M/S. TATA MOTORS LIMITEDversusSTATE OF JHARKHAND AND OTHERS

                        [2018] 14 S.C.R. 1241                              1241


                  M/S. TATA MOTORS LIMITED                                 A
                                   v.
             STATE OF JHARKHAND AND OTHERS
                (Civil Appeal Nos. 5299-5304 of 2003)
                        DECEMBER 14, 2018                                  B
              [A. K. SIKRI AND M. R. SHAH, JJ.]
      Bihar Motor Vehicles Taxation Act, 1994: s. 6 – Tax payable
by a manufacturer or a dealer – Manufacturer/dealer of the motor
vehicles – Liability to pay tax u/s. 6, during the period the chassis
are in their possession-before they are delivered to the dealers and/      C
or the purchasers of the said vehicles – Held: Manufacturer/dealer-
appellants are liable to pay tax u/s. 6 – Liability to pay tax u/s. 6 is
linked with the incidence of manufacturer or the dealer possessing
the vehicle which is suitable for use on road during the course of
his business – Sections 5 and 6 operate in altogether different
contexts – Under s. 5 tax is payable at the time of registration of the    D
vehicle, which is payable by the registered owner – In contrast, s. 6
is the stage before that as it is on the event of the vehicle being
possessed by the manufacturer or dealer – Entry 57 of List II, VII
Schedule empowers the State Legislature to impose tax on vehicle
merely on possession – Furthermore, for the delayed payment,               E
penalty was rightly imposed – Constitution of India – Entry 57, List
II VII Schedule.
      Dismissing the appeals, the Court
      HELD: 1.1 The High Court rejected the submission that
the Bihar Act was enacted by the State Legislature under                   F
Entry 57 of List II (State List) of the VIIth Schedule to the
Constitution , which entry does not empower the State Legislature
to impose tax on vehicle merely on possession, with the reason
that under this entry, taxes on vehicles which are suitable for use
on roads can be imposed and it was undisputed case of the parties
that the vehicles manufactured by the appellants are suitable for          G
use on roads. Therefore, section 6 of the Bihar Motor Vehicles
Taxation Act, 1994 which stipulates the manufacturer or a dealer
of a motor vehicle, in respect of the motor vehicle in his
possession in the course of business as such a manufacturer or
dealer shall pay tax, is within the legislative competence of              H
                                 1241
1242                SUPREME COURT REPORTS                   [2018] 14 S.C.R.


 A     Entry 57. The reasoning given by the High Court is the correct
       analysis of Entry 57 of List II of VIIth Schedule to the Constitution.
       [Paras 19, 20][1251-A-E]
             1.2 The High Court rightly concluded that amendment in
       Motor Vehicles Act (Central Act) 1988 would have no relevance
 B     to the provisions contained in the Bihar Act. Whether the
       definition of a dealer includes manufacturer or not would be
       immaterial inasmuch as under Section 6 of the Bihar Act, the
       Legislature has made provision to tax both the dealer as well as
       the manufacturer. [Para 21][1251-D-F]

 C            1.3 The submission that the tax was in respect of motor
       vehicles in possession of the manufacturer in the course of his
       business as a manufacturer, or in possession of the dealer in the
       course of his business as a dealer under the authorization of trade
       certificate granted under the Central Motor Vehicle Rules, 1989,
       is accepted. The manufacturer comes in the possession of the
 D     motor vehicle after the vehicle is manufactured and is suitable
       for use on roads. The dealer in the course of his business of
       getting the Motor Vehicle from the manufacturer and selling it to
       a customer comes in the possession of the Motor Vehicle on the
       basis of a trade certificate granted under the Central Motor
       Vehicle Rules, 1989. Neither earlier nor now there is any
 E
       obligations in a manufacturer to obtain a trade certificate under
       the 1989 Rules for carrying on the business of a manufacturer.
       [Para 22][1252-B-E]
             1.4 A challenge to the constitutionality of Section 6 laid by
       the appellants in the earlier round of litigation, in regard to the
 F     same Assessment Years, was repelled and constitutional validity
       of Section 6 was upheld in Telco case. Once Section 6 is held to
       be valid, it is only the interpretation thereof which was to be gone
       into by the High Court in this round, in order to find out whether
       the assessment orders passed in respect of these appeals were
 G     valid or not. On interpreting this provision, liability to pay tax
       under Section 6 is linked with the incidence of manufacturer or
       the dealer possessing the vehicle which is suitable for use on
       road during the the course of his business. [Para 23][1252-E-G]
             Tata Engineering and Locomotive Company Ltd. v. State
             of Jharkhand (TELCO case) AIR 1999 Patna 62 –
 H
             approved.
  M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND                       1243


