplicable
Para 25
(2005) 7 SCC 615
referred to
Para 29
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5299-
5304 of 2003.
From the Judgment and Order dated 29.11.2002 of the High Court
of Jharkhand at Ranchi in C.W.J.C. No. 1239 of 2000 alongwith C.W.J.C.
Nos. 1240, 1430, 1432, 1439 and 1454 of 2000.
With
Civil Appeal Nos 6591 of 2003, 8-12 of 2004.
Arvind P. Datar, Ashok Kumar Panda, Sunil Kumar, Sr. Advs.,
Ajay Aggarwal, Ms. Mallika Joshi, Rajat Gava, Rajan Narain, Mahesh
Agarwal, Rishi Agrawala, Ms. Parul Shukla, E. C. Agrawala, Rajesh
Kumar, Devashish Bharuka, Shankar Lal Agarwal, Ravi Bharuka,
Ms. Sarvshree Singh, Justine George, Akshay Amritanshu, R. C. Kohli,
Vijay Prakash, Sanjai Kumar Pathak, Ms. Rashmi Malhotra, G. S.
Makker, Mrs. Anil Katiyar, Ratan Kumar Choudhuri, Abhinav Mukerji,
Mrs. Bihu Sharma, Ms. Pratishtha Vij, Siddharth Garg, Advs. for the
appearing parties.
The Judgment of the Court was delivered by
A. K. SIKRI, J.
1. A common question
of law which arises in all these appeals
pertains to levy of tax by the respondent No.1 State under Section 6 of
the Bihar Motor Vehicles Taxation Act, 1994 (hereinafter referred to as
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the ‘Bihar Act’) on the chassis of the motor vehicles manufactured by
the appellants during the period these chasis are in their “possession”,
i.e., before they are delivered to the dealers and/or the purchasers of the
said vehicles.
2. The Bihar Act envisages three kinds of taxes, namely:
(a)  on registered vehicles under Section 5 of the Act;
(b)  on vehicles held under trade certificates as per Section 6 of
the Act; and
(c)  in respect of vehicles registered, where the registration is
temporary, a marginal tax under Section 7(4) of the Act.
3. As would be noticed, tax under Section 5 of the Bihar Act is
paid by the ultimate buyers who, on purchase of vehicles and becoming
owners thereof, get these vehicles registered in their names.  After the
manufacture of the vehicle and before it is sold to the ultimate buyer to
use the said vehicle, a temporary registration is required by the
manufacturer under Section 7 of the Bihar Act.  Since this registration is
temporary for a limited duration, a fractional tax is paid by the manufacturer
or dealer under Section 7(4) of the Bihar Act.  Section 6, on which the
fulcrum of dispute revolves, deals with those vehicles which are in
possession of a manufacturer or dealer in the course of his business and
are held under trade certificates.  Sections 5, 6 and 7 are reproduced
below in order to have an idea of the payment of these three motor
vehicle taxes:
“5.  Levy of tax – (1) Subject to other provisions of this
Act, on
and from the date of commencement of this Act, every owner of
a registered motor vehicle shall pay tax on such vehicle at the
rate specified in Schedule I.
(2)  Subject to other provisions of this Act, on and from the date
of commencement of this Act, every owner of a registered motor
vehicle shall pay Additional Motor Vehicles Tax on such vehicle
at the rate specified in Schedule II.
(3)  The State Government may, by notification from time to time,
increase the rate of tax specified in the Schedules:
Provided that no such increase shall, during any year, exceed fifty
percent of the rate of taxes prescribed in the Schedules.
6.  Tax payable by a manufacturer or a dealer – A tax at the
annual rate specified in Schedule III in lieu of the rates specified
M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND
[A. K. SIKRI, J.]
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in Schedule I shall be paid by a manufacturer or a dealer in motor
vehicles in respect of the motor vehicles in his possession in the
course of his business as such manufacturer or dealer under the
authorisation of trade certificate granted under the Central Motor
Vehicles Rules, 1989.
7.  Payment of tax –
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(4)  In the case of motor vehicles temporarily registered under
Section 43 of the Motor Vehicles Act, 1988, the tax for vehicles
other than personalised vehicles shall be levied at the rate of 1/
12th of the tax payable for the year for such vehicles.  In case of
extension of the period of temporary registration under the proviso
to sub-section (2) of Section 43 tax at the rate of 1/12th payable
for the year shall be payable on every extension of temporary
registration for period of 30 days or part thereof;
Provided that for temporary registration of personalised vehicles
the rates of tax will be Rs.50/- for a motor cycle (including moped,
scooter and cycle with attachment for propelling the same by
mechanical power) and Rs.100/- for a motor car.”
