NHPC LTD. versus STATE OF HIMACHAL PRADESH SECRETARY & ORS.
[2023] 12 S.C.R. 1, Supreme Court of India, 2023
Outcome: Dismissed (Dismissed)
Segment: Issues
[2023] 12 S.C.R. 1 : 2023 INSC 810
1
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 deﬁ nition of the term ‘business’;
deﬁ ning 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
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
2
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 eﬀ ect, 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 ineﬀ ective – 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 ineﬀ ective, 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
3
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, ﬁ nality 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 bonaﬁ de 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, eﬀ ectiveness 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 eﬀ ect that the judgment pointing 
out the defect would not have been passed, if the altered position as sought 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
4
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 ﬁ eld 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
5
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 Oﬃ  cer, 
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.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
6
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 ﬁ led assailing the ﬁ nal 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 ﬁ led 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.
7
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 diﬀ erent 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 clariﬁ ed 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
8
8
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. ﬁ led 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 speciﬁ ed 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.
9
iii. That in passing the Assessment Orders dated 01 October, 1992, 
erroneous and baseless assumptions had been made to the eﬀ ect 
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 suﬀ ered 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 ﬁ led 
by the appellant and directed the Respondents to refund the tax collected 
under the provisions of the Act of 1955. The pertinent ﬁ ndings 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 deﬁ nitions 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 deﬁ nition 
of ‘owner’ would fortify such ﬁ nding, as ‘owner’ was deﬁ ned 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 deﬁ ned to mean “a public service 
vehicle or public carrier, or private carrier or a trailer attached to 
any such vehicle.” Further, the deﬁ nition 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 deﬁ nition of ‘motor vehicle’, as deﬁ ned 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
10
at the relevant point of time. That on applying the deﬁ nition 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 deﬁ nition of ‘motor vehicle’ 
was enlarged to include any ‘transport vehicle,’ which, as deﬁ ned 
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 deﬁ nition 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 ﬁ ction 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 deﬁ nition of ‘route’ for the purposes of the Act and 
the deﬁ nition 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 deﬁ ned 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.
11
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 artiﬁ cial 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 eﬀ ect to unless 
the terms ‘route’ and ‘normal rate’ had been expressly and 
unambiguously deﬁ ned. 
3.7. A Special Leave Petition ﬁ led 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, deﬁ nitions of the terms ‘business’, ‘fare’, ‘freight’ and ‘passenger’ 
were amended. Further, deﬁ nitions 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 ﬁ ling Civil Writ Petition No. 725 of 1998 before the High 
Court. The primary grounds of challenge were as under: 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
12
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 deﬁ nitions of ‘passenger’, ‘business’, ‘fare’ and ‘road’ 
are artiﬁ cial 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 deﬁ nition 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 
ﬁ led 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 ﬁ ndings of the Division Bench of the High Court may 
be epitomized as under: 
i. 
The Court did not ﬁ nd favour with the contention of the Petitioner 
that the impugned legislations had the eﬀ ect 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.
13
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 diﬀ erent categories of motor vehicles and for 
diﬀ erent 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 deﬁ nition 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 ﬁ led. 
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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
14
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
15
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 diﬀ erences 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 coﬀ ers. 
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 
Oﬃ  cer, 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 deﬁ nes 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]

SUPREME COURT REPORTS 
[2023] 12 S.C.R.
16
‘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 proﬁ t 
and whether or not any gain or proﬁ t 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 speciﬁ es 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 proﬁ t motive, would be treated at par with a person or entity 
who/which carries on a business with a proﬁ t motive. In both 
the circumstances, unequals would be treated equally and this 
is opposed to the Constitutional mandate of equality under the 
law.