      Bolani Ores Ltd. v. State of Orissa (1974) 2 SCC 777 ;           A
      Travancore Tea Estates Co. Ltd. & Ors. v. State of Kerala
      & Ors. (1980) 3 SCC 619 ; M/s Central Coal Fields
      Ltd. v. State of Orissa & Ors. 1992 Supp. (3) SCC 133
      – referred to.
       1.5 It was submitted that Section 6 uses the expression ‘in     B
lieu of the rates specified in Schedule I’; that the tax which is to
be paid is either as per Schedule I i.e. in accordance with Section
5 of the Bihar Act or at the annual rates specified in Schedule III;
and that the words ‘in lieu of’ cannot be read as ‘in addition to’,
cannot be accepted. Sections 5 and 6 operate in altogether
different contexts. Under Section 5, tax is payable at the time of     C
registration of the vehicle, which is payable by the registered
owner. In contrast, Section 6 is the stage before that as it is on
the event of the vehicle being possessed by the manufacturer or
dealer. Therefore, the appellants are liable to pay tax under
Section 6 of the Bihar Act. May be, Section 6 is not happily           D
worded. But the intent is to convey that tax will not be payable as
per Schedule I which is payable under Section 5 but in place
thereof it would be payable as per Schedule III. [Para 24]
[1253-A-D]
       2.1 Section 23, in no uncertain terms, lays down that any
                                                                       E
person who does not pay the tax during the prescribed period
shall pay a penalty at the rate prescribed by the State Government
together with arrears of tax. Therefore, for non-payment of the
tax within the prescribed period, penalty becomes payable at the
rates specified in Rule 4. The vires of Section 6 were challenged
in the High Court in earlier proceedings and this challenge was        F
repelled. Further, since Rule 4 uses the expression ‘may’, on
that basis it was also argued that this rule gives discretion to the
Assessing Officer. That argument was also repelled in Telco case.
This position in law has attained finality. [Para 29][1255-E-G]
      2.2 While upholding the validity of Section 23 of the Act in     G
Telco, insofar as penalty is concerned, the Court had set aside
the same on the ground that before imposing the penalty, no show
cause notice was issued. Permission was given to the tax
authorities to take fresh decision after giving the show cause
notice. Show cause notices were issued and after hearing the
appellants, the penalty was imposed. In view thereof, the High         H
1244                SUPREME COURT REPORTS                   [2018] 14 S.C.R.


 A     Court rightly repelled the challenge against imposition of penalty.
       [Para 31][1256-B-D]
             Hindustan Steel Ltd. v. State of Orissa (1969) 2 SCC
             627 – held inapplicable.
             State of U.P. & Ors. v. Sukhpal Singh Bal (2005) 7 SCC
 B           615 – referred to.
                              Case Law Reference
       AIR 1999 Patna 62               approved                 Para 16
       (1974) 2 SCC 777                referred to              Para 23
 C     (1980) 3 SCC 619                referred to              Para 23
       1992 Supp. (3) SCC 133          referred to              Para 23
       (1969) 2 SCC 627                held inapplicable        Para 25
       (2005) 7 SCC 615                referred to              Para 29
             CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 5299-
 D
       5304 of 2003.
              From the Judgment and Order dated 29.11.2002 of the High Court
       of Jharkhand at Ranchi in C.W.J.C. No. 1239 of 2000 alongwith C.W.J.C.
       Nos. 1240, 1430, 1432, 1439 and 1454 of 2000.

 E                                         With
             Civil Appeal Nos 6591 of 2003, 8-12 of 2004.
             Arvind P. Datar, Ashok Kumar Panda, Sunil Kumar, Sr. Advs.,
       Ajay Aggarwal, Ms. Mallika Joshi, Rajat Gava, Rajan Narain, Mahesh
       Agarwal, Rishi Agrawala, Ms. Parul Shukla, E. C. Agrawala, Rajesh
 F     Kumar, Devashish Bharuka, Shankar Lal Agarwal, Ravi Bharuka,
       Ms. Sarvshree Singh, Justine George, Akshay Amritanshu, R. C. Kohli,
       Vijay Prakash, Sanjai Kumar Pathak, Ms. Rashmi Malhotra, G. S.
       Makker, Mrs. Anil Katiyar, Ratan Kumar Choudhuri, Abhinav Mukerji,
       Mrs. Bihu Sharma, Ms. Pratishtha Vij, Siddharth Garg, Advs. for the
       appearing parties.
 G
             The Judgment of the Court was delivered by
             A. K. SIKRI, J.
             1. A common question of law which arises in all these appeals
       pertains to levy of tax by the respondent No.1 State under Section 6 of
       the Bihar Motor Vehicles Taxation Act, 1994 (hereinafter referred to as
 H
   M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND                                1245
                    [A. K. SIKRI, J.]