4. As is clear from the reading of these Sections, Section 5 is the
charging section as per which every owner of a registered motor vehicle
is under an obligation to pay tax on such vehicle, rates whereof are
specified in Schedule I.  Insofar as Section 6 is concerned, liability is
cast on the manufacturer of motor vehicles or a
dealer in motor vehicles
to pay tax in respect of motor vehicles in his possession in the course of
his business as a manufacturer or a dealer, under the authorisation of
trade certificate granted under the Central Motor Vehicle Rules, 1989
(hereinafter referred to as ‘MV Rules’).  Here tax is at annual rate
specified in Schedule III, which is ‘in lieu’ of the rates specified in
Schedule I. It clearly implies, therefore, that a manufacturer or dealer
pays the tax in respect of vehicles in his possession for which he has
been granted trade certificate which authorises him to possess the said
vehicle before it is sold to the ultimate consumer. Obviously, the rate
specified in Schedule III is much lesser than the tax which is payable by
the registered owner under Section 5 of the Bihar Act.
5. Section 7(4), on the other hand, applies to those cases where
the motor vehicles are temporarily registered under Section 43 of the
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Motor Vehicles Act, 1988 (hereinafter referred to as the ‘MV Act’).  In
contrast with Section 6, here the person, unlike the manufacturer or
dealer having trade certificate, gets the vehicle registered on temporary
basis.  The tax levied here is 1/12th of the tax payable for the year for
such vehicles.
6. The three situations, thus, become obvious.  A manufacturer
after manufacturing motor vehicle would be in possession of the said
vehicle till it is delivered to a dealer.  Likewise, a dealer would remain in
possession of such a vehicle till it is sold to the consumer.  Ordinarily, a
motor vehicle cannot be driven unless it is registered.  That requirement
is provided under Section 39 of the MV Act.  It is in consonance with
this provision that under Section 5 of the Bihar Act, tax is levied by the
respondent State on the owner of the registered vehicle, at the time of
registration. Since this tax is to be paid by the ultimate owner who
purchases the vehicle, to avoid double taxation and payment of same tax
by the manufacturer or dealer, Rule 33 of the MV Rules exempts such
manufacturer or dealer from the necessity of registration subject to the
condition that they obtain trade certificates from the registering authority.
It is because of the reason that in the course of their business as
manufacturer or dealer the vehicle would come on the road and would
be driven.  For this reason, a dealer or a manufacturer of motor vehicle
is permitted to obtain
trade certificate so that he is exempted from
registering the vehicle in his name.  The Bihar Act, even in such a case,
contemplates levy of tax.  This tax is payable under Section 6 at the
annual rate specified in Schedule III, as noted above.  In case a dealer
or a manufacturer is not having trade certificate, in order to drive the
motor vehicle during the period it remains with him, he is supposed to get
the vehicle registered for a temporary period.  This temporary registration
is to be done as per the provisions contained in Section 43 of the MV
Act.  It may be clarified that such temporary registration can be obtained
by any person who is the owner of a motor vehicle and is not confined to
a dealer or a manufacturer.  An owner who gets the vehicle temporarily
registered in his name is supposed to pay tax under the Bihar Act though
at a much lesser rate than the rate specified in Schedule I, inasmuch as
it is only at the rate of 1/12th of the tax payable for the year for such
vehicles.  It is because of the reason that temporary registration is for a
period of one month.
7. All the appellants in these appeals fall in the category of
manufacturers or dealers of the motor vehicles.  They have paid taxes
M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND
[A. K. SIKRI, J.]
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under Section 7(4) of the Bihar Act.  Likewise, in respect of those vehicles
retained and used by the appellants for their own purposes and not sold,
these appellants have discharged their tax liability under Section 5 of the
Bihar Act as well.
