NHPC LTD. v. STATE OF HIMACHAL PRADESH SECRETARY & ORS.

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SECRETARY & ORS.[B. V. NAGARATHNA, J.]

submitted that in order to fall within the meaning of the term ‘business’ as defined under Section 2 (aa) of the Amendment and Validation Act of 1997, the trade, commerce, or manufacture of the assessee, or, the transactions connected therewith or incidental thereto must have some connection with the business of carrying passengers and goods by road. The main activity of the assessees would not amount to carrying on business, as the same does not relate to the activity of carrying passengers and goods by road. In a case where the main activity does not amount to ‘business’, then the connected, incidental or ancillary activities would also not amount to ‘business’ unless an independent intention to conduct business in these connected, incidental or ancillary activities is established by the revenue. In the present case, there is no material to establish that the ancillary activity of providing transport facilities to the employees and the children of the assessees-appellants herein is conducted with an independent intention to conduct business through such activity. Therefore, in the present case, neither the main activity of the appellants, nor the ancillary activity of providing transport facilities to their employees and their children, would amount to ‘business’ as defined under the Amendment and Validation Act of 1997.

18Copy pinpoint18. We do not find the said argument is acceptable. As observed hereinabove, the amended definition of the term ‘business’ includes within the scope of the term, not only the business of carrying passengers and goods, but also any other trade, commerce, manufacture or concern, whether or not the same is carried on with a motive to earn profit. Further activities incidental and ancillary to such trade, commerce, manufacture or concern are also included within the ambit of ‘business’. As per the amended definition, it is not necessary for either the primary business, trade or manufacture, or the ancillary activity to be related to the business of carrying passengers and goods. That is the very purpose of the amendment. The definition of ‘business’ as amended has the widest amplitude and includes any trade, commerce, manufacture, adventure or concern.

19Copy pinpoint19. Learned counsel for the appellants have contended that definitions of ‘passenger’, ‘business’, ‘fare’ and ‘road’ are artificial and unnatural, as also contrary to the purpose and object of the Act and hence, ultra-vires. However, no reasons have been cited to demonstrate how the said definitions are artificial. Therefore, we find no merit in the said contention.

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20Copy pinpoint20. It is also submitted, with respect to the term ‘passenger’ that fundamentally, ‘passenger’ means a person who travels by paying a fare to the owner or operator of the vehicle, vide M/s Tata Engineering and Locomotive Co. (supra). Therefore, a non-fare paying employee of the operator, or a school going child of such employee, is not a passenger. The said submission would also not come to the aid of the appellants. The meaning of the term ‘passenger’ would have to be gathered in every case, having regard to the definition of the said term in the relevant statute. The decision of this Court in M/s Tata Engineering and Locomotive Co. (supra) would be of no assistance to the appellants in this regard, as the said judgment turns on its own facts. In the said case, this Court while referring to the charging provision contained in the Bombay Motor Vehicles (Taxation of Passengers) Act, held that non-fare paying passengers would not fall within the purview of the said Act. The said decision would not be relevant in the facts of the present case, as an interpretation of the charging provision in the Act of 1955 as amended, would not give rise to a conclusion that a non-fare paying employee of the operator, or a school going child of such employee, is not a passenger. The term ‘passenger’, in the present case, has been defined under Section 2(g) of the Act in a broad sense to mean any person travelling in a motor vehicle, but shall not include the driver, conductor, or any employee of the owner of the vehicle travelling in the bonafide discharge of his duties in connection with the vehicle. The only three categories of persons who are excluded from the definition of ‘passenger’ are: (a) driver of the motor vehicle; (b) conductor; and (c) any employee of the owner of the vehicle travelling in the bonafide discharge of his duties in connection with the vehicle. The non-fare paying employees of the appellants and their children, would not fall under any of the said exceptions. Although, some of them are employees of the appellants, they are not travelling in the motor vehicle in discharge of duties “in connection with the vehicle”, their duties may be in connection with various affairs of the appellants, but not “in connection with the vehicle” of the appellants. Hence, ‘passengers’ in this case would include non-fare paying employees of the appellant, or school going children of such employees.

21Copy pinpoint21. We shall now proceed to consider and determine the next aspect argued by learned counsel, i.e., with respect to legislative competence of the Himachal Pradesh Legislative Assembly to enact the Act of 1955 and

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SECRETARY & ORS.[B. V. NAGARATHNA, J.]

the Amendment and Validation Act of 1997, which are stated to be enacted on the strength of Article 246, read with Entry 56 of List II of the Seventh Schedule of the Constitution of India. This argument appears to be a formal one as the High Court did not have an occasion to consider the aspect of legislative competence vis-à-vis the impugned Act.

22Copy pinpoint22. The import of the Act of 1955, as amended by the Amendment and Validation Act of 1997, could be gathered from the Preamble which provides that it has been enacted to provide for levying a tax on passengers and goods carried by road in motor vehicles. It is therefore clear that tax is sought to be imposed on passengers and goods, carried by road in motor vehicles. It is a no brainer that such a tax falls within the legislative field governed by Entry 56 of List II of the Seventh Schedule of the Constitution, which pertains to “taxes on goods and passengers carried by road and inland water ways.” Simply for the reason that notices have been issued to the owners or assessment orders have been passed against the owners of the vehicles, it cannot be said that the tax is levied on the motor vehicles. If the persons carried happen to be employees of the owners of the buses, such employees should pay the tax. When the employer, i.e., the owner of the vehicle, does not collect the tax from such employees, he should himself pay it, in discharge of the employer’s statutory duty as an agent of the State to collect tax on the basis of the amended provision. Whether to collect the tax payable from the passengers (the employees and their children) or discharge the liability itself is the prerogative of the appellants. The incidence of the tax continues to be on the passengers who travel in the buses or other vehicles of the appellants irrespective of whether they travel gratis or are paying any fare. The impact or burden of the tax however, has been assumed by the appellants-employers owing to the fact that they wish to provide free transportation to the employees and their children as a welfare measure. Therefore, we do not find any substance in the contention of the appellants that the tax was sought to be imposed on ‘motor vehicles’ and therefore, the same is outside the legislative competence of the State Legislature for Himachal Pradesh. It is clarified that the tax is on passengers and goods and the same has to be paid by the owners of the motor vehicles whose responsibility it is to pay. Therefore, there is no substance in the argument concerning legislative competence of the State Legislature in enacting the Act of 1955 or the Amendment and Validation Act of 1997.