the ‘Bihar Act’) on the chassis of the motor vehicles manufactured by            A
the appellants during the period these chasis are in their “possession”,
i.e., before they are delivered to the dealers and/or the purchasers of the
said vehicles.
       2. The Bihar Act envisages three kinds of taxes, namely:
       (a) on registered vehicles under Section 5 of the Act;                    B
       (b) on vehicles held under trade certificates as per Section 6 of
       the Act; and
       (c) in respect of vehicles registered, where the registration is
       temporary, a marginal tax under Section 7(4) of the Act.
                                                                                 C
      3. As would be noticed, tax under Section 5 of the Bihar Act is
paid by the ultimate buyers who, on purchase of vehicles and becoming
owners thereof, get these vehicles registered in their names. After the
manufacture of the vehicle and before it is sold to the ultimate buyer to
use the said vehicle, a temporary registration is required by the
manufacturer under Section 7 of the Bihar Act. Since this registration is        D
temporary for a limited duration, a fractional tax is paid by the manufacturer
or dealer under Section 7(4) of the Bihar Act. Section 6, on which the
fulcrum of dispute revolves, deals with those vehicles which are in
possession of a manufacturer or dealer in the course of his business and
are held under trade certificates. Sections 5, 6 and 7 are reproduced
                                                                                 E
below in order to have an idea of the payment of these three motor
vehicle taxes:
       “5. Levy of tax – (1) Subject to other provisions of this Act, on
       and from the date of commencement of this Act, every owner of
       a registered motor vehicle shall pay tax on such vehicle at the
       rate specified in Schedule I.                                             F
       (2) Subject to other provisions of this Act, on and from the date
       of commencement of this Act, every owner of a registered motor
       vehicle shall pay Additional Motor Vehicles Tax on such vehicle
       at the rate specified in Schedule II.
       (3) The State Government may, by notification from time to time,          G
       increase the rate of tax specified in the Schedules:
       Provided that no such increase shall, during any year, exceed fifty
       percent of the rate of taxes prescribed in the Schedules.
       6. Tax payable by a manufacturer or a dealer – A tax at the
       annual rate specified in Schedule III in lieu of the rates specified      H
1246                SUPREME COURT REPORTS                      [2018] 14 S.C.R.


 A           in Schedule I shall be paid by a manufacturer or a dealer in motor
             vehicles in respect of the motor vehicles in his possession in the
             course of his business as such manufacturer or dealer under the
             authorisation of trade certificate granted under the Central Motor
             Vehicles Rules, 1989.
 B           7. Payment of tax –
                        xx               xx                         xx
             (4) In the case of motor vehicles temporarily registered under
             Section 43 of the Motor Vehicles Act, 1988, the tax for vehicles
             other than personalised vehicles shall be levied at the rate of 1/
 C           12th of the tax payable for the year for such vehicles. In case of
             extension of the period of temporary registration under the proviso
             to sub-section (2) of Section 43 tax at the rate of 1/12th payable
             for the year shall be payable on every extension of temporary
             registration for period of 30 days or part thereof;
 D           Provided that for temporary registration of personalised vehicles
             the rates of tax will be Rs.50/- for a motor cycle (including moped,
             scooter and cycle with attachment for propelling the same by
             mechanical power) and Rs.100/- for a motor car.”
              4. As is clear from the reading of these Sections, Section 5 is the
       charging section as per which every owner of a registered motor vehicle
 E
       is under an obligation to pay tax on such vehicle, rates whereof are
       specified in Schedule I. Insofar as Section 6 is concerned, liability is
       cast on the manufacturer of motor vehicles or a dealer in motor vehicles
       to pay tax in respect of motor vehicles in his possession in the course of
       his business as a manufacturer or a dealer, under the authorisation of
 F     trade certificate granted under the Central Motor Vehicle Rules, 1989
       (hereinafter referred to as ‘MV Rules’). Here tax is at annual rate
       specified in Schedule III, which is ‘in lieu’ of the rates specified in
       Schedule I. It clearly implies, therefore, that a manufacturer or dealer
       pays the tax in respect of vehicles in his possession for which he has
       been granted trade certificate which authorises him to possess the said
 G
       vehicle before it is sold to the ultimate consumer. Obviously, the rate
       specified in Schedule III is much lesser than the tax which is payable by
       the registered owner under Section 5 of the Bihar Act.
             5. Section 7(4), on the other hand, applies to those cases where
       the motor vehicles are temporarily registered under Section 43 of the
 H
   M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND                               1247
                    [A. K. SIKRI, J.]

