Holding

The Explanation to Section 3(1) deems any vehicle with a current registration as suitable for use on roads, rendering the owner or possessor liable to pay tax irrespective of fitness, and Section 38 of the Motor Vehicles Act does not limit this liability.

Summary

The State of Karnataka sought to recover motor vehicle tax arrears for a 12‑ton lorry that had been sold by the first respondent to the second respondent without reporting the transfer. Both respondents argued they were not liable: the first because he had sold the vehicle, the second because the lorry was in a workshop, unfit for road use and lacked a Certificate of Fitness. The trial court acquitted them, and the High Court dismissed the State’s appeal in limine. The Supreme Court held that under Section 3(1) of the Karnataka Motor Vehicles Taxation Act, a vehicle with a current Certificate of Registration is deemed suitable for use on roads irrespective of its fitness, making the owner or possessor liable to pay tax in advance; the deeming provision is not limited by Section 38 of the Motor Vehicles Act. Consequently, the trial court’s acquittal was erroneous, but the State chose not to pursue prosecution and the second respondent had died, so the acquittal was left undisturbed. The appeal was allowed in part, affirming the State’s interpretation of the tax provisions.

Issues considered

The liability to pay tax under Section 3(1) of the Karnataka Motor Vehicles Taxation Act when a vehicle is not road‑worthy and lacks a Certificate of Fitness.
Whether the Explanation to Section 3(1) creates a deeming provision that makes a vehicle with a current registration liable for tax irrespective of fitness.
The effect, if any, of Section 38 of the Motor Vehicles Act on the tax liability under Section 3(1).
The correctness of the trial court’s acquittal of the respondents.

Legislation cited

Constitution of Indias. Entry 57, List II, Schedule VII
Karnataka Motor Vehicles Taxation Act, 1957 (formerly Mysore Motor Vehicles Taxation Act)s. 12(1)(a), s. 3(1), s. 4, s. 7
Motor Vehicles Act, 1939s. 22, s. 38

Subjects

motor vehicle taxregistrationfitness certificatedeeming provisiontax refundKarnataka Motor Vehicles Taxation Actliabilitytax arrears

Judgment

STATE OF KARNATAKA A
v.
K. GOPALAKRISHNA SHENOY & ANR.

JULY 15, 1987

• [A.P. SEN, AND. S. NATARAJAN, JJ.]

The Mysore· (Now Kamataka) Motor Vehicles Taxation Act,
1957-S. 3( I) and Explanation theretO-Scope and effect of-,-Owner or
a person having control or possession of a motor vehicle is statutorily
B

obliged to pay tax in advance as long as Certificate of Registration is
current, irrespective.of condition of vehicle and irrespective of Certifi·
cate of Fitness-The deeming effect of s. 38 of the Motor Vehicles Act,
c
1939 does not extend to s. 3(l)and Explanation thereto of the Act.

The first respondent sold his lorry to the second_ respondent but
did not report the transfer to the Transport Authority and the latter
issued a demand notice for payment of tax due under s. 3(1) of the D
!\lysore Motor Vehicles Taxation Act, 1957. The first respondent re·
futed his li~bility on the ground of transfer of the vehicle, and the
-1 · second respondent, on the plea that the vehicle was not in a lit condition
and lying in a workshop during the relevant period., A complaint was
filed against them under s. 3(1) read with s. 12(1)(a) of the Act. The
!\lagistrate held that since the first respondent had sold the vehicle he E
was not liable to pay the tax and, likewise, the second respondent too
was not liable since the vehicle did not have a fitness certificate and had
• been left in a workshop for repairs. The Magistrate further held that
the currency of the Registration Certificate during the relevant period
~ did not alter the situation in any manner because it could not have
currency so as to attract tax liability when the vehicle was not covered F.
by a valid Certificate of Fitness. The appeal filed against the acquittal of
the respondents was dismissed in limine by the High Court.

/.,,;._ Holding that the Trial Court wa~ In error in acquitting the res·
\
pondents and the High Court was not justified in dismissing in limine
the appeal against acquittal, and, allowing the appeal, this Court, · G
.A .
HELD: The expression 'suitable for use on roads' occurring in
s. 3( 1) of the Act and its Explanation must have the same meaning as in
Entry 57 of the State List and as construed by this Court in Automobile
Transport Ltd. v. State of Rajasthan; (1963} 1S.C.R.491. The resultant .,
position that emerges is thats. 3( 1) confers a right upon the State to le_vy H
481
482 SUPREME COURT REPORTS [ 1987] 3.S.C.R.

