Nippon Motor Corporation Pvt. Ltd. v. Regional Transport Officer, Ernakulam; Deputy Transport Commissioner, Central Zone, Ernakulam; Transport Commissioner; State of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **TUESDAY, THE 18TH DAY OF OCTOBER 2016/26TH ASWINA, 1938** **WP(C).No. 18413 of 2014 (B) ----------------------------** **PETITIONER(S): -------------** **NIPPON MOTOR CORPORATION PVT. LTD., KALAMASSERY, ERNAKULAM - 683 105, REPRESENTED BY M.A.M.BABU MOOPAN, CHAIRMAN AND MANAGING DIRECTOR.** **BY ADVS.SRI.VIJAYAN. K.U. SRI.K.V.VIMAL** **RESPONDENT(S):** **--------------** **1. THE REGIONAL TRANSPORT OFFICER, ERNAKULAM, KAKKANAD - 682 030.** **2. DEPUTY TRANSPORT COMMISSIONER, CENTRAL ZONE, ERNAKULAM - 682 030.** **3. TRANSPORT COMMISSIONER,** **TRANS TOWERS, VAZHUTHACAUD, THIRUVANANTHAPURAM - 695 014.** **4. STATE OF KERALA, REPRESENTED BY PRINCIPAL SECRETARY TO GOVERNMENT, MOTOR VEHICLES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** **BY GOVERNMENT PLEADER SRI.BOBBY JOHN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 27-07-2016 THE COURT ON 18-10-2016, DELIVERED THE FOLLOWING:** **msv/** ## **WP(C).No. 18413 of 2014 (B)** ## **----------------------------** ## **APPENDIX** **PETITIONER(S)' EXHIBITS -----------------------** **EXHIBIT P1. COPY OF THE PURCHASE INVOICE NO.90075531 DATED 27.02.12.** **EXHIBIT P2. COPY OF THE BILL OF ENTRY 8018829 DATED 21.08.2012.** **EXHIBIT P3. COPY OF THE CHALAN NO.2004614947 DATED 04.10.2012 FOR REMITTANCE OF CUSTOMS DUTY OF RS.2,17,50,246.** **EXHIBIT P4. COPY OF THE E-RECEIPT TOWARDS PAYMENT OF CUSTOMS DUTY.** **EXHIBIT P5. COPY OF THE REGISTRATION CERTIFICATE OF THE VEHICLE ALONG WITH PARTICULARS THEREOF.** **EXHIBIT P6. COPY OF THE JUDGMENT IN REVIEW PETITION NO.911 OF 2013 IN WA 968 OF 2013 26/11/13.** **EXHIBIT P7. COPY OF THE REQUEST OF EXCESS COLLECTION BEFORE THE IST RESPONDENT ON 22.03.14. EXHIBIT P8. COPY OF THE RELEVANT PORTION OF THE KERALA FINANCE ACT 2014.** **EXHIBIT P9. COPY OF THE RELEVANT PORTION OF CLAUSE (ii) OF SUB-SECTION 2 OF SECTION 1 OF THE KERALA FINANCE ACT 2014.** ## **RESPONDENT(S)' EXHIBITS** **-----------------------** ## **NIL** **//TRUE COPY//** ## **P.S.TO JUDGE** **Msv/** ## **A.M. SHAFFIQUE, J.** =============== W.P. (C) No. 18413 of 2014 ================== Dated this, the 18[th] day of October, 2016 ## **J U D G M E N T** This writ petition is filed seeking for refund of tax collected in excess of 15% of purchase value as shown in Ext.P1 purchase invoice and for a declaration that clause (ii) of sub section (2) of section 1 of Kerala Finance Act, 2014 is void, inoperative unenforceable and unconstitutional. 2. The short facts involved in the writ petition would disclose that the petitioner imported a motor car from UK having an invoice value of `1,56,53,590/-. As per the Motor Vehicles Taxation Act, 1976, (hereinafter referred to as the Act), there is an obligation to pay one time tax on the purchase value of the vehicle. As per section 2(e) of the Act, purchase value is defined as meaning, the value of the vehicle as shown in the original purchase invoice. On production of the vehicle before the 1[st] respondent, the same was registered on payment of `56,10,600/- as one time tax. According to the petitioner, the tax liability would only be `23,48,038/-, as a result of which, there is an excess collection of `32,62,562/-. W.P(C) No.18413/14 -:2:- 3. In the meantime, a Division Bench of this Court in _**Fathima Shirin v. Joint Regional Transport Officer, Kayamkulam and Others**_ (2013 (3) KLT 945) held that the purchase value as defined under Section 2(e) of the Act does not include the value added tax on the said amount. Petitioner therefore requested for refund of the motor vehicle tax which was collected in excess as per letter dated 22/3/2014 (Ext.P7). In the meantime, the Government amended Section 2(e) of the Act redefining “purchase value” as per Finance Act, 2014 by which clause (e) has been substituted as under:- _“(e) “purchase value”, means the value of the vehicle as shown in the purchase invoice and includes value added tax, cess and customs/excise duty chargeable on vehicle:_ _Provided the discount or rebate given by the dealer to the registered owner shall not be deducted from the bill amount for computing the purchase value:_ _Provided further that where the purchase value of any vehicle including a vehicle imported from other countries or a vehicle acquired or obtained otherwise than by way of purchase, is not ascertainable on account of non availability of the invoice, the purchase value shall be the value or price of the vehicles of the same specifications which are already registered or available with the manufacturer or as_ W.P(C) No.18413/14 ## -:3:- _fixed by the Customs and Central Excise Department for the purpose of levying customs duty, and includes excise or customs duty levyed on the purchase of a motor vehicle, as the case may be.”