Motor Vehicles Act, 1988 (hereinafter referred to as the ‘MV Act’). In          A
contrast with Section 6, here the person, unlike the manufacturer or
dealer having trade certificate, gets the vehicle registered on temporary
basis. The tax levied here is 1/12th of the tax payable for the year for
such vehicles.
       6. The three situations, thus, become obvious. A manufacturer            B
after manufacturing motor vehicle would be in possession of the said
vehicle till it is delivered to a dealer. Likewise, a dealer would remain in
possession of such a vehicle till it is sold to the consumer. Ordinarily, a
motor vehicle cannot be driven unless it is registered. That requirement
is provided under Section 39 of the MV Act. It is in consonance with
this provision that under Section 5 of the Bihar Act, tax is levied by the      C
respondent State on the owner of the registered vehicle, at the time of
registration. Since this tax is to be paid by the ultimate owner who
purchases the vehicle, to avoid double taxation and payment of same tax
by the manufacturer or dealer, Rule 33 of the MV Rules exempts such
manufacturer or dealer from the necessity of registration subject to the        D
condition that they obtain trade certificates from the registering authority.
It is because of the reason that in the course of their business as
manufacturer or dealer the vehicle would come on the road and would
be driven. For this reason, a dealer or a manufacturer of motor vehicle
is permitted to obtain trade certificate so that he is exempted from
registering the vehicle in his name. The Bihar Act, even in such a case,        E
contemplates levy of tax. This tax is payable under Section 6 at the
annual rate specified in Schedule III, as noted above. In case a dealer
or a manufacturer is not having trade certificate, in order to drive the
motor vehicle during the period it remains with him, he is supposed to get
the vehicle registered for a temporary period. This temporary registration      F
is to be done as per the provisions contained in Section 43 of the MV
Act. It may be clarified that such temporary registration can be obtained
by any person who is the owner of a motor vehicle and is not confined to
a dealer or a manufacturer. An owner who gets the vehicle temporarily
registered in his name is supposed to pay tax under the Bihar Act though
at a much lesser rate than the rate specified in Schedule I, inasmuch as        G
it is only at the rate of 1/12th of the tax payable for the year for such
vehicles. It is because of the reason that temporary registration is for a
period of one month.
     7. All the appellants in these appeals fall in the category of
manufacturers or dealers of the motor vehicles. They have paid taxes            H
1248                 SUPREME COURT REPORTS                     [2018] 14 S.C.R.


 A     under Section 7(4) of the Bihar Act. Likewise, in respect of those vehicles
       retained and used by the appellants for their own purposes and not sold,
       these appellants have discharged their tax liability under Section 5 of the
       Bihar Act as well.
               8. In the aforesaid backdrop, the issue is as to whether such
 B     manufacturers or dealers, like the appellants herein, are liable to pay tax
       under Section 6 as well. To reiterate, after the manufacture of the
       vehicle when it remains with the manufacturer (or when it remains with
       the dealer after delivery thereof to the dealer by the manufacturer) and
       before it is sold to the ultimate consumer, the vehicle is brought on the
       road and is driven. It maybe for the purpose of testing the technical
 C     suitability of such a vehicle or when it goes for delivery from the
       manufacturer’s factory to the dealer’s showroom. Likewise, dealer
       may also drive this vehicle for limited purpose, say it is driven by the
       customer etc. Since, a vehicle cannot be brought on road and be driven
       without any valid registration, contemplates two situations to meet such
 D     contingencies. It provides for temporary registration under Section 43
       of the MV Act. Another option is given to those manufacturers or dealers
       who obtain trade certificates from the registering authority and in such a
       case as per Rule 33 of the Motor Vehicle Rules, manufacturers or dealers
       are exempted from the necessity of registration. The appellants in these
       appeals are either manufacturers or dealers. They have paid taxes under
 E     Section 7(4) of the Bihar Act. In respect of such vehicles, taxes also
       stand paid under Section 5 of the Bihar Act. Question of additional tax
       liability under Section 6 of the Act arises in this backdrop.
             9. Before we answer this question, it would be necessary to take
       note of those amendments in the Central Government, i.e., MV Act
 F     from time to time which have bearing on these cases.
              10. Section 2(8) of the MV Act (the Central Act) provides the
       definition of ‘dealer’. As per this provision, as originally stood, a
       manufacturer was also included in the definition of ‘dealer’. However,
       this provision was amended vide Act 54 of 1994 whereby the Legislature
 G     omitted ‘manufacturer’ from the ambit of the expression ‘dealer’. The
       manufacturer, therefore, no more remained the dealer. The amended
       definition of ‘dealer’ which came into effect with effect from November
       14, 1994, is as under:
             “2. Definitions.—In this Act, unless the context otherwise
             requires,—
 H
   M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND                             1249
                    [A. K. SIKRI, J.]