8. In the aforesaid backdrop, the issue is as to whether such
manufacturers or dealers, like the appellants herein, are liable to pay tax
under Section 6 as well.  To reiterate, after the manufacture of the
vehicle when it remains with the manufacturer (or when it remains with
the dealer after delivery thereof to the dealer by the manufacturer) and
before it is sold to the ultimate consumer, the vehicle is brought on the
road and is driven.  It maybe for the purpose of testing the technical
suitability of such a vehicle or when it goes for delivery from the
manufacturer’s factory to the dealer’s showroom.  Likewise, dealer
may also drive this vehicle for limited purpose, say it is driven by the
customer etc. Since, a vehicle cannot be brought on road and be driven
without any valid registration, contemplates two situations to meet such
contingencies.  It provides for temporary registration under Section 43
of the MV Act.  Another option is given to those manufacturers or dealers
who obtain trade certificates from the registering authority and in such a
case as per Rule 33 of the Motor Vehicle Rules, manufacturers or dealers
are exempted from the
necessity of registration.  The appellants in these
appeals are either manufacturers or dealers.  They have paid taxes under
Section 7(4) of the Bihar Act.  In respect of such vehicles, taxes also
stand paid under Section 5 of the Bihar Act.  Question of additional tax
liability under Section 6 of the Act arises in this backdrop.
9. Before we answer this question, it would be necessary to take
note of those amendments in the Central Government, i.e., MV Act
from time to time which have bearing on these cases.
10. Section 2(8) of the MV Act (the Central Act) provides the
definition of ‘dealer’.  As per this provision, as originally stood, a
manufacturer was also included in the definition of ‘dealer’.  However,
this provision was amended vide Act 54 of 1994 whereby the Legislature
omitted ‘manufacturer’ from the ambit of the expression ‘dealer’.  The
manufacturer, therefore, no more remained the dealer. The amended
definition of ‘dealer’ which came into effect with effect from November
14, 1994, is as under:
“2. Definitions.—In this Act, unless the context otherwise
requires,—
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(8) “dealer” includes a person who is engaged—
(a) [* * *]
(b) in building bodies for attachment to chassis; or
(c) in the repair of motor vehicles; or
(d) in the business of hypothecation, leasing or hire-purchase of
motor vehicle;”
11. Thus, under the Central Act, prior to its amendment in
November, 1994, motor vehicles would require registration in all events,
save and except those which were in possession of “dealers”.  In the
latter event, the vehicles could be temporarily kept under a trade
certificate, which, under the rules, provides extremely limited mobility.
In November, 1994, manufacturers were taken out of this exception by
amendment in the definition of dealers.
12. The Bihar Motor Vehicle Rules, 1992 (Bihar Rules) as
applicable in the State of Bihar and in some other States were amended
as empowering the manufacturers themselves to act as authorities, who
could grant temporarily registration.  Thus, under the revised scheme
post November, 1994, it is only a dealer (other than a manufacturer)
who could keep a vehicle for a limited period of time under a trade
certificate.  Manufacturers, therefore, would have to temporarily register
the vehicle under Section 43 of the Central Act.  Upon its purchase, the
customer would then register the vehicle finally under Section 39 of the
Central Act.
13. The State of Bihar enacted Bihar Motor Vehicles Taxation
Act in April 1994 at a time when the manufacturers also could continue
in possession of
Tariff heading vehicles under a trade certificate.
14. After the amendment of 1984, the facility of trade certificate
to a manufacturer stands withdrawn.  The manufacturer undoubtedly
can possess a vehicle, which is in his factory as long as it is not used in
any place contrary to Section 39 of the Bihar Act.  The only manner in
which a manufacturer can use a vehicle is the manner indicated under
Section 39 without obtaining a registration.
15. Prior to the above-said amendment of the Central Act, a
Division Bench of the Patna High Court took the view that vehicles,
which were in use, would either require a registration certificate,
permanent or temporary, or would require a trade certificate.  A
M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND
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manufacturer who is required to obtain a trade certificate but did not do
so, would not escape the net of tax by being the beneficiary of his own
wrong.
16. To complete the narrative, it would also be pertinent to mention
that after the amendment in November, 1994, as noted above, when the
Assessing Authority sought to levy tax under Section 6 of the Bihar Act,
this action was challenged by the appellants by filing writ petitions in the
High Court of Patna.  In those writ petitions, vires of Section 6 of the
Bihar Act were also challenged. The challenge was repelled by the High
Court vide its judgment dated July 03, 1998, with the leading case known
as Tata Engineering and Locomotive Company Ltd. vs. State of
Jharkhand1 (TELCO case). This judgment has attained finality as
Special Leave Petition thereagainst was dismissed by this Court.  After
the aforesaid judgment, the District Transport Office, Jamshedpur again
confirmed the demand of tax under Section 6 of the Act vide his order
dated July 05, 1999 in the case of the appellant/TELCO.  This order was
confirmed by the Appellate Authority at Ranchi on December 18, 1999
as well as by Revisional Authority by his order dated April 20, 2000.