_ 4. According to the petitioner, the very act of the amendment and that too with retrospective effect of more than seven years and three months is arbitrary, confiscatory and is liable to be declared as unconstitutional. 5. Counter affidavit has been filed on behalf of the 2[nd] respondent _inter alia_ stating that tax was levied on the vehicle at the rate of 15% of the purchase value at the time of collecting one time tax on motor car and other non transport vehicles existing during the relevant period. The system of Value Added Tax was introduced in the year 2005 which envisages charging of tax at every point of sale, that is, at every stage of sale, value added tax is added to the price. Therefore, the purchase value as defined under the Act w.e.f. 1/4/2007 included VAT as well. However, in _**Fathima Shirin**_ (supra) and certain other judgments, it was held that purchase value shall not include Value Added Tax and other duties charged on the vehicle. It is in the said background, to give clarity to the meaning “purchase value”, the W.P(C) No.18413/14 ## -:4:- amendment has been brought into effect as per Finance Act, 2014. Necessarily, the amendment is made with retrospective effect from 1[st] day of April, 2007 as provided under Section 1(2) (ii) of the Kerala Finance Act, 2014. It is therefore contended that the amendment is only clarificatory in nature and there is no arbitrariness or illegality on the part of the legislature in clarifying the meaning of the word “purchase value” as contemplated under the KVAT Act. 6. Heard the learned counsel for the petitioner and the learned Government Pleader appearing on behalf of the Government and its authorities. 7. The short question to be considered in this writ petition is whether the amendment made to the Motor Vehicle Taxation Act with regard to section 2(e) is in any way unconstitutional, especially with regard to the retrospectivity involved in the matter. In fact, similar question was considered by a Division Bench of this Court in _**Nagendra Mani v. State of Kerala**_ (2015 (4) KHC 313) (WA No.568/2015). In that case, though the learned Single Judge had considered the _vires_ of the amendment to section 2(e), it was observed that there was no pleadings W.P(C) No.18413/14 -:5:- challenging the legality or constitutionality of the amendment brought about with retrospective effect from 01/04/2007. However, the Division Bench observed that even in the absence of sufficient pleadings, the learned Single Judge while deciding the writ petition had considered the legal validity of the amendment and therefore, the legal effect of the amendment based on the decision in _**Fathima Shirin's case**_ (supra) was considered and it was held that “we are also endorsing the views of the learned Single Judge that amendment brought about to the term 'purchase value' under Section 2(e) of the MVT Act as per the Kerala Finance Act, 2014 is only 'clarificatory in nature', as nothing new was introduced or declared illegal or invalid”. Further, the Division Bench held that the amendment was not intended to defeat the judgment in _**Fathima Shirin's case**_ (supra). That was a case in which the demand was for refund of tax which was denied on a finding that the payment effected by the appellant was was not under any mistake in law and therefore they are not entitled for seeking refund. Before proceeding further, it will be useful to quote paras 9 and 10 of the judgment which reads as under:- ## W.P(C) No.18413/14 ## -:6:- _“9. The scope and extent of the power of legislature to amend the existing law with retrospective effect affecting or wiping out the decision rendered earlier by the court was considered