      (8) “dealer” includes a person who is engaged—                          A
      (a) [* * *]
      (b) in building bodies for attachment to chassis; or
      (c) in the repair of motor vehicles; or
      (d) in the business of hypothecation, leasing or hire-purchase of       B
      motor vehicle;”
       11. Thus, under the Central Act, prior to its amendment in
November, 1994, motor vehicles would require registration in all events,
save and except those which were in possession of “dealers”. In the
latter event, the vehicles could be temporarily kept under a trade
                                                                              C
certificate, which, under the rules, provides extremely limited mobility.
In November, 1994, manufacturers were taken out of this exception by
amendment in the definition of dealers.
       12. The Bihar Motor Vehicle Rules, 1992 (Bihar Rules) as
applicable in the State of Bihar and in some other States were amended
as empowering the manufacturers themselves to act as authorities, who         D
could grant temporarily registration. Thus, under the revised scheme
post November, 1994, it is only a dealer (other than a manufacturer)
who could keep a vehicle for a limited period of time under a trade
certificate. Manufacturers, therefore, would have to temporarily register
the vehicle under Section 43 of the Central Act. Upon its purchase, the       E
customer would then register the vehicle finally under Section 39 of the
Central Act.
       13. The State of Bihar enacted Bihar Motor Vehicles Taxation
Act in April 1994 at a time when the manufacturers also could continue
in possession of Tariff heading vehicles under a trade certificate.
                                                                              F
      14. After the amendment of 1984, the facility of trade certificate
to a manufacturer stands withdrawn. The manufacturer undoubtedly
can possess a vehicle, which is in his factory as long as it is not used in
any place contrary to Section 39 of the Bihar Act. The only manner in
which a manufacturer can use a vehicle is the manner indicated under
Section 39 without obtaining a registration.                                  G
      15. Prior to the above-said amendment of the Central Act, a
Division Bench of the Patna High Court took the view that vehicles,
which were in use, would either require a registration certificate,
permanent or temporary, or would require a trade certificate. A
                                                                              H
1250                 SUPREME COURT REPORTS                      [2018] 14 S.C.R.


 A     manufacturer who is required to obtain a trade certificate but did not do
       so, would not escape the net of tax by being the beneficiary of his own
       wrong.
              16. To complete the narrative, it would also be pertinent to mention
       that after the amendment in November, 1994, as noted above, when the
 B     Assessing Authority sought to levy tax under Section 6 of the Bihar Act,
       this action was challenged by the appellants by filing writ petitions in the
       High Court of Patna. In those writ petitions, vires of Section 6 of the
       Bihar Act were also challenged. The challenge was repelled by the High
       Court vide its judgment dated July 03, 1998, with the leading case known
       as Tata Engineering and Locomotive Company Ltd. vs. State of
 C     Jharkhand1 (TELCO case). This judgment has attained finality as
       Special Leave Petition thereagainst was dismissed by this Court. After
       the aforesaid judgment, the District Transport Office, Jamshedpur again
       confirmed the demand of tax under Section 6 of the Act vide his order
       dated July 05, 1999 in the case of the appellant/TELCO. This order was
 D     confirmed by the Appellate Authority at Ranchi on December 18, 1999
       as well as by Revisional Authority by his order dated April 20, 2000.
       Writ petitions were filed challenging this order in the High Court which
       have been dismissed vide impugned judgment dated September 24, 2002.
       In appeal Nos. 5299-5304 of 2003 validity of the judgment is questioned.
       Civil Appeal Nos. 5299-5304 of 2003 arise out of this judgment.
 E
              17. Civil Appeal Nos. 8-12 of 2004 are filed by a dealer who has
       paid the tax under Section 6 of the Act as well, however, for delayed
       payment, penalty and interest are imposed which were challenged by
       the said appellants in the High Court and the High Court has dismissed
       the case of the appellants vide its judgment dated July 22, 2003 following
 F     its judgment in TELCO case.
              18. It is in this conspectus, this Court is to first determine the
       question of liability of tax under Section 6 of the Bihar Act and in the
       event this tax is upheld, question of penalty and interest would have to
       be determined.
 G           19. We may point out that before the High Court, the appellants
       had challenged the vires of Section 6 on the ground that the State
       Legislature lacks competence to make a provision of this nature. It was
       pointed out that Section 6 levies the tax on a manufacturer or a dealer of
       motor vehicles merely on ‘possession’ thereof by such a manufacturer
       1
 H     AIR 1999 Patna 62
  M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND                             1251
                   [A. K. SIKRI, J.]