17
vii. That the deﬁ nitions of ‘business’, ‘passenger’, ‘road’, ‘fare’ and 
‘freight’ under the Amendment and Validation Act of 1997 are 
artiﬁ cial and insertion/substitution of such deﬁ nitions 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 ﬁ eld 
of legislation, merely using artiﬁ cial 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 ﬁ nality, force and eﬀ ect of the 
said judgment of the High Court, which has been aﬃ  rmed 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 deﬁ nition 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
18
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 
deﬁ ned 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 eﬀ ect 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
19
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 deﬁ ciencies 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 inﬁ rmities which formed 
the basis of the Court’s decision to strike down the law and 
make such amended law eﬀ ective 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 Notiﬁ
cation 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 ﬁ xed 
by the competent authority, under the MV Act, for diﬀ erent classes 
of roads and motor vehicles in the State, or on fares and freights 
speciﬁ ed in Schedule I to the Act for diﬀ erent 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
20
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 deﬁ ned under the said Act. 
Owing to such a defect/lacuna, the charging provision could not be 
given eﬀ ect 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 ﬁ xed by the competent authority, under the 
MV Act, or (b) fares and freights speciﬁ ed in Schedule I to the 
Act for diﬀ erent 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 deﬁ ned, thereby removing 
the defects/deﬁ ciencies 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 deﬁ nition of ‘business’. ‘The term ‘business’ 
was deﬁ ned in a narrow manner in the Act of 1955 and meant the 
business of carriage of
passengers and goods. Therefore, when 
the deﬁ nitions 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 deﬁ nition 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 proﬁ t 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 proﬁ t motive, or any ancillary
21
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 aﬃ  rmed. 
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? 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
22
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) deﬁ ned ‘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 deﬁ ned ‘business’ to mean the business of carrying 
passengers and goods by motor vehicles. Section 2 (g) deﬁ ned ‘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 ﬁ de discharge of his duties in connection with the vehicle. The term 
‘owner’ was deﬁ ned 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 notiﬁ cation, 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.”
23
7.3. Section 2(c) provided an inclusive deﬁ nition 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 
eﬀ ect, 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 deﬁ nition 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 proﬁ t 
motive; and any transaction in connection with, incidental or 
ancillary to such trade, commerce or manufacture.
iii. The deﬁ nition of ‘fare’ was amended to include sums ﬁ xed 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 speciﬁ ed under Schedule I. 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
24
iv. The term ‘owner’ has been deﬁ ned 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 deﬁ ning 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 
Notiﬁ cation 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 ﬁ xed by the 
competent authority, under the MV Act, for diﬀ erent classes of 
roads and motor vehicles in the State; or on fares and freights 
speciﬁ ed in Schedule I to the Act for diﬀ erent 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 diﬀ erent categories of motor 
vehicles and class of roads.
25
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 
Pradesh Passengers 
and Goods Taxation 
Act, 1955
The Himachal Pradesh 
Passengers and Goods Taxation 
(Amendment and Validation) 
Act, 1997
Preamble 
An Act to provide 
for levying a tax on 
passengers and goods 
carried by road in 
certain motor vehicles.
An Act to provide for levying a tax 
on passengers and goods carried 
by road in motor vehicles.
Deﬁ nition 
of the term 
‘business’
2(a) “business” 
means the business of 
carrying passengers 
and goods by motor 
vehicles.