by the Constitution Bench of the Apex Court in Sri. Prithvi Cotton Mills Ltd. etc. v. Broach Borough Municipality and others ((1969) 2 SCC 283 = AIR 1970 SC 192) and affirmed the wide power of legislature unambiguously. Again, relying on the above decision, the Apex Court reiterated the power of legislature to enact validating Acts in Bhuvaneshwar Singh and another v. Union of India and others (1994 (6) SCC 77)._ _10. The proposition which culled out from the above decisions can be summarised as follows: If the legislature has legislative competency, they can legislate on the subject either prospectively or retrospectively and such power cannot be questioned, provided that such legislation shall not be made in violation of the provisions of the Constitution. The legislature has power to validate action taken under a particular enactment by removing defect in the original statute retrospectively because of which the statute or the part of it had been declared ultra vires. The legislature can, at any time, make a valid law and make it retrospectively so as to bind the past transactions. The validation of tax, which was declared illegal by the court of law is legal and permissible if the grounds of illegality or invalidity are capable of being removed and are, in fact,_ ## W.P(C) No.18413/14 ## -:7:- _removed and tax thus made legal. The legislature has power to give its own meaning and interpretation of law and also to give a new meaning binding on courts. The exercise of rendering ineffective judgments or orders of competent courts by changing the very basis by legislation is a well-known device of validating legislation. Sometimes, the legislature gives its own meaning and interpretation of the law under which the tax was collected and by legislative fiat makes the new meaning binding upon courts. A valid and proper legislation may neutralise or render earlier decision ineffective after change of law by way of amendment.”_ 8. This is a case in which the petitioner specifically challenges the validity of the amendment. Therefore, despite the observations made by the Division Bench in _**Nagendra Mani**_ (supra), the amendment has to be considered on the basis of the pleadings in the case. 9. There is no doubt about the legislative competence of the State Government to make an amendment in terms of the Finance Act, 2014. As far as the claim for refund is concerned, the eligibility to receive the refund can arise only if the aforesaid provision is declared to be void on account of it being unconstitutional. In fact, there is no dispute regarding the W.P(C) No.18413/14 ## -:8:- legislative competence. Therefore, the only contention that requires to be considered is whether the amendment giving effect to the aforesaid provision with retrospective effect amounts to an arbitrary exercise of power affecting the fundamental right of the petitioner. In taxation regime, it is a well settled principle of law that there could be retrospective imposition of tax. While accepting the said proposition, in the present facts of the case, the question for consideration would be, whether the amendment is in any way affecting the fundamental rights of the citizen under Article 14 of the Constitution of India. 10. Coming back to the facts of the case, the main contention urged by the Government is that the definition of “purchase value” as it originally stood was intended to take in all taxes, duties and other components. The former definition reads as under:- _“2(e) “Purchase value” means value of the vehicle as shown in the original purchase invoice”._ This provision was interpreted by the Division Bench in _**Fathima Shirin's case**_ (supra) and it was held that the term “purchase value” does not include VAT component, customs duty or such other things, whereas according to the Government, the intention W.P(C) No.18413/14 ## -:9:- was that when Value Added Tax had come into force, every time there is a purchase, the tax component is also included. Such an argument was not accepted by the Division Bench in _**Fathima Shirin's case**_ (supra) while interpreting the statutory provision. It is in that background that the Government had brought in the amendment with retrospective effect. Such being the facts, when the amendment is only of a clarificatory nature, I do not think that giving the amendment a retrospective operation would affect any of the fundamental rights of the citizen. As far as the case on hand is concerned, the facts reveal that the petitioner had voluntarily remitted the amount of Motor Vehicles Tax taking into consideration the value of the vehicle along with all other tax, customs duty etc,. There was no complaint with reference to the liability to pay motor vehicle tax at the relevant time. The vehicle was imported as per Bill of Entry dated 21/8/2012 and the writ petition is filed only after the judgment in _**Fathima Shirin's case**_ (supra). 