or a dealer. It was argued that the Bihar Act was enacted by the State       A
Legislature under Entry 57 of List II (State List) of the VIIth Schedule
to the Constitution of India, which entry does not empower the State
Legislature to impose tax on vehicle merely on possession. This entry
reads as under:
      “Taxes on vehicles, whether mechanically propelled or not, suitable    B
      for use on roads, including tram cars subject to the provisions of
      entry 35 of List III.”
       20. The High Court, however, rejected this contention with the
reason that under this entry, taxes on vehicles which are suitable for use
on roads can be imposed and it was undisputed case of the parties that       C
the vehicles manufactured by the appellants are suitable for use on roads.
Therefore, the provision which stipulates the manufacturer or a dealer
of a motor vehicle, in respect of the motor vehicle in his possession in
the course of business as such a manufacturer or dealer shall pay tax, is
within the legislative competence of Entry 57. This contention has been
raised before us as well. However, we do not agree with the appellants       D
as the reasoning given by the High Court is the correct analysis of Entry
57 of List II of VIIth Schedule to the Constitution.
       21. Insofar as argument predicated on the amendment in the Motor
Vehicles Act (the Central Act), 1988 is concerned, we again find that
the High Court has rightly concluded that this amendment would have          E
no relevance to the provisions contained in the Bihar Act. Whether the
definition of a dealer includes manufacturer or not would be immaterial
inasmuch as under Section 6 of the Bihar Act, the Legislature has made
provision to tax both the dealer as well as the manufacturer. We agree
with the following observations of the High Court in this behalf:
                                                                             F
      “7. ...It goes without saying also that 1994 Act has been enacted
      under and in terms of Entry 57 (supra) by the State Legislature;
      whereas 1988 Act has been enacted by the Union Parliament
      under and in terms of Entry 35 of the Concurrent List. Also,
      whereas the Preamble to 1988 Acts states that the Act has been
      enacted to consolidate and amend the law relating to Motor             G
      Vehicles, the Preamble to 1994 Act states that this Act has been
      made with a view to regulate the imposition and levy of tax on
      Motor Vehicles in the State of Bihar (as it was at the relevant
      time). Both the Act, therefore, deal with two different fields of
                                                                             H
1252                  SUPREME COURT REPORTS                        [2018] 14 S.C.R.


 A            legislation and the areas of their operation are also different, having
              been enacted by two different classes of Legislatures, one in terms
              of the power exercisable and vested under clause (2) and the
              other in terms of the power vested and exercisable under clause
              (3) of Article 246 of the Constitution. Therefore, at the risk of
              repetition, we have no hesitation in saying that any change or
 B
              alteration in one Act cannot be said to have any effect upon the
              other.”
               22. We also agree with the respondents that the tax was in respect
       of motor vehicles in possession of the manufacturer in the course of his
       business as a manufacturer, or in possession of the dealer in the course
 C     of his business as a dealer under the authorization of trade certificate
       granted under the Central Motor Vehicle Rules, 1989. The manufacturer
       comes in the possession of the motor vehicle after the vehicle is
       manufactured and is suitable for use on roads. The dealer in the course
       of his business of getting the Motor Vehicle from the manufacturer and
 D     selling it to a customer comes in the possession of the Motor Vehicle on
       the basis of a trade certificate granted under the Central Motor Vehicle
       Rules, 1989. Neither earlier nor now there is any obligations in a
       manufacturer to obtain a trade certificate under the 1989 Rules for
       carrying on the business of a manufacturer.
               23. It is pertinent to mention that a challenge to the constitutionality
 E
       of Section 6 laid by the appellants in the earlier round of litigation, in
       regard to the same Assessment Years, was repelled and constitutional
       validity of Section 6 was upheld in Telco case. The High Court had in
       coming to such a conclusion, referred to the judgment of this Court in
       Bolani Ores Ltd. v. State of Orissa2, Travancore Tea Estates Co.
 F     Ltd. & Ors. v. State of Kerala & Ors.3 and M/s Central Coal Fields
       Ltd. v. State of Orissa & Ors.4. Once Section 6 is held to be valid, it is
       only the interpretation thereof which was to be gone into by the High
       Court in this round, in order to find out whether the assessment orders
       passed in respect of these appeals were valid or not. On interpreting
       this provision, as observed earlier as well, liability to pay tax under Section
 G
       6 is linked with the incidence of manufacturer or the dealer possessing
       the vehicle which is suitable for use on road during the course of his
       business.
       2
        (1974) 2 SCC 777
       3
        (1980) 3 SCC 619
       4
 H      1992 Supp. (3) SCC 133
    M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND                              1253
                     [A. K. SIKRI, J.]