2[(aa) “business” includes:-
i. The business of carrying 
passengers and goods by motor 
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 man ufactu re, 
adventure or concern is carried 
on with a motive to make gain 
or proﬁ t and whether or not any 
gain or proﬁ t 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.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
26
Deﬁ nition 
of the term 
‘fare’
2(c) “fare” includes 
sums payable for a 
season ticket or in 
respect of the hire of a 
contract carriage;
2(c) “fare” or “freight includes 
sums fixed by the competent 
authority under the Motor 
Vehicles Act for the hire of 
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 ﬁ xed, also includes such 
sum as speciﬁ ed in Schedule-1:
Deﬁ nition 
of the term 
‘motor 
vehicle’
2(e) “motor vehicle” 
means a public 
service vehicle or 
public carrier, or 
private carrier or a 
trailer when attached 
to any such vehicle;
2(d) “motor vehicle” means 
any transport vehicle, which 
is mechanically propelled and 
adapted for use upon roads
whether the power of propulsion 
is transmitted thereto from an 
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
(ii) A maxi cab, which is 
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:]
27
Deﬁ nition 
of the term 
‘owner’
2(f) “owner” means 
the owner of the motor 
vehicle in respect 
of which a permit 
has been granted or 
countersigned under 
the provisions of the 
Motor Vehicles Act, 
1939 (4 of 1939) and 
includes (a) the holder 
of a permit in respect 
of such vehicle, (b) 
any person for the 
time being in charge of 
such vehicle, (c) any 
person responsible for 
the management of 
the place of business 
of such owner, (d) 
Government or a 
Corporation constituted 
u n d e r  t h e  R o a d 
Transport Corporations 
Act, 1950;
2(f) “owner means” the 
owner of the motor vehicle 
used for carrying passengers 
or transporting goods in or 
through the territory of the 
State of Himachal Pradesh, and 
includes, - 
(a) The de-facto and de-jure 
owners;
(b) Any person for the time being 
incharge of such vehicle; 
(c) any person responsible for 
the management of the place of 
business of such owners; 
(d )  Th e  Gov e r n me n t o r 
Corporation constituted under the 
road Transport Corporation Act, 
1950 (64 of 1950):
Deﬁ nition 
of the term 
‘Private 
service 
vehicle’
-
(gb) “Private service vehicle” 
means a motor vehicle constructed 
or adopted 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;
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
28
Deﬁ nition 
of the term 
‘road’
-
(ge) “road” means a track for 
travel or transportation to and 
fro, serving as a means of 
communication, between two 
places;
Deﬁ nition 
of the term 
‘transport 
vehicle’
-
(ia) “transport vehicle” means a 
public service vehicle, a goods 
carriage, an educational institution 
bus or a private service vehicle;
Charging 
provision:
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 one 
sixth of the value of the 
fare or freight, as the 
case may be, and as 
the Government may, 
by notiﬁ cation, direct, 
subject to a minimum 
of ﬁ ve paise in any one 
case, the amount of 
tax being calculated to 
the nearest multiple of 
ﬁ ve paise by ignoring 
two paise or less and 
counting more than two 
paise as ﬁ ve paise.]
3. Levy of Tax.- (1) There shall 
be levied, charged and paid to the 
State Government a tax,-
(i) On all fares in respect of 
all passengers carried by motor 
vehicles at such rates not exceeding 
ﬁ fty percent of the value of freight, 
and
(ii) on all freights in respect of 
all goods transported by motor 
vehicles at such rates not exceeding 
ﬁ ve percent of the value of freight,
As the Government may, by 
notiﬁ cation, direct, subject to a 
minimum of five paise in any 
one case, the amount of tax being
calculated to the nearest multiple 
of ﬁ ve paise by ignoring two paise 
or less and counting more than two 
paise as ﬁ ve paise.]
29
Explanation:- When 
p a s s e n g e r s  a r e 
carried and goods 
are transported by 
a motor vehicle and 
no fare or freight, 
whether chargeable 
or n ot has been 
charged the tax shall 
be levied and paid 
as if such passengers 
were carried or good 
transported at the 
normal rate prevalent 
on the route.
(2) Where any fare or 
freight charged is a lump 
sum paid by a person on 
account of a season 
ticket or as subscription 
or contribution for 
any privilege, right 
or facility which is 
combined with the 
right of such person 
being carried or his 
goods transported by a 
motor vehicle, without 
any further payment 
or at a reduced charge, 
the tax shall be levied 
on the amount of such 
lump sum or on such 
amount as appears to 
the prescribed authority 
to be fair and equitable
(1A) Notwithstanding anything 
contained in sub-section (1), 
when passengers are carried 
and goods are transported by a 
motor vehicle and-
i. No fare or freight, whether 
chargeable or not has been 
charged, or 
ii. fare or freight has been 
charged at a concessional rate,
The tax at the rates as directed by 
notiﬁ cation 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 and frights ﬁ xed by the 
competent authority under the 
Motor Vehicles Act for diﬀ erent 
classes of roads and motor 
vehicles in the State or on the 
fares and freights, for diﬀ erent 
classes of roads and motor
vehicles, speciﬁ ed in Schedule- I 
to this Act, whichever is higher:
Provided that the State Government 
may, by notification, amend 
Schedule-I, and thereupon the 
Schedule-1, shall stand amended 
accordingly:
Provided further that every 
notiﬁ cation amending Schedule-1, 
shall be laid on the Table of the 
Legislative Assembly.]