A a tax on all motor vehicles which are suitably designed for use on roads
at prescribed rates without reference to the road-worthy condition of
the vehicle or otherwise. Section 4 enjoins every registered owner or
person having possession or control of the motor vehicle to pay the tax
in advance. The Explanation to s. 3(1) contains a deeming provision
and its effect is that as long as the Certificate of Registration of a motor
B 'ehicle is current, it must be deemed to be a vehicle suitable for use on
the roads. The inevitable consequence of the Explanation would be that
the owner or a person having control or possession of a motor vehicle is
statutorily obliged to pay the tax in advance for the motor vehicle
as long as the Certificate of Registration is current irrespective of
the condition of the vehicle for use on the roads and irrespective of
C whether the vehicle had a Certificate of Fitness with concurrent validity
or not. [490B-C; E-G]
State v. Boodi Reddappa, [1975] 1 Karnataka Law Journal 206,
overruled.
V. Naraina Reddy v. Commissioner of Transport, (1971] 2
D Mysore Law Journal, 319, B.G. Bhagwan v. Regional Transport Offi-
cer, A.I.R. 1967 Mysore 139, discussed and distinguished.
Automobile Transport Ltd. v. State of Rajasthan, (1963] 1 SCR
491 referred to.
(ii) The scheme of the Act is such that the tax due on a motor
E vehicle has got to be paid in terms of s. 3 a\ the prescribed rate, and in
advance, and, the liability to pay tax continues as long as the Certificate
of Registration is current; but, if it so happens that inspite of the
Certificate of Registration being current, the vehicle had not actually
been put to use for the whole of the period or a continuous part thereof,
not being less than one calendar month, the person paying the tax
F should apply to the Prescribed Authority under s. 7 and obtain a refund
of the tax for the appropriate period after satisfying the Authorities
about the truth and genuineness of his claim. Sections 3 and 4 are
absolute in their terms and the liability to pay the tax in advance is not
dependent upon the vehicle being covered by a Certificate of Fitness or
not. Even if the vehicle was not in a road-worthy condition and could
G not be put to use on the roads without the necessary repairs being
carried out, the 6Wner or person having possession or control of
a vehicle is enjoined to pay the tax on the vehicle and then seek a
refund. The principle underlying the Act is that every motor vehicle
which has been issued a Certificate of Registration is to be deemed a
potential user of the roads all through the time the Certificate of
H Registration is current and therefore liable to pay tax under s. 3(1)
read withs. 4. [491E-H; 492C-D]
KARNATAKA v. K.c;. SHENOY 483

(iii) It is not for the Transport Authorities to justify the demand A
for tax by proving that the vehicle is in a flt condition and can be put
to use on the roads or that it bad plied on the roads without payment
of tax. It would be absolutely impossible for the State to keep moni·
toring all the vehicles and prove that each and every registered vehicle
is in a fit condition and would be making use of the roads and is there-
~ fore liable to pay the tax. For that reason, the State has made the B
payment of tax compulsory on every registered vehicle and that too
in advance and has at the same time provided for the grant of refund
of tax whenever the person paying the tax has not made use of the roads
by plying the vehicle and substantiates his claim by proper proof.
Any view to the contrary would defeat the purpose and intent of the
Act. [492E-G] c
(iv) Section 3(1) of the Act and the Explanation thereto have to be
construed on their own force and not with reference toss. 22 or 38 of the
c\fotor Vehicles Act. Section 22 of that Act deals with the necessity for
registration of motor vehicles and mandates that no person shall drive a
\... motor vehicle and no owner shall cause or permit his motor vehicle to be D
,.- driven in any public place or in any other place for the purpose of
carrying passengers or goods unless the vehicle is registered in accord-
ance with Chapter 3 of that Act and the Certificate of Registration
granted has not been suspended or cancelled. Section 38 of that Act on
the other hand' deals with the Certificate of Fitness for transport vehi-
cles. This Section lays down that a transport vehicle shall not be deemed E
~ _\. to be validly registered for the purposes of s. 22, unless it carries a
Certificate of Fitness in the prescribed form issued by the Prescribed
Authority. The very terms of s. 38 limit the deeming effect caused by
.~ the absence of a Certificate of Fitness to the rights conferred under s. 22
pursuant to the registration of a vehicle. There is therefore, no scope for
extending the deeming provision ins. 38 of the Motor Vehicles Act to F
s. 3( I I and the Explanation thereto of the Act. In fact the Explanation to
s. 3( I I clearly sets out that the deeming effect conferred by it will have
overriding force on s. 3(1), This is made clear by the words "for the
purposes of this Act" contained in the Explanation. The reason is that
s. 38 of the Motor Vehicles Act has been provided so as to effectively
-~revent an owner or person having possession or control of a motor G
Yehicle from carrying passengers or goods in it inspite of the vehicle not
being in a flt condition and not carrying a Certificate of Fitness and
thereby endangering the safety of the public. The deeming effect on the
Certificate of Registration ofa vehicle when it is. not carrying a Certifi-
l8te of Fitness is to ensure·that the safety of the public is not jeopardised
by any one driving or using a vehicle without a Certificate of Fitness for H
484 SUPREME COURT REPORTS (1987) 3.S.C.R.