Writ petitions were filed challenging this order in the High Court which
have been dismissed vide impugned judgment dated September 24, 2002.
In appeal Nos. 5299-5304 of 2003 validity of the judgment is
questioned.
Civil Appeal Nos. 5299-5304 of 2003 arise out of this judgment.
17. Civil Appeal Nos. 8-12 of 2004 are filed by a dealer who has
paid the tax under Section 6 of the Act as well, however, for delayed
payment, penalty and interest are imposed which were challenged by
the said appellants in the High Court and the High Court has dismissed
the case of the appellants vide its judgment dated July 22, 2003 following
its judgment in TELCO case.
18. It is in this conspectus, this Court is to first determine the
question of liability of tax under Section 6 of the Bihar Act and in the
event this tax is upheld, question of penalty and interest would have to
be determined.
19. We may point out that before the High Court, the appellants
had challenged the vires of Section 6 on the ground that the State
Legislature lacks competence to make a provision of this nature.  It was
pointed out that Section 6 levies the tax on a manufacturer or a dealer of
motor vehicles merely on ‘possession’ thereof by such a manufacturer
1AIR 1999 Patna 62
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or a dealer.  It was argued that the Bihar Act was enacted by the State
Legislature under Entry 57 of List II (State List) of the VIIth Schedule
to the Constitution of India, which entry does not empower the State
Legislature to impose tax on vehicle merely on possession.  This entry
reads as under:
“Taxes on vehicles, whether mechanically propelled or not, suitable
for use on roads, including tram cars subject to the provisions of
entry 35 of List III.”
20. The High Court, however, rejected this contention with the
reason that under this entry, taxes on vehicles which are suitable for use
on roads can be imposed and it was undisputed case of the parties that
the vehicles manufactured by the appellants are suitable for use on roads.
Therefore, the provision which stipulates the manufacturer or a dealer
of a motor vehicle, in respect of the motor vehicle in his possession in
the course of business as such a manufacturer or dealer shall pay tax, is
within the legislative competence of Entry 57.  This contention has been
raised before us  as well.  However, we do not agree with the appellants
as the reasoning given by the High Court is the correct analysis of Entry
57 of List II of VIIth Schedule to the Constitution.
21. Insofar as argument predicated on the amendment in the Motor
Vehicles Act (the Central Act), 1988 is concerned, we again find that
the High Court has rightly concluded that this amendment would have
no relevance to the provisions contained
in the Bihar Act.  Whether the
definition of a dealer includes manufacturer or not would be immaterial
inasmuch as under Section 6 of the Bihar Act, the Legislature has made
provision to tax both the dealer as well as the manufacturer.  We agree
with the following observations of the High Court in this behalf:
“7. ...It goes without saying also that 1994 Act has been enacted
under and in terms of Entry 57 (supra) by the State Legislature;
whereas 1988 Act has been enacted by the Union Parliament
under and in terms of Entry 35 of the Concurrent List.  Also,
whereas the Preamble to 1988 Acts states that the Act has been
enacted to consolidate and amend the law relating to Motor
Vehicles, the Preamble to 1994 Act states that this Act has been
made with a view to regulate the imposition and levy of tax on
Motor Vehicles in the State of Bihar (as it was at the relevant
time).  Both the Act, therefore, deal with two different fields of
M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND
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legislation and the areas of their operation are also different, having
been enacted by two different classes of Legislatures, one in terms
of the power exercisable and vested under clause (2) and the
other in terms of the power vested and exercisable under clause
(3) of  Article 246 of the Constitution.  Therefore, at the risk of
repetition, we have no hesitation in saying that any change or
alteration in one Act cannot be said to have any effect upon the
other.”
 22. We also agree with the respondents that the tax was in respect
of motor vehicles in possession of the manufacturer in the course of his
business as a manufacturer, or in possession of the dealer in the course
of his business as a dealer under the authorization of trade certificate
granted under the Central Motor Vehicle Rules, 1989.  The manufacturer
comes in the possession of the motor vehicle after the vehicle is
manufactured and is suitable for use on roads.  The dealer in the course
of his business of getting the Motor Vehicle from the manufacturer and
selling it to a customer comes in the possession of the Motor Vehicle on
the basis of a trade certificate granted under the Central Motor Vehicle
Rules, 1989.  Neither earlier nor now there is any obligations in a
manufacturer to obtain a trade certificate under the 1989 Rules for
carrying on the business of a manufacturer.