(2) Where any fare or fright 
charged is a lump sum paid by
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
30
having regard to the 
fare or freight ﬁ xed by 
a competent authority 
un d er t he  Mo tor 
Vehicles Act, 1939.
(3) Where passengers 
are carried or goods 
transported by a motor 
vehicle from any place 
outside the State [or 
from any place outside 
the State to any place 
outside the State but 
through the State or 
from any place within 
the State to any other 
pl a ce wit hi n the 
State but through the 
intervening territory 
of another State] to 
any place within the 
State, or from any 
place within the State 
to any place outside 
the State the tax shall 
be payable 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 freight as 
the distance covered in 
the State bears to the
a person on account of a season 
ticket or as subscription or 
contribution for any privilege, 
right or facility which is combined 
with the right of such person being 
carried or his goods transported 
by a motor vehicle, without any 
further payment or at a reduced 
charge, the tax shall be levied on 
the amount of such lump sum or 
on such amount as appears to the 
prescribed authority to be fair and 
equitable having regard to the fare 
or frieght ﬁ xed by a competent 
authority under the Motor Vehicles 
Act, 4 [1988].
(2-A) Where a motor vehicle plies 
for hire or reward in contravention 
of the provisions of
the Motor 
Vehicles Act, 1988 the owner 
of such vehicle shall, without, 
prejudice to any action which 
is or may be taken under that 
Act, be liable to pay tax at the 
rate speciﬁ ed in sub-section (1) 
or such amount of fares and 
freights as may be determined 
in the prescribed manner by the 
prescribed authority.]
(3) Where passengers are carried 
or goods transported by a motor 
vehicle from any place outside the 
State but through the intervening 
territory of another State] to any 
place
31
total distance of the 
journey.
outside the State the tax shall be 
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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
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[2023] 12 S.C.R.
32
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, notiﬁ cation 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
33
(b) no act or omission on the part of any person, before the 
commencement of this act, shall be punishable as an oﬀ ence 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 
nulliﬁ cation of the eﬀ ect 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 eﬀ ect 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
34
concerned with retrospective eﬀ ect, 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 ineﬀ ective or an invalid 
law, the cause for ineﬀ ectiveness or invalidity must be removed 
before validation can be said to take place eﬀ ectively. 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 ineﬀ ective and illegal. Granted 
legislative competence, it is not suﬃ  cient 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 suﬃ  ciently 
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 ﬁ ction 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
35
tax was collected and by legislative ﬁ at 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 eﬀ ect of 
the earlier decision of the court which becomes ineﬀ ective 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 eﬀ ect 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 ﬁ nd out: 
(a) whether the vice pointed out by the Court and invalidity suﬀ ered 
by previous law is cured complying with the legal and constitutional 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
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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 ineﬀ ective by enacting 
valid law on the topic within its legislative ﬁ eld 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 eﬀ ect to 
retrospective legislation with a deeming date or with eﬀ ect 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 
ineﬀ ective 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 eﬀ ect 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:
37
“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 ineﬀ ectiveness or 
invalidity. When a law is enacted with retrospective eﬀ ect, 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 ﬂ aw 
pointed out by the court can have a curative and neutralizing 
eﬀ ect. 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 
eﬀ ect 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
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Legislatures have plenary powers of legislation within the ﬁ elds 
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 ineﬀ ective judgments of 
competent courts declaring the invalidity. It is also well settled that a 
validating Act may even make ineﬀ ective 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 eﬀ ect 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 
ineﬀ ectiveness 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 eﬀ ect 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:
39
“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 eﬀ ect of the judgments of the Court can be nulliﬁ ed 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) Nulliﬁ cation 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 nulliﬁ ed by 
a subsequent legislation made by the legislator. That a binding 
judicial pronouncement between the parties cannot be made 
ineﬀ ective 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
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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 identiﬁ ed as under:
“It could, thus, clearly be seen that this Court has held 
that the eﬀ ect of the judgments of this Court can nulliﬁ ed 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 nulliﬁ cation 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 ineﬀ ective, 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.