A carrying passengers or goods and trying to take umbrage for the viola-
tion by contending that he was entitled to make such use because of the
Certificate of Registration issued to the vehicle being current. It has
also to be noticed thats. 38 of the Motor Vehicles Act contains a safety
measure whiles. 3 of the Act pertains to a compensatory measure. The
former cannot therefore limit the operation of the latter. [493C-G; 494A-C)
B
CRIMINAL APPELLATE JURISDICTION: Criminal Appeal
...
No. 2 of 1977.

From the Judgment and Order dated 26.3.1976 of the Karnataka
High Court in Criminal Appeal No. 169 of 1976:
c R.B. Datar, Swaraj Kaushal and M.A. Khan for the Appellants.

K.R. Nagaraja for the Respondent.

The Judgment of the Court was delivered by
D
NAT ARAJAN, J. The objective of the State of Karnataka in '-1
filing this Appeal by Special Leave is to seek a pronouncement of this
Court on the scope and effect of Section 3(1) of the Mysore Motor
Vehicles Taxation Act, 1957 (now the Karnataka Motor Vehicles
Taxation Act 1957} and not tci pursue the prosecutorial action against
E respondents 1 and 2 for their contravention of certain provisions of the
said Act. This position was conceded by the learned counsel for the
State even at the commencement of his arguments. Even so, the facts
of the criminal case filed against the respondents and the reasons for
their acquittal require mention for a proper comprehension of the
legal issues involved in the case.
F
The first respondent sold his goods vehicle, to wit a 12 ton lorry
bearing Registration No. MYH 3797, to the second respondent on
c. 1. 71 but neither of the respondents reported the transfer of the
vehicle to the Regional Transport Officer in compliance with the terms
of Sub-Section (l)(a) and Sub-Section (l}(b) of Section 31 of the .
G Motor Vehicles Act. Be that as it may, it came to the notice of thrl-
Regional Transport Officer subsequently that the tax payable for the
vehicle under Section 3( 1) of the Mysore Motor Vehicles Taxation
Act, 1957 (hereinafter the Taxation Act) for the period t. 10.72 to
3 l.3.74 amounting to Rs.6,300 had not been paid. This led to a
demand notice being issued to the first respondent to pay the arrears
H of tax together with penalty. The first respondent refuted his liability

.lt::i:tlSil~l.i!iU ~
KARNATAKA v. K.G. SHENOY [NATARAJAN. J.l 485

to pay the arrears of tax on the ground he had transferred the vehicle A
to the second respondent as early as on 2.1.71. A demand notice was
then issued to the second respondent and he too refuted his liability to
pay the arrears of tax on the plea that the vehicle was not in a fit
condition and it had been lying in a workshop during the relevant
period without repairs being affected for want of spare parts. Since
both the respondents failed to pay the arrears of tax the Transport B
Authorities filed a complaint against them under Section 3(1) read
with Section !2( ! )(a) of the Taxation Act in the Court of the Chief
Judicial Magistrate, Man galore. In the trial of the case the second
respondent sought to prove his defence by examining the owner of a.
workshop known as Lokmata Garaj!;e and filing several defence
exhibits. The Chief Judicial Magistrate accepted the defence of the c
respondents and held that since the first respondent had sold the vehi-
cle he was not liable to pay the arrears of tax and likewise the second
respondent too was not liable to pay the tax because the vehicle did not
have a fitness certificate and had been left in a workship for repairs
being carried out. The Chief Judicial Magistrate further held that the
currency of the Registration Certificate during the relevant period will D
not alter the situation in any manner because the Registration Certifi-
cate cannot have currency so as to attract tax liability when the vehicle
was not covered by a valid certificate of fitness. For taking suc,h a view
and acquitting the respondents, the learned Magistrate relied on a
decision of the Karnataka High Court in State v. Boodi Reddappa.
[ 1975] 1 Karnataka Law Journal p. 206. The State preferred an appeal E
against the acquittal to the High Court but the High Court dismissed
the appeal in limine and hence the present appeal by special leave by
the State.

