Supreme Court of India
THE REGIONAL TRANSPORT OFFICER-CUM-TAXING AUTHORITY, ROURKELA AND ORS.versusSTEEL AUTHORITY OF INDIA LTD.
- Citation
- 1995 INSC 706
- Decided
- 9 November 1995
- Disposal
- Dismissed
Holding
The State cannot arbitrarily change the tax item; the vehicles remain taxable under Item 6 pending a fact‑finding inquiry, and the appropriate correction is to shift from Item 3 to Item 6, not to Item 4.
Summary
The Steel Authority of India Ltd (SAIL) operates a fleet of buses to transport its employees and had been paying tax under Item 3 of the Orissa Motor Vehicles Taxation Act, 1975, as goods carriers. In December 1990 the State of Orissa re‑classified the vehicles under Item 4, which imposes a higher rate for vehicles used for hire and passenger conveyance. SAIL challenged the re‑classification, arguing that the buses are provided free to employees and therefore should fall under the residuary Item 6, with relief available under Sections 10 and 15 of the Act. The Orissa High Court erred by assuming the change was from Item 6 to Item 4 and remanded the matter. The Supreme Court held that the State cannot arbitrarily change the tax item without a factual inquiry and that, pending any relief under Sections 10/15, the vehicles remain taxable under Item 6, not Item 4. The Court directed that the appropriate corrective measure is to shift the tax from Item 3 to Item 6, reserving the right to a fact‑finding inquiry. The appeal was disposed of accordingly with no costs awarded.
Issues considered
- Whether the State can unilaterally shift the tax classification of SAIL's employee‑transport buses from Item 3 to Item 4 without a factual inquiry.
- Whether the buses used for employee conveyance fall under Item 4 (hire and passenger conveyance) or Item 6 (residuary) of the Schedule.
- Whether SAIL is entitled to relief under Sections 10 and 15 of the Orissa Motor Vehicles Taxation Act, 1975.
Legislation cited
- Constitution of Indias. Article 226
- Orissa Motor Vehicles Taxation Act, 1975s. 10, s. 15
Subjects
motor vehicles taxtax classificationarbitrarinessfact‑finding inquiryrelief under sections 10 and 15employee transportstate taxation powerschedule items
Judgment
- THE REGIONAL TRANSPORT OFFICER-CUM-TAXING
AUTHORITY, ROURKELA AND ORS.
A
v.
STEEL AUTHORITY OF INDIA LTD.
NOVEMBER 9, 1995
B
[MADAN MOHAN PUNCHHI AND SUiATA V. MANOHAR, JJ.]
Orissa Motor Vehicles Taxation Act, 1975 :
Sections JO and 15-Schedule-ltems 3, 4 and 6.
c
Motor Vehicles-Use by Employer for canying employees-Payment of
tax under item 3-Later employer required to pay higher "tax under item
4-Employer's case that tax was leviable under Item 6-Consensus between
parties-Held till relief was sought under sections JO and 15 vehicles exigible
to tax-Co1Tective measures for changing rates of tax under items 3 to D
6--Liberty to State to come to a different conclusion after a fact finding
enquiry.
The Respondent-Authority was paying tax, under Item 3 of the
Schedule to the Orissa Motor Vehicles Taxation Act, 1975, on the buses
employed by it for carrying its employees from its township to its factory. E
Later it was required to pay higher tax under Item 4 of the Schedule
whereunder tax rates are prescribed for Motor Vehicles plying for hire and
used for conveyance of passengers. The respondent contested the levy
contending that as no charges were recovered from employees for use of
vehicles the tax liability per se was not attracted under Item 4 but may fall F
under Item 6 subject to claim of relief under Sections 10 and 15 of the Act.
The High Court assumed that the change effected was from Item No. 6 to
Item No. 4 of the Schedule.
In appeal to this Court the respondent-authority conceded that an
inquiry may be held on the footing that tax was exigible on its fleet of G
vehicles but the change effected from Item 3 to Item 4 was uncalled for.
Disposing of the appeal, this Court
HELD : 1. The State cannot be permitted to act arbitrarily in
choosing the Item of taxation and leave it to the subject to disprove H
31
32 SUPREME COURT REPORTS (1995] SUPP. 5 S.C.R.
A liability. State should examine the facts and then apply the charging Item
on the plain language of the provision obviating any unjust imposition.
(34-A-B]
2. The appellant has failed to justify as to how straightaway jump in
the rate of tax could be made without the necessary fact establishment. So
B till relief can successfully be sought by the Respondent-Authority under
section 10 and/or 15 of the Act, it is exigible to tax and the corrective
measures presently can be for changing the rates of tax under Item No. 3
to Item No. 6, reserving the right to the appellant-State to come to a
different conclusion after a fact finding inquiry, in which the respondent
should be associated. Till such stage is arrived &t, there is no occasion for
c the appellant-State to demand tax over and above which in any event is
due to it under Item No. 6. As this opinion is only embedded in the area
of cons~nsus it shall not be taken to be a pronouncement on the ap-
plicability of Item No. 6. (33-G-H; 34-A; B-C]
D CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8286 of
1995.