41
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 ﬁ at, 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, ﬁ nality 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
42
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 
bonaﬁ de 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, eﬀ ectiveness 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 
eﬀ ect 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.
43
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 ﬁ rst, 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 identiﬁ ed 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 deﬁ nition of ‘motor vehicle’ and ‘owner’ as found 
in the Act of 1955. Further, the deﬁ nitions of ‘motor vehicle’ as 
well as the deﬁ nition 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 deﬁ nition of ‘transport vehicle’ was 
restricted. 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
44
ii. Explanation to Section 3 (1) of the Act of 1955 introduced a legal 
ﬁ ction 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 
deﬁ nition of ‘route’ for the purposes of the Act and the deﬁ nition 
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 
deﬁ ned 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 artiﬁ cial 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 eﬀ ect to unless the terms 
‘route’ and ‘normal rate’ had been expressly and unambiguously 
deﬁ ned. 
v. 
The term ‘business’ was deﬁ ned in a narrow manner in the Act of 
1955 and meant the business of carriage of
passengers and goods. 
Therefore, when the deﬁ nition 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 
deﬁ nition of ‘owner’ would fortify such ﬁ nding, as ‘owner’ was 
deﬁ ned to be a person holding a permit under the Motor Vehicles 
Act.
16.2. Having identiﬁ ed the basis for the ﬁ nding of the Division 
Bench of the High Court that the Act of 1955 was inapplicable to the
45
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 
the Act of 1955 by 
the Division Bench 
of the High Court in 
the judgment dated 27 
March, 1997.
Details of the corresponding 
provision(s) enacted/amendment 
introduced by the Amendment and 
Validation Act to remove the defects.
1.
The term ‘business’ 
was deﬁ ned in a narrow 
manner in the Act of 
1955 and meant the 
business of carriage of 
passengers and goods.
The deﬁ nition of ‘business’ has been 
enlarged by way of the Amendment 
and Validation Act 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 proﬁ t motive; and 
any transaction in connection with, 
incidental or ancillary to such trade, 
commerce or manufacture.
2.
The expression ‘fare’ 
included sums payable 
for a season ticket in 
respect of the hire of 
contract carriage. It 
did not include a case 
where no fare or freight 
was charged from a 
passenger. 
In Section 2(c) of the Amendment 
and Validation Act, fare or freight
has been defined to include sums 
fixed by the competent authority 
under the Motor Vehicles Act for the 
hirer of motor vehicles for carriage of 
passengers and the transport of goods 
therein and includes sum payable for a 
season ticket and where no such fare 
or freight has been ﬁ xed, also includes 
such sum as speciﬁ ed in Schedule I.
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
46
3.
The meaning of the 
word “Motor Vehicle” 
meant a public service 
vehicle or public carrier, 
or private carrier or a 
trailer when attached to 
any such vehicle; 
The scope of the expression “Motor 
Vehicle” has been extended to mean 
any transport vehicle, which is 
mechanically propelled and adapted 
for use upon roads whether the power 
of propulsion is transmitted thereto 
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’ 
was restricted to those 
persons holding a 
permit under the Motor 
Vehicles Act.
The scope of term ‘owner’ has been 
enlarged 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.
5.