23. It is pertinent to mention that a
challenge to the constitutionality
of Section 6 laid by the appellants in the earlier round of litigation, in
regard to the same Assessment Years, was repelled and constitutional
validity of Section 6 was upheld in Telco case.  The High Court had in
coming to such a conclusion, referred to the judgment of this Court in
Bolani Ores Ltd. v. State of Orissa2, Travancore Tea Estates Co.
Ltd. & Ors. v. State of Kerala & Ors.3 and M/s Central Coal Fields
Ltd. v. State of Orissa & Ors.4.  Once Section 6 is held to be valid, it is
only the interpretation thereof which was to be gone into by the High
Court in this round, in order to find out whether the assessment orders
passed in respect of these appeals were valid or not.  On interpreting
this provision, as observed earlier as well, liability to pay tax under Section
6 is linked with the incidence of manufacturer or the dealer possessing
the vehicle which is suitable for use on road during the course of his
business.
2(1974) 2 SCC 777
3(1980) 3 SCC 619
41992 Supp. (3) SCC 133
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24. A half-hearted argument was also made by the appellants to
the effect that Section 6 uses the expression ‘in lieu of the rates specified
in Schedule I’ and it was argued that the tax which is to be paid is either
as per Schedule I i.e. in accordance with Section 5 of the Bihar Act or at
the annual rates specified in Schedule III.  It was emphasised that the
words ‘in lieu of’ cannot be read as ‘in addition to’.  However, there is
no merit in this argument as well.  Sections 5 and 6 operate in altogether
different contexts.  Under Section 5, tax is payable at the time of
registration of the vehicle, which is payable by the registered owner.  In
contrast, Section 6 is the stage before that as it is on the event of the
vehicle being possessed by the manufacturer or dealer.  We, therefore,
are of the opinion that the appellants are liable to pay tax under Section
6 of the Bihar Act.  May be, Section 6 is not happily worded.  But the
intent is to convey that tax will not be payable as per Schedule I which is
payable under Section 5 but in place thereof it would be payable as per
Schedule III.
25. Insofar as imposition of penalty is concerned, it is as per the
provisions of Section 23 of the Act which mentions that for non-payment
of tax under the Act, penalty can be imposed. The appellants have
referred to the judgment of this Court in Hindustan Steel Ltd. v. State
of Orissa5 which describes the nature of penalty as under:
“8. Under the Act penalty may be
imposed for failure to register
as a dealer — Section 9(1) read with Section 25(1)(a) of the Act.
But the liability to pay penalty does not arise merely upon proof of
default in registering as a dealer. An order imposing penalty for
failure to carry out a statutory obligation is the result of a quasi-
criminal proceeding, and penalty will not ordinarily be imposed
unless the party obliged either acted deliberately in defiance of
law or was guilty of conduct contumacious or dishonest, or acted
in conscious disregard of its obligation. Penalty will not also be
imposed merely because it is lawful to do so. Whether penalty
should be imposed for failure to perform a statutory obligation is a
matter of discretion of the authority to be exercised judicially and
on a consideration of all the relevant circumstances. Even if a
minimum penalty is prescribed, the authority competent to impose
the penalty will be justified in refusing to impose penalty, when
there is a technical or venial breach of the provisions of the Act or
5(1969) 2 SCC 627
M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND
[A. K. SIKRI, J.]
A
B
C
D
E
F
G
H
1254                    SUPREME COURT REPORTS            [2018] 14 S.C.R.
where the breach flows from a bona fide belief that the offender
is not liable to act in the manner prescribed by the statute. Those
in charge of the affairs of the Company in failing to register the
Company as a dealer acted in the honest and genuine belief that
the Company was not a dealer. Granting that they erred, no case
for imposing penalty was made out.”
26. It was argued that action of the appellants was bona fide
inasmuch as when the notices were received for the first time for payment
of tax under Section 6 of the Act, the same were challenged albeit the
validity of Section 6 was upheld by the High Court.  Thereafter, tax was
paid by the appellants though challenged again in the present round of
litigation.  On that basis, it was argued that action of the appellants was
bona fide.