Before we proceed to consider the relevant provisions of the
Taxation Act and the Motor Vehicles Act, we may refer to the deci- F
sion in Reddappa's case which has been followed by the Chief Judicial
Magistrate. The case pertained to the owner of a goods vehicle who
was prosecuted under Section 12(1)(a) of the Taxation Act for non-
payment of tax for a certain period during which the vehicle was not
covered by a certificate of fitness and there was also no evidence that
the vehicle had been put to use on the roads even without a certificate G
of fitness. The Trial Magistrate acquitted the owner of the goods vehi-
cle and the State preferred an appeal to the High Court and contended
that as per the deeming provision contained in the Explanation to
Section 3( I) of the Taxation Act, the owner was bound to pay tax as
long as the Certificate of Registration was current. The Division
Bench rejected the contention and held that the word 'kep"t' occurring H

- -~- ---,-- W utdl &Ill.: fe~ ,...- - - - - - - - - -
486 SUPREME COURT REPORTS (1987] 3.S.C.R.
).._
A in Section 3( 1) must be construed as 'kept for use' and that in the
absence of evidence to show that the vehicle had been made use of or
that it had been 'kept for use', the currency of the Certificate of
Registration would not by itself attract tax liability. For taking such a
view the High Court placed reliance on an earlier decision rendered in
Naraina Reddy v. Commr. of Transport, [ 1971) 2 Mys. Law Journal
B 3191. The Bench also held, following the view taken in yet another
....
earlier case B.G. Bhagwan v. Regional Transport Officer, (AIR 1967
Mysore 139) that in the absence of a fitness certificate, Section 38 of
the Motor Vehicles Act would be attracted and therefore a Certificate
..,
of Registration will not have currency without a co-extensive certi-
ficate of fitness for the vehicle.
c Even without going into the correctness of the view taken by the
High Courts, we would like to point out that the two earlier decisions
do not really provide support for the view taken by the High Court.
Bhagwan's case was decided on the basis of the peculiar facts therein.
What had happened in that case was that the Superintendent of Police
f'-'
D made a surprise check of a stage carriage and found it to be defective j!I
and unsuitable for use on the roads. He, therefore, held a joint inspec- '-f
tion of the vehicle with the Regional Transport Officer and thereafter I~!;

the Regional Transport Officer cancelled the certificate of fitness of
the vehicle on 9.2.63. The permit-holder returned to the Regional
Transport Officer the Certificate of Registration as well as the token of
E the vehicle but failed to surrender the permit till 23.11.63. His failure to
surrender'the permit was construed as a lapse contravening the notifi-
cation issued by the Government and hence he was called upon to pay
;(--
the tax and the penalty for three quarters commencing from 1.4.63 and
ending with 31.12.63. The permit-holder sought the issue of a writ to
quash the order of demand served on him. Before the High Court the
F State took the stand that notwithstanding the cancellation of the
Certificate of Fitness, the Certificate of Registration continued to have
currency and therefore the permit-holder was liable to pay the tax in
terms of the Explanation to Section 3( I) of the Taxation Act. The
High Court repelled the contention and held that once the certificate
of fitness had actually been cancelled, the Certificate of Registration
G cannot be said to have currency on ~ deemed basis as envisaged by the -{--
Explanation to Section 3(1) and hence the demand for tax for the three
quarters was not legal and the order should therefore, be quashed.
From the facts stated above it may be seen that it was a case where the
certificate of fitness had actually been cancelled by the Transport
Authorities· but inspite of such cancellation they sought to recover the
H tax from the permit-holder on the sole ground that the Certificate of

..
KARNATAKA v. K.G. SHENOY [NATARAJAN. J.[ 487

-"· Registration had deemed currency by reason of the Explanation to A
Section 3(1). The Division Bench did not lay down any general propo-
sition of law that the currency of a Certificate of Registration is always
linked up with the currency of a Certificate of Fitness and in the
absence of the same, a Certificate of Registration by itself can never
have currency and the deeming provision in the Explanation to Section
J.- 3( 1) should be construed in that restricted manner. The Bench made B
it clear that its decision was confined to the peculiar facts of that
case as may be seen from the following sentences at page 40:
~··

- "In view of the cancellation of the fitness certificate, it
follows that the Certificate of Registration issued to the
petitioner was no more current. That being the position,
the Explanation to Section 3(1) of the Mysore Motor Vehi-
C

cles Taxation Act, 1957, is inapplicable to the facts of the
present case." (Emphasis supplied)