       24. A half-hearted argument was also made by the appellants to           A
the effect that Section 6 uses the expression ‘in lieu of the rates specified
in Schedule I’ and it was argued that the tax which is to be paid is either
as per Schedule I i.e. in accordance with Section 5 of the Bihar Act or at
the annual rates specified in Schedule III. It was emphasised that the
words ‘in lieu of’ cannot be read as ‘in addition to’. However, there is
                                                                                B
no merit in this argument as well. Sections 5 and 6 operate in altogether
different contexts. Under Section 5, tax is payable at the time of
registration of the vehicle, which is payable by the registered owner. In
contrast, Section 6 is the stage before that as it is on the event of the
vehicle being possessed by the manufacturer or dealer. We, therefore,
are of the opinion that the appellants are liable to pay tax under Section      C
6 of the Bihar Act. May be, Section 6 is not happily worded. But the
intent is to convey that tax will not be payable as per Schedule I which is
payable under Section 5 but in place thereof it would be payable as per
Schedule III.
       25. Insofar as imposition of penalty is concerned, it is as per the      D
provisions of Section 23 of the Act which mentions that for non-payment
of tax under the Act, penalty can be imposed. The appellants have
referred to the judgment of this Court in Hindustan Steel Ltd. v. State
of Orissa5 which describes the nature of penalty as under:
      “8. Under the Act penalty may be imposed for failure to register
                                                                                E
      as a dealer — Section 9(1) read with Section 25(1)(a) of the Act.
      But the liability to pay penalty does not arise merely upon proof of
      default in registering as a dealer. An order imposing penalty for
      failure to carry out a statutory obligation is the result of a quasi-
      criminal proceeding, and penalty will not ordinarily be imposed
      unless the party obliged either acted deliberately in defiance of         F
      law or was guilty of conduct contumacious or dishonest, or acted
      in conscious disregard of its obligation. Penalty will not also be
      imposed merely because it is lawful to do so. Whether penalty
      should be imposed for failure to perform a statutory obligation is a
      matter of discretion of the authority to be exercised judicially and
                                                                                G
      on a consideration of all the relevant circumstances. Even if a
      minimum penalty is prescribed, the authority competent to impose
      the penalty will be justified in refusing to impose penalty, when
      there is a technical or venial breach of the provisions of the Act or

5
(1969) 2 SCC 627                                                                H
1254                 SUPREME COURT REPORTS                    [2018] 14 S.C.R.