27. In order to test this argument, we shall have to consider the
provision under which penalty can be imposed.  The provision in the Act
is Section 23 and Rule 4 of the Taxation Rules provides for the rates of
penalty.  Section 23 reads as under:
“Liability to pay penalty for non-payment of tax in time. - If the
tax payable in respect of a vehicle other than personalised vehicle
has not been paid during prescribed period, the person liable to
pay such tax shall pay together with the arrears of tax, a penalty
at the rates prescribed by the State Government.”
28. Rule 4, likewise, is to the following
effect:
“4. Due date of payment and penalty for non-payment of taxes in
time.— (1) For vehicles other than personalised vehicles the due
date of payment of tax shall be the date of expiry of the period for
which the tax has been last paid. In cases where no such tax had
previously been paid, the date of acquisition of the vehicle or the
date when such tax is imposed by law shall be due date for tax
payment. For payment of differential taxes under the provision of
Section 8, the due date shall be within seven days from the date
of alteration in the vehicle or the change in its use.
(2) Where the tax for any period in respect of a vehicle has not
been paid as required under the provisions of sub-rule (1) and
continues to remain unpaid thereafter, the taxing officer may
impose penalty in respect of such vehicles at the rate specified in
the table below:—
A
B
C
D
E
F
G
H
1255
TABLE
(3) Where the composite fee in respect of vehicles plying under
National Permit Scheme has not been paid within the due date as
required under the provisions of the said Scheme, the Taxing Officer
shall impose penalty at the rate provided in the said Scheme, in
respect of such vehicle.”
 29. Section 23, in no uncertain terms, lays down that any person
who does not pay the tax during the prescribed period shall pay a penalty
at the rate prescribed by the State Government together with arrears of
tax.  Therefore, for non-payment of the tax within the prescribed period,
penalty becomes payable at the rates specified in Rule 4.  The vires of
Section 6 were challenged in the High Court in earlier proceedings and
this challenge was repelled. Further, since Rule 4 uses the expression
‘may’, on that basis it was also argued that this rule gives discretion to
the Assessing Officer. That argument was also repelled in Telco case.
This position in law has attained finality.  At this stage, it would be useful
to refer to the judgment in State of U.P. & Ors. v. Sukhpal Singh Bal6
wherein this Court held:
“15.  ...A penalty may be the subject-matter of a breach of statutory
duty or it may be the subject-matter of a complaint. In ordinary
Period 
Amount of penalty 
(i) If paid within fifteen 
days from the due date 
of payment. 
Nil. This will be treated as a 
grace period.
(ii) If paid after fifteen 
days but within 30 days 
of 
the due date 
of 
payment.
Penalty
to be charged at the 
rate of 25 per cent, of the tax.
(iii) If paid after 30 days 
but within 60 days of the 
due date of payment. 
Penalty to be charged at the 
rate of 50 per cent, of the taxes 
due.
(iv) If paid after 60 days 
but within 90 days of 
due 
date 
of 
tax 
payment. 
Penalty to be charged equal to 
the taxes due.
(v) If paid beyond 90 
days after the due date.
Penalty to be charged will be 
twice the taxes due.
6(2005) 7 SCC 615
M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND
[A. K. SIKRI, J.]
A
B
C
D
E
F
G
H
1256                    SUPREME COURT REPORTS            [2018] 14 S.C.R.
parlance, the proceedings may cover penalties for avoidance of
civil liabilities which do not constitute offences against the State.
This distinction is responsible for any enactment intended to protect
public revenue...”
30. It is clear that under the Bihar Act, as per Section 23, penalties
levied for breach of statutory duty for non-payment of tax.
31. In view of the aforesaid specific legal provisions, judgment in
the case of Hindustan Steel Ltd. referred to by the appellants will not
be applicable in the instant case.  It is also to be borne in mind that while
upholding the validity of Section 23 of the Act in Telco, insofar as penalty
is concerned, the Court had set aside the same on the ground that before
imposing the penalty, no show cause notice was issued.  Permission was
given to the tax authorities to take fresh decision after giving the show
cause notice.  It is an admitted case that show cause notices were issued
and after hearing the appellants, the penalty was imposed.    Taking into
consideration all these aspects, the High Court in the impugned judgment
dated July 22, 2003 in the case of M/s. R.K. Automotives & Ors. (Civil
Appeal Nos. 8-12 of 2004) has repelled the challenge against imposition
of penalty.  We agree with the aforesaid conclusion.
32. As a result, all these appeals are dismissed.
Nidhi Jain
Appeals dismissed.