In so far as the decision in Naraina Reddy's case is concerned, the
permit-holder therein had paid the tax for his s\age carriage for the D
t" quarter ended 30.6.59 but failed to pay the tax for the next two
quarters ending with 30.9.59 and 31.12.59. On 5.2.60 he paid the tax
for the months of February and March 60 alone. The non-payment of
tax for the period 1.7.59 to 5.2.60 was subsequently noticed and a
demand was made on him to pay the arrears of tax for the abovesaid
period together with penalty. The permit-holder contended that the E
- ~ demand was illegal because the vehicle was not in use during the
relevent period and he had actually kept it in a workshop at
Madanapalle in Andhra Pradesh from 30.6.59 and furthermore the
~ certificate of fitness for the vehicle had expired on 30.6.59 itself and it
had been renewed only on 5.2.60 and besides he had also surrendered
the Certificate of Registration to the Transport Authorities and F
intimated them that he would not be operating the vehicle. The permit
holder's representations were not accepted and he was directed to
make the payment. The permit-holder then challenged the validity of
the demand before the High Court by means of a petition under Arti-
cle 226 of the Constitution. A two-fold argument was advanced to
-)-assail the order of demand. The first one was that the words "kept in G
the State of Mysore" occurring in Section 3(1) should be read as "kept
for use in the State of Mysore" and as such unless the State proved that
the vehicle had intact been kept for use, whenever wanted, the physi-
cal act of keeping alone would not attract the tax liability under
Section 3(1). The second argument was that the period of currency of a
Certificate of Registration was co-extensive with the currency of a H
488 SUPREME COURT REPORTS [1987] 3.S.C.R.

A Certificate of Fitness and as such once the Certificate of Fitness
expired and was not renewed, the Certificate of Registration would
automatically cease to have currency. The High Court sustained the
first argument and remanded the matter for 'a finding on the nature of
the keeping of the vehicle but rejected the second contention and held
that the currency of a Certificate of Registration was not dependent on
B the concurrent currency of a Certificate of Fitness. The High Court ~
held as follows:-

"By the Explanation to Sub-Section ( 1) of Section 3, the
legislature, for the purpose of the Act has provided that

c
Motor Vehicles so long as their Certificates of Registration
are current shall be deemed suitable for use on roads. The -
legal fiction created by Section 38 of the Motor Vehicles
Act is only for the purpose of Section 22 of that Act and
cannot be extendeJ to the Taxation Act."

lnspite of this clear pronouncement in Naraina Reddy's case about
D Section 38 not having any impact on Section 3( 1) of the Taxation Act,
the High Court has held in Reddappa's case that Sections 38 and 22 of 'f
the Motor Vehicles Act have an impact on Section 3(1) of the Taxation
Act and, therefore, a Certificate of Registration cannot have currency
if the vehicle is not covered by a Certificate of Fitness for the cor-
responding period. Thus we find the decisions in Bhagwan's case and
E Naraina Reddy's case do not really constitute authority for the view
taken in Reddappa's case. J:.. ._
We will now examine the scope of Section 3(1) of the Taxation
Act and the effect of the Explanation to it. At the relevant time the ~
Mysore Motor Vehicles Taxation Act 1957 (now the Karnataka Motor
F Vehicles Taxation Act, 1957) was in force and Section 3(1) and the
Explanation read as follows:-

"( 1) A tax at the rates specified in Part A of the Schedule
shall be levied on all motor vehicles suitable for use on
roads, kept in the State of Mysore;
G -(-
Provided that in the case of motor vehicles kept by a
dealer in or manufacturer of, such vehicles for the purposes
of trade, the tax shall only be levied and paid by such
dealer or manufacturer on vehicles permitted to be used on
roads in the manner prescribed by rules made under the
H Motor Vehicles Act, 1939.
KARNATAKA v. K.G. SHENOY [NATARAJAN, J.J 489

Explanation.-A motor vehicle of which the certifi- A
cate of registration is current shall, for the purpose of this
Act, be deemed to be a vehicle suitable for use on roads."

It will also be apposite to extract the relevant portion of Section 4
since Sections 3 and 4 go together.
B
"4. Payment of Tax.-(!) The tax levied under Section 3
shall be paid in advance by the registered owner or person
having possession or control of the motor vehicle, for a
quarter, half-year or year, at his choice, (within ten days

- from the commencement of such quarter, half-year, or year
as the case may be.)
c
Proviso. "omitted".

Explanation. "omitted".

On a reading of Sections 3 and 4 it may be seen that they make the D
~ registered owner or person having possession or control of a motor
vehicle kept in the State absolutely liable to pay tax in advance at the
rates specified in Part A of the Schedule thereto for a quarter, half-
year or year at his choice. The Motor Vehicle Taxation Acts in all the
States of the Indian Union follow a uniform pattern. Entry 57 of List II
of Schedule VII of the Constitution is the Legislative Entry conferring E
_ \.. power on the States to levy the tax. It has been observed by this Court
~ in Auto1f!obi/e Transport Ltd. v. State of Rajasthan, [1963] I S.C.R.
491 thai the tax on motor vehicles is a compensatory tax levied for the
-4 use of the roads and it is not a tax on ownership or possession of motor
vehicles. The object of the Act is achieved by charging to tax all motor
vehicles suitable for use on roads kept in the State, the registered F
owner or person having possession or control being held liable to pay
the tax in advance and then providing for grant of refund for non-user
subject to prescribed conditions.