 A           where the breach flows from a bona fide belief that the offender
             is not liable to act in the manner prescribed by the statute. Those
             in charge of the affairs of the Company in failing to register the
             Company as a dealer acted in the honest and genuine belief that
             the Company was not a dealer. Granting that they erred, no case
             for imposing penalty was made out.”
 B
               26. It was argued that action of the appellants was bona fide
       inasmuch as when the notices were received for the first time for payment
       of tax under Section 6 of the Act, the same were challenged albeit the
       validity of Section 6 was upheld by the High Court. Thereafter, tax was
       paid by the appellants though challenged again in the present round of
 C     litigation. On that basis, it was argued that action of the appellants was
       bona fide.
              27. In order to test this argument, we shall have to consider the
       provision under which penalty can be imposed. The provision in the Act
       is Section 23 and Rule 4 of the Taxation Rules provides for the rates of
 D     penalty. Section 23 reads as under:
             “Liability to pay penalty for non-payment of tax in time. - If the
             tax payable in respect of a vehicle other than personalised vehicle
             has not been paid during prescribed period, the person liable to
             pay such tax shall pay together with the arrears of tax, a penalty
 E           at the rates prescribed by the State Government.”
       28. Rule 4, likewise, is to the following effect:
             “4. Due date of payment and penalty for non-payment of taxes in
             time.— (1) For vehicles other than personalised vehicles the due
             date of payment of tax shall be the date of expiry of the period for
 F           which the tax has been last paid. In cases where no such tax had
             previously been paid, the date of acquisition of the vehicle or the
             date when such tax is imposed by law shall be due date for tax
             payment. For payment of differential taxes under the provision of
             Section 8, the due date shall be within seven days from the date
             of alteration in the vehicle or the change in its use.
 G
             (2) Where the tax for any period in respect of a vehicle has not
             been paid as required under the provisions of sub-rule (1) and
             continues to remain unpaid thereafter, the taxing officer may
             impose penalty in respect of such vehicles at the rate specified in
             the table below:—
 H
    M/S. TATA MOTORS LIMITED v. STATE OF JHARKHAND                              1255
                     [A. K. SIKRI, J.]

                                  TABLE                                         A
         Period                    Amount of penalty

         (i) If paid within fifteen Nil. This will be treated as a
         days from the due date grace period.
         of payment.
                                                                                B
         (ii) If paid after fifteen Penalty to be charged at the
         days but within 30 days rate of 25 per cent, of the tax.
         of the due date of
         payment.
         (iii) If paid after 30 days Penalty to be charged at the
         but within 60 days of the rate of 50 per cent, of the taxes
         due date of payment.        due.                                       C
         (iv) If paid after 60 days Penalty to be charged equal to
         but within 90 days of the taxes due.
         due      date     of   tax
         payment.
         (v) If paid beyond 90 Penalty to be charged will be
         days after the due date. twice the taxes due.                          D

      (3) Where the composite fee in respect of vehicles plying under
      National Permit Scheme has not been paid within the due date as
      required under the provisions of the said Scheme, the Taxing Officer
      shall impose penalty at the rate provided in the said Scheme, in
      respect of such vehicle.”                                                 E

        29. Section 23, in no uncertain terms, lays down that any person
who does not pay the tax during the prescribed period shall pay a penalty
at the rate prescribed by the State Government together with arrears of
tax. Therefore, for non-payment of the tax within the prescribed period,
penalty becomes payable at the rates specified in Rule 4. The vires of          F
Section 6 were challenged in the High Court in earlier proceedings and
this challenge was repelled. Further, since Rule 4 uses the expression
‘may’, on that basis it was also argued that this rule gives discretion to
the Assessing Officer. That argument was also repelled in Telco case.
This position in law has attained finality. At this stage, it would be useful   G
to refer to the judgment in State of U.P. & Ors. v. Sukhpal Singh Bal6
wherein this Court held:
      “15. ...A penalty may be the subject-matter of a breach of statutory
      duty or it may be the subject-matter of a complaint. In ordinary
6
(2005) 7 SCC 615                                                                H
1256                  SUPREME COURT REPORTS                        [2018] 14 S.C.R.


 A             parlance, the proceedings may cover penalties for avoidance of
               civil liabilities which do not constitute offences against the State.
               This distinction is responsible for any enactment intended to protect
               public revenue...”
             30. It is clear that under the Bihar Act, as per Section 23, penalties
 B     levied for breach of statutory duty for non-payment of tax.
              31. In view of the aforesaid specific legal provisions, judgment in
       the case of Hindustan Steel Ltd. referred to by the appellants will not
       be applicable in the instant case. It is also to be borne in mind that while
       upholding the validity of Section 23 of the Act in Telco, insofar as penalty
 C     is concerned, the Court had set aside the same on the ground that before
       imposing the penalty, no show cause notice was issued. Permission was
       given to the tax authorities to take fresh decision after giving the show
       cause notice. It is an admitted case that show cause notices were issued
       and after hearing the appellants, the penalty was imposed. Taking into
       consideration all these aspects, the High Court in the impugned judgment
 D     dated July 22, 2003 in the case of M/s. R.K. Automotives & Ors. (Civil
       Appeal Nos. 8-12 of 2004) has repelled the challenge against imposition
       of penalty. We agree with the aforesaid conclusion.
               32. As a result, all these appeals are dismissed.

 E     Nidhi Jain                                                    Appeals dismissed.




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