S.P Bharucha, J.—
Civil Appeals Nos. 6466-76 of 1995
1. Under challenge by the State of Himachal Pradesh is the judgment of a Division Bench of the High Court of Himachal Pradesh delivered on writ petitions filed under Article 226 of the Constitution to challenge amendments to the Himachal Pradesh Passengers and Goods Taxation Act, 1955 and the rules framed thereunder. The High Court allowed the writ petitions, coming to the conclusion that confining the payment of tax under the said Act to the mode of payment by lump sum made the provision invalid.
2. Section 3 of the said Act is the charging section. It provides, insofar as is relevant:
“3. Levy of Tax.—(1) There shall be levied, charged and paid to the State Government a tax on all fares and freights in respect of all passengers carried and goods transported by motor vehicles at such rates not exceeding … as the Government may, by notification, direct.”
(emphasis supplied)
3. Section 4 lays down the method of collection of the tax and states that the tax shall be collected by the owner of the motor vehicle and paid to the State Government in the prescribed manner. The proviso thereto, which is under challenge, reads:
“Provided further that in case of motor vehicles (including the stage or contract carriages), other than those specified in the first proviso, in which the passengers are carried, the State Government may assess the tax … at lump sum, in the manner prescribed, taking into consideration the registered capacity of the vehicle and the distance travelled or to be travelled by such motor vehicles under a permit issued to such vehicles.”
(emphasis supplied)
4. The rule made to effectuate the said proviso, which was also the subject-matter of challenge, laid down the formula for such assessment of the lump sum tax. The formula was this:
“Number of seats × number of scheduled kilometres × 3/5 × rate of passenger tax × rate per kilometre.
Explanation.—In this formula, 3/5 represents average occupancy taken at sixty per cent of the number of seats.”
(emphasis supplied)
5. It may be mentioned that earlier, the relevant proviso had provided that in case of contract carriages the State Government “may accept a lump sum in lieu of the tax chargeable on fare in the manner prescribed”. This proviso was challenged. This Court, in Sainik Motors v. State of Rajasthan AIR 1961 SC 1480, (1962) 1 SCR 517 upheld the proviso for the reason that
“payment of the lump sum is not obligatory, and a person can elect to pay tax calculated on actual fares and freights. … There is no compulsion for any operator to elect to pay a lump sum if he does not choose to do so.”
6. As far as the said Act as it now stands is concerned, it is plain from Section 3 thereof that the levy of the tax is on “all fares … in respect of all passengers carried …”. The proviso to Section 4 that is under challenge takes into account for the purpose of assessment of the lump sum tax only “the registered capacity of the vehicle and the distance travelled or to be travelled …”. It makes no account of “all fares … in respect of all passengers carried …”, and it makes it obligatory for the operator to pay such lump sum tax.
7. Learned counsel for the appellant State submitted that the said Section 4 and rule had been so amended having regard to surveys made and data collected by the State Government and with a view to prevent tax evasion. This may be so, but there can be no generalisation of tax that can be levied under Section 3. It can only be levied with due regard to all fares in respect of all passengers carried by the particular operator. No hypothetical assumption can be made about how many passengers an operator has carried. The amendment of the said Section 4 by the inclusion of the proviso quoted above, is beyond the scope of the said Act. It is, therefore, unnecessary to consider Rule 9, as amended, whose terms also, in fact, leave the matter in no doubt.
8. The State may now make assessments of passenger tax on the basis that is provided for in Section 3 of the Act.
9. The civil appeals are dismissed with costs.
Civil Appeals Nos. 6477 and 6480 of 1995
10. The High Court, in the judgment aforementioned, held that the levy and realisation of tax on the basis which had been held to be invalid by it “for the period between 1-4-1991 and 30-9-1992 shall not stand invalidated …. We propose to direct that the declaration made by us today shall be applicable prospectively and with effect from 1-10-1992 alone”. Some operators challenge the correctness of this. They are right, for the doctrine of prospective overruling cannot be utilised by the High Court. Once the High Court came to the conclusion, rightly, that the provisions concerned were invalid, it was obliged to so declare and, consequently, the collections made thereunder stood invalidated.
11. These civil appeals are, therefore, allowed and the direction of the High Court insofar as it relates to prospective overruling is set aside. The judgment and order of the High Court shall also operate for the period between 1-4-1991 and 30-9-1992.
12. No order as to costs.
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