What falls for consideration now is whether the owner or person
~ ~aving the possession or control of a motor vehicle is not bound to pay G
the tax under Section 3( I} of the Act because the vehicle was in a state
of repair and was not put to use on the road and furthermore the
Certificate of Fitness of the vehicle had not been kept current even
though the Certificate of Registration was kept current. One factor
which has to be borne in mind in interpreting Section 3(1) and its
Explanation is the meaning to be given to the words "suitable for use H

- -- ., :;: . ---.· •1·---.. ..1 _____
·--··""b~.l!ll
490 SUPREME COURT REPORTS [1987] 3.S.C.R.

on roads" occurring in them as otherwise a misconception would arise.
A
These very words occur in Entry 57 in the State List which reads as
under:-

"Taxes on vehicles, whether mechanically propelled or
not, suitable for use on roads, including ram cars subject
B to the provisions of Entry 35 of List III".

The words "suitable for use on roads" in the said Entry have been
construed by Hidayatullah, J. as he then was in Automobile Transport __..,,;
case as under (vide page 571):-

c "The words 'suitable for use on roads' describe the kinds of -
vehicle and not their condition. They exclude from the
Entry, farm machinery aeroplanes, railways etc. which ,-4_
though mechanically propelled are not suitable for use on
roads. The inclusion of trams using tracks which may be on
roads or off them, makes the distinction still more
D apparent."

It, therefore, follows that the same meaning should be given to those
words occurring in Section 3(1) and the Explanation also. The resul-
tant position that emerges is that Section 3( 1) confer.s a right upon the
State to levy a tax on all motor vehicles which are suitably designed for
E use on roads at prescribed rates without reference to the road worthy
condition of the vehicle or otherwise. Section 4 enjoins every regis- J. ._
tered owner or person having possession or control of the motor vehi- '
cle to pay the tax in advance. The Explanation to Section 3(1) contains
a deeming provision and its effect is that as long as the Certificate of )..-
Registration of a motor vehicle is current, it must be deemed to be a
F vehicle suitable for use on the roads. The inevitable consequence of
the Explanation would be that the owner or a person having control or
possession of a motor vehicle is statutorily obliged to pay the tax in
advance for the motor vehicle as long as the Certificate of Registration
is current irrespective of the condition of the vehicle for use on the
roads and irrespective of whether the vehicle had a Certificate of Fit-
G ness witn concurrent validity or not. The Act, however, takes caret~~
see that the owner of a motor vehicle or a person having possession or
control of it is nofpenalised by payment of tax in advance for a vehicle
which had not been actually used during the whole of a period or part
of a period for which tax had been paid by him. The Legislative provi-
sion in this behalf is to be found in Section 7 of the Taxation Act. The
H relevant portion is contained in Sub-Section (1) and it reads as follows:

·~---,_.: ._,,..,._ ~-.. - - m; - 111
KARNATAKA v. K.G. SHENOY [NATARAJAN, J.J 491

"Refund of Tax.-(!) Where a tax on any motor vehicle
A
has been paid for any period and it is proved to the s~tis
faction of the prescribed authority that the vehicle has not
been used during the whole of that period, or a continu-
ous part thereof, not being less than one calendar month,
a refund shall be made of such portion of the tax and
subject to such conditions as may be prescribed." B

The Rules framed under the Act prescribe the conditions referred to in
~- Section 7. Rules 20 to 23 are the relevant Rules. Rule 20 sets out the
· manner and time in which the application for refund should be made

- and the Authorities who can sanction refund. Rule 21 provides for the
issue of a Certificate of Refund, and Rule 22 refers to the payment of C
refund to a person on production of a Certificate of Refund in Form
17. Rule 23 deals with the scales of refund. If the vehicle had not been
used during the whole of the perio.d for which tax bas been paid then
the applicant is entitled to get a refund of the entire tax amount. If the
vehicle had been made use of for a portion of the period then different
scales of refund have been provided according to the period of user D
and period of non-user of the vehicle.