From the Judgment and Order dated 18.6.92 of the Orissa High
Court in O.J. C. No. 847 of 1991.
E Jayant Kr. Das and P.N. Misra for the Appellants.
Altaf Ahmed, Additional Solicitor General, Fazlin Anam, Dhruv
Mehta and S.K. Mehta for the Respondent.
The following Order of the Court was delivered : -
F · The Steel Authority of India, the sole respondent herein, employs a
fleet of buses meant to carry its employees from its township to its factory
at Rourkela. This has been so for over three decades. For some inex-
plicable reasons, the Steel Authority of India Ltd. was all along being made
to pay tax under Item 3 of the Schedule to the Orissa Motor Vehicles
G Taxation Act, 1975 on buses kept by it on the footing of being goods
carriers. As is the case of both sides, Item 3 was hardly applicable and yet
tax was kept asked and paid. With effect from 19.12.1990, the appellant
herein, i.e., State of Orissa and its officers,. put to change the head of
taxation and required the respondent to pay higher tax under Item 4 of
the Schedule, whereunder rates of tax are prescribed for motor vehicles
H plying for hire and used for conveyance of passengers, including motor
- REGNL. TPT. OFFICER-CUM-TAXING AUTHORITY v. SA.LL.
cabs. Challenging such step the respondent - Steel Authority of India,
moved the High Court of Orissa in a writ petition under Article 226 of the
33
A
Constitution.
Right at the outset, the High Court in dealing with the controversy
fell into a factual error in assuming that the change effected was from Item B
No. 6 to Item No. 4 of the Schedule. Item No. 6, however, is a residuary
item and covers up the cases of motor vehicles other than those liable to
tax under the earlier provisions of the Schedule. Since the case of the
respondent - Steel Authority of India Ltd. is that the vehicles kept by it are
for use of its employees for the purpose stated above, without obligating
them to pay hire charges, it was a facility extended to the employees, and C
thus per se, would not attract exigibility under Item No. 4 but may fall under
Item No. 6, subject to the right of the respondent to claim relief under
Sections 10 and 15 of the aforesaid Act. The High Court, in these cir-
cumstances, pronounced on certain legal aspects of the matter on the
supposition that the respondent - Steel Authority of India Ltd. had to D
prove its facts to claim that it was not liable to pay tax at all on the vehicles
in question and thereby effected a remand of a sort. That aspect apparently
was in the area where relief could be sought under sections 10 and/or 15
of the Act. As we have been able to examine the judgment, the question
whether the Steel Authority of India Ltd. - the respondent herein, was
liable to pay tax under Item 6 or Item 4 of the Schedule was not gone into. E
Having heard learned counsel for the parties in detail, we do not feel
inclined to pronounce upon the correctness or otherwise, of the judgment
of the High Court, when it is conceded by learned counsel for the Steel
Authority of India Ltd. that an inquiry may be held on the footing that the F
tax is exigible from the Authority for keeping its fleet of vehicles. And
further, the change effected straightaway from rates under Item No. 3 to
Item. No. 4 was uncalled for without there being a categorical finding by
the taxing authorities that those vehicles were being run for hire. The
appellant on the other hand, has demonstrably not been able to justify
before us how straightaway that jump in the rate could be made without G
the necessary fact establishment. So we go through a limited area of
consensus to say that till reliefs (if due) can successfully be sought by the
Steel Authority of India Ltd. under sections 10 and/or 15 of the Act, it is
exigible to tax and the corrective measure presently can be for changing
the rates of tax under Item No. 3 to Item No. 6, reserving the right to the H
A
34 SUPREME COURT REPORTS [1995) SUPP. 5 S.C.R.
appellant-State to come to a different conclusion after a fact finding
inquiry, in which of course, the respondent would be associated. The State
-
.
cannot be permitted to act arbitrarily in choosing the Item of taxation and
leave it to the subject to disprove liability. It is the State which ht1.s to
examine the facts and then apply the charging Item on the plain language
of the provision obviating any unjust imposition. Till such stage is arrived
B at, there is no occasion for the appellant~State to demand tax over and
above which in any event is due to it under Item No. 6. Nonetheless, we
make it clear, that this opinion of ours is only embedded in that area of
consensus and shall not be taken to be a pronouncement on the ap-
plicability of Item No. 6, in the facts and circumstances of the case.
c
The appeal stands disposed of accordingly. No costs.
T.N.A. Appeal disposed of.
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