As per the Explanation 
to Section 3(1) of the 
Act of 1955, where no 
fare or freight had been 
charged, tax was to be 
levied on the ‘normal 
rate’ chargeable on a 
given ‘route.’ However, 
there was lack of clarity 
as to the meaning of the 
terms ‘normal rate’ and 
‘route’, as appearing in 
the charging provision, 
i.e. Section 3(1) and the 
Explanation thereto, in 
the absence of 
i. 
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 ﬁ xed by the competent 
authority, under the MV Act, or 
(b) fares and freights specified in 
Schedule I to the Act for diﬀ erent 
classes of roads and motor vehicles. 
The higher of the two fares is to be 
adopted in every case.
ii. Schedule I to the Amendment and 
Validation Act prescribes the fare
47
deﬁ nitions in the Act 
of 1955.
and freight for diﬀ erent categories of 
motor vehicles, for diﬀ erent roads. 
iii. 
Section (2gc) defining the 
term ‘road’ has been introduced. 
16.3. It is evident from the table presented hereinabove that the defects 
identiﬁ ed by the Division Bench of the High Court in the judgment dated 
27 March, 1997, forming the basis for its decision to the eﬀ ect 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 ﬁ xed by the competent authority, 
under the MV Act, or (b) fares and freights speciﬁ ed in Schedule 
I to the Act for diﬀ erent
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 diﬀ erent classes of roads and motor 
vehicles. Section (2gc) deﬁ ning the term ‘road’ has also been 
introduced. Therefore, the vacuum identiﬁ ed 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
48
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 deﬁ nition of ‘business’. ‘The term ‘business’ was 
deﬁ ned in a narrow manner in the Act of 1955 and meant the 
business of carriage of passengers and goods. Therefore, when 
the deﬁ nitions 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 deﬁ nition 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 proﬁ t 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 proﬁ t 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 deﬁ nition 
of ‘owner’ would fortify such ﬁ nding, as ‘owner’ was deﬁ ned 
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
49
submitted that in order to fall within the meaning of the term ‘business’ as 
deﬁ ned 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 deﬁ ned 
under the Amendment and Validation Act of 1997. 
18. We do not ﬁ nd the said argument is acceptable. As observed 
hereinabove, the amended deﬁ nition 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 proﬁ t. Further activities 
incidental and ancillary to such trade, commerce, manufacture or concern are 
also included within the ambit of ‘business’. As per the amended deﬁ nition, 
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 deﬁ nition 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 deﬁ nitions 
of ‘passenger’, ‘business’, ‘fare’ and ‘road’ are artiﬁ cial 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 deﬁ nitions 
are artiﬁ cial. Therefore, we ﬁ nd no merit in the said contention. 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
50
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 deﬁ nition 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 deﬁ ned 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 bonaﬁ de discharge of his duties in connection with the vehicle. The 
only three categories of persons who are excluded from the deﬁ nition of 
‘passenger’ are: (a) driver of the motor vehicle; (b) conductor; and (c) any 
employee of the owner of the vehicle travelling in the bonaﬁ de 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 aﬀ airs 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
51
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 ﬁ eld 
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 ﬁ nd 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 clariﬁ ed 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. 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
52
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 deﬁ nition of 
the term ‘business’; deﬁ ning 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 ﬁ led 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 ﬁ ling writ petitions before the High Court. The impugned orders of the 
High Court of Himachal Pradesh were passed in December 2008 and July,
53
2009. The Special Leave Petitions ﬁ led 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 aﬃ  rmed 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 ﬁ nally 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 ﬁ nancial year onwards and not for 
the period prior thereto. One of the reasons for directing so is by bearing 
in mind that the aﬀ ected 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 
NHPC LTD. v. STATE OF HIMACHAL PRADESH 
SECRETARY & ORS.[B. V. NAGARATHNA, J.]
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
54
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 ﬁ nal 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 ﬁ led 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 aﬃ  rmed, 
subject to what has been clariﬁ ed 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