Section 7 read with the relevant Rules, therefore, makes it clear
that an owner or other person paying the tax for a motor vehicle in
advance would not suffer in any manner on account of the payment of
the tax if the vehicle is not put to use on the roads and he can apply to E
- .~ the authorities concerned and seek appropriate refund as per the
scales given in Rule 23. The scheme of the Taxation Act is such that
the tax due on a motor vehicle has got to be paid in terms of Section 3
~ at the prescribed rate and in advance and the liability to pay tax con-
tinues as long as the Certificate of Registration is current but if it so
happens that in spite of the Certificate of Registration being current, F
the vehicle had not actually been put to use for the whole of the period
or a continuous part thereof, not being less than one calendar month,
the person paying the tax should apply to the Prescribed Authority and
obtain a refund of the tax for the appropriate period after satisfying
the Authorities about the truth and genuineness of his claim. Sections
~ ~ 3 and 4 are absolute in their terms and the liability to pay the tax in G
advance is not dependant upon the vehicle being covered by a Certifi-
cate of Fitness or not. Even if the vehicle was not in a road worthy
condition and could not be put to use on the roads without the neces-
sary repairs being carried out, the owner or person having possession
or control of a vehicle is enjoined to pay the tax on the vehicle and
then seek a refund. Perhaps in exceptional cases where the vehicle has H
492 SUPREME COURT REPORTS [1987] 3.S.C.R.

A met with a major accident or where it is in need of 'such extensive
repairs that it would be impossible to put the vehicle to use or where
the Transport Authorities themselves prohibit the use of the vehicle
due to its defective condition and cancel the Certificate of Fitness or
suspend it, the person concerned may surrender the Certificate of
Registration and other documents like permit etc., and seek the
B permission of the Transport Authorities to waive the payment of tax
on the ground that no proof of non-user was necessary and as such
payment of tax on the one hand and an automatic application for re-
fund on the· other would be a needless ritualistic formality and if the
permission sought for is granted, he need not pay the tax. In all other
cases the only course left open is for the person_concerned, to pay the
C tax in advance and thereafter apply to the Authorities and obtain
refund of tax after proving that the vehicle was not fit for use on the
-
roads and had infact not been made use of. The principle underlying
the Taxation Act is that every motor vehicle issued a Certificate of
Registration is to be deemed a potential user of the roads all through
the time the Certificate of Registration is current and therefore liable
D to pay tax under Section 3( 1) read with Section 4. If however, the
vehicle had not made use of the roads because it could not be put on
the roads due to repairs, even though the Certificate of Registration
was current, the owner or person concerned has to seek for and obtain
refund of the tax paid in advance after satisfying the Authorities about
the truth of his claim. It is not for the Transport Authorities to justify
E the demand for tax by proving that the vehicle is in a fit condition and
can be put to use on the roads or that it had plied on the roads without
payment of tax. It would be absolutely impossible for the State to keep
monitoring all the vehicles and prove that each and every registered
vehicle is in a fit condition and would be making use of the roads and is
therefore liable to pay the tax. For that reason, the State has made the
F payment of tax compulsory on every registered vehicle and that too in
advance and has at the same time provided for the grant of refund of
tax whenever the person paying the tax has not made use of the roads
by plying the vehicle and substantiates his claim by proper proof. Any
view to the contrary would defeat the purpose and intent of the Taxa-
tion Act and would also afford scope and opportunity for some of the
G persons liable to pay the tax to ply the vehicle unlawfully without
payment of tax and later on justify their non-payment by setting up a
plea that the vehicle was in repair for a continuous period of over a
month or the whole of a quarter, half-year or year as they choose to
claim.

H In view of a legislative change in the Act we do not find any
KARNATAKA v. K.G. SHENOY [NATARAJAN. !.[ 493

-4 necessity to go into the question whether the words "kept in the State A
of Mysore" should be construed as "kept for use in the State of
Mysore". It may be remembered that this construction found favour with
the Karnataka High Court in its decision in Naraina Reddy's case and
Reddappa's case. The Words "kept in the State of Mysore" and the
proviso to the Section have been omitted by Karnataka Act 38 of 1976
and therefore, the discussion on that point will only be of academic B
+-
-
value now. It is for that reason we do not feel it necessary to go into
that aspect of the matter.