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Summary of conclusions:

23Copy pinpoint23. In the result we arrive at the following conclusions: i. The Act of 1955, as amended by the Amendment and Validation Act of 1997, is valid. The said Act seeks to impose tax on passengers and goods carried by road in motor vehicles and the Himachal Pradesh Legislative Assembly possessed the legislative competence under Article 246, read with Entry 56 of List II of the Seventh Schedule of the Constitution of India, to enact the Act of 1955 and the Amendment and Validation Act of 1997. ii. By enacting the Amendment and Validation Act of 1997, the Himachal Pradesh State Legislature has validly removed the basis of the judgment of the Division Bench of the High Court dated 27 March, 1997, inter-alia, by amending the definition of the term ‘business’; defining the terms ‘fare’, ‘freight’ and ‘road’; deleting the Explanation to Section 3(1); and inserting Section 3 (1A) which brought non-fare paying passengers at par with fare- paying passengers for the purpose of levying tax under the Act. Thus, the Amendment and Validation Act of 1997 is a valid piece of Legislation. iii. The activity of the appellant in providing gratis transportation to its employees, and their children, would be a taxable activity under Section 3(1-A) of the Amendment and Validation Act of 1997.

24Copy pinpoint24. The next question is with regard to the liability of the appellants to pay the tax under the Act of 1955 as amended by the Amendment and Validation Act of 1997. The Act of 1955 was assailed in W.P.(C)No.1733 of 1995 by the appellants herein. The High Court of Himachal Pradesh by judgment dated 27.03.1997 struck down certain provisions of the Act and held that the Act did not apply to the appellants herein. The Special Leave Petition filed against the said judgment was also dismissed by this Court on 28th July, 1997. Thereafter, the Amendment and Validation Act of 1997 was enacted by the legislature of the State of Himachal Pradesh. The amendments were unsuccessfully challenged by the appellants herein by filing writ petitions before the High Court. The impugned orders of the High Court of Himachal Pradesh were passed in December 2008 and July,

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SECRETARY & ORS.[B. V. NAGARATHNA, J.]

2009. The Special Leave Petitions filed before this Court were converted to Civil Appeals as leave was granted in them. This Court has now upheld the Amendments made to the Act of 1955 by virtue of the Amendment and Validation Act of 1997 and affirmed the judgment of the High Court of Himachal Pradesh. Therefore, the question is from when the appellants herein would have to pay the tax as prior to 1997 they were successful in assailing the Act of 1955 and it was only thereafter that the Amendment and Validation Act of 1997 was passed by the legislature of the State of Himachal Pradesh. That was also challenged by the appellants herein and the controversy has now finally been set at rest. Therefore, the question is, whether, the appellants herein would be liable to pay the tax from the date when the Amendment and Validation Act of 1997 was passed or from any future date?

25Copy pinpoint25. We have considered this question in the light of the fact that the appellants are public sector organisations (and not private operators) who are engaged in transporting their employees and their children to the work sites and to the school and back gratis as a facility being provided to them having regard to the location of the work sites in remote hilly terrain and to ensure the safety of the children of the employees of the appellant organisations.

26Copy pinpoint26. As there has been a long passage of time since the enactment of the Amendment and Validation Act of 1997, that is about twenty-six years till date and by now there would have been replacement of the motor vehicles or buses by the appellants and their liability to pay the said taxes, being at large, and now set at rest, we think that, in exercise of our powers under Article 142 of the Constitution, the appellants should be made liable to pay the tax w.e.f. 01.04.2023, the current financial year onwards and not for the period prior thereto. One of the reasons for directing so is by bearing in mind that the affected appellants herein are not private bus operators or stage carriage operators but are public sector units engaged in hydro-power projects and irrigation projects and as a convenience or facility, owning buses for transporting their employees and children of the employees to the work sites and to schools and return to their homes as a facility being provided to them for the reasons narrated above. That apart, we have now held that by enacting the Amendment and Validation Act of 1997, the lacunae pointed out by the High Court vide the judgment and order dated

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27 March, 1997 have been removed. Therefore, saddling the appellants with any anterior demand would not be just and proper. We order accordingly. Therefore, while moulding the relief to be given to the appellants herein, only with regard to the period from which the liability to pay tax under the Act of 1955 as amended by the Amendment and Validation Act of 1997, the appeals stand dismissed.

27Copy pinpoint27. In the result, these appeals are dismissed and the final Orders of the Division Bench of the High Court of Himachal Pradesh, dated 11 December, 2008 and 06 May, 2009 whereby the vires of the Act of 1955 as amended from time to time, particularly by the Amendment and Validation Act of 1997 has been upheld and the writ petitions filed by the appellants herein, i.e., Civil Writ Petition Nos. 725 of 1998, 422 of 1998, 401 of 2001, 464-467 of 2001 and 79 of 2007, have been dismissed, are hereby affirmed, subject to what has been clarified in Paragraph 26 above. Parties to bear their respective costs. Pending applications, if any, stand disposed of in the aforesaid terms.

Headnotes prepared by: Appeals dismissed. Ankit Gyan