The next factor for consideration is whether the impact of Sec-

- tion 38 of the Motor Vehicles Act on Section 22 of the said Act will
have its ramifications on Section 3( 1) and the Explanation of the Taxa-
tion Act. Section 22 deals with the necessity for registration of motor
c
,l vehicles and mandates that no person shall drive a motor vehicle and
no owner shall cause or permit his motor vehicle to be driven in any
public place or in any other place for the purpose of carrying passen-
gers or goods unless the vehicle is registered in accordance with Chap-
ter 3 of the Act and the Certificate of Registration granted has not D
\.- been suspended or cancelled. Section 38 on the other hand deals with
the Certificate of Fitness for transport vehicles. This section lays down
that a transport vehicles shall not be deemed to be validly registered
for the purposes of Section 22, unless it carries a Certificate of Fitness
in the prescribed form issued by the Prescribed Authority. The very
terms of Section 38 limit the deeming effect caused by the absence of a E
Certificate of Fitness to the rights conferred under Section 22 pursuant
-~ to the registration of a vehicle. There is therefore, no scope for extend-
ing the deeming provision in Section 38 to Section 3( 1) and the Expla-
nation thereto of the Taxation Act. In fact the Explanation to Section
~
3(1) clearly sets out that the deeming effect conferred by it will have
overriding force on Section 3(1). This is made clear by the words "for F
the purposes of this Act" contained in the Explanation. The operative
force of the deeming provision contained in Section 38 being restricted
to Section 22 of the Motor Vehicles Act has been correctly noticed by
the Karnataka High Court in Naraina Reddy's case and the High
Court has held at page 322 as follows:-
._ )- G
"The k5al fiction created by Section 38 of the Motor Vehi-
cles Act is only for the purpose of section 22 of that Act and
cannot be extended to the Taxation Act."

Though the High Court has taken the correct '!iew, it has not
gone into the reason underlying the restriction of the operation of H

-=-~-.,.,..--------------- . ., ___ . . . .,
494 SUPREME COURT REPORTS [1987] 3.S.C.R.

Section 38 to Section 22 of the Motor Vehicle Tax Act alone. The
A
reason is that Section 38 has been provided so as to effectively prevent
an owner or person having possession or control of a motor vehicle
from carrying passengers or goods in it inspite of the vehicle not being
in a fit condition and not carrying a certificate of fitness and ther-eby
endangering the safety of the public. The deeming effect on the certifi-
B cate of registration of a vehicle when it is not carrying a certificate of _..
fitness is to ensure that the safety of the public is not jeopardised by
anyone driving or using a vehicle without a certificate of fitness for
carrying passengers or goods and trying to take umbrage for the viola-
tion by contending that he was entitled to make such use because of

C
the certificate of registration issued fo the vehicle being current. It has
also to be noticed that Section 38 contains a safety measure while
Section 3 of the Taxation Act pertains to a compensatory measure.
-
The former cannot therefore limit the operation of the latter i.e. Sec-
tion 3(1) of the Taxation Act and the explanation thereto.

In the light of our discussion it follows that Section 3(1) of the
D Taxation Act and its Explanation have to be construed on their own
force and not with reference to Section 38 of the Motor Vehicles Act. , ~
The combined effect of Sections 3, 4 and 7 of the Act is that the State is
empowered to levy tax on all motor vehicles which are suitably de-
signed and manufactured for use on the roads. The Explanation pro-

*-
vides that every motor vehicle of which a Certificate of Registration is
E current shall be deemed to be a vehicle suitable for use on roads and
liable to pay tax as a potential user of the roads at the rates prescribed
by the Government. Section 4 enjoins the tax levied under Section 3 to
be paid in advance. Section 7 provides that in the event of a vehicle for
which tax has been paid in advance under Section 4 had not been made
use of for the whole of the period for which tax has been paid or of a
F continuous part thereof, not being less than one calendar month the
person paying the tax may apply to the Prescribed Authority and
obtain appropriate refund as prescribed by the Rules after producing
proof in support of the claim for refund. In the light of this position the
decision rendered in Reddappa's case is not correct law.

G Admittedly the respondents had failed to pay the tax in advance ~
in compliance with Sections 3 and 4. They had also failed to inform the ~
Transport Authorities that the goods vehicle was not fit for use on the
roads and had been left in a workshop during the period 1.10. 72 to ,
31.3.74 and they had also failed to surrender the Certificate of Regis-
tration and the Certificate of Fitness which was in force till 28.11. 72. In
H such circumstances the Trial Court was in error in acquitting them and
KARNATAKA v. K.G. SHENOY [NATARAJAN. J.J 495

the High Court too was not justified in dismissing in limine the appeal A
against acquittal. Since the transfer of the vehicle had not been re-
ported to the Authorities the first respondent was as much liable as the
second respondent to pay the arrears of tax that was demanded.

However, as stated at the outset itself the State is not anxious to B
pursue the prosecution against the respondents. Moreover, it is re-
ported that the second respondent has died during the pendency of the
appeal. In the result the appeal succeeds in so far as the contentions of
the State regarding the scope and effect of Section 3(1) and the Expla-
nation of the Taxation Act, 1957, are concerned, but the acquittal of

-- respondents 1 and 2 will remain undisturbed.

H.L.C. Appeal allowed.
c