11. In _**Rai Ramakrishna and others v. State of Bihar**_ (AIR 1963 SC 1667), the Apex Court while considering the question relating to retrospective operation of Bihar Taxation on W.P(C) No.18413/14 ## -:10:- Passengers and Goods (Carried by Public Service Motor Vehicles) Act, 1961 held that though the legislature can pass a law and make its provisions retrospective, it would be relevant to consider the effect of the retroactive operation of the law both in respect of legislative competence of the legislature and the reasonableness of the restrictions imposed by it. 12. In yet another judgment in _**D. Cawasji and Company Mysore v. State of Mysore and another**_ (AIR 1984 SC 1780), the Apex Court while considering the constitutional validity of the Mysore Sales Tax Amendment Act, 1969 held that, the State, instead of remedying the defect or removing the lacuna, has brought in an amendment to raise the rate of tax from 6½ % to 45% with retrospective effect from 1[st] April, 1966 to avoid the liability of refunding the excess amount of sales tax collected. On facts, it was observed that as a result of the judgment of the High Court declaring the levy as illegal, the State became obliged to refund the excess amount wrongfully and illegally collected by virtue of the specific direction to that effect in the earlier judgment. It was held that the only object of enacting the amended provision is to nullify the effect of the judgment which W.P(C) No.18413/14 ## -:11:- became conclusive and binding on the parties to enable the State Government to retain the amount wrongfully and illegally collected as sales tax which object has been sought to be achieved by the impugned amendment. In fact, the facts of this case is totally different from the facts in which we are concerned. That apart, in the case on hand, the Motor Vehicles Department had no doubt about the amount to be collected as tax. A question had arisen only when _**Fathima Shirin's case**_ (supra) had come before this Court in which this Court had only declared the law by giving an interpretation to the word “purchase value”. The statute was amended only for the purpose of clarifying the meaning to the word “purchase value” and it is so found in the judgment in _**Nagendra Mani**_ (supra). 13. In _**Bhubaneshwar Singh and another v. Union of India and Others**_ [1994 (6) SCC 77], the Apex court held that though the legislature can retrospectively remove the defect in or change the basis of the principal Act which was the cause of invalidating the Act or a part thereof by court thus rendering the court's judgment ineffective, it cannot nullify the judgment itself. It was held that a validating legislation which removes the cause W.P(C) No.18413/14 -:12:- of invalidity cannot be considered to be an encroachment on judicial power. 14. In _**Laxmi Engineering Works v. P.S.G.Industrial Institute**_ [1995 (3) SCC 583], while considering the meaning and ambit of the expression 'commercial purpose' in the Consumer Protection Act, it was held that the explanation in the form of clarificatory nature applies to all pending proceedings. 15. In _**Mega Traders and others v. State of Kerala and another**_ (1991 (83) STC 59), a learned Single Judge of this Court had occasion to consider a question relating to an amendment to Entry 155 of the First Schedule to the Kerala General Sales Tax Act, 1963 by which agarbathis which were taxed at the general rate of 5% were brought into the schedule and made taxable at 10% with retrospective effect from 1[st] April, 1984. It was held that the amendments imposed an unreasonable and unexpected fresh burden and could not be upheld because of the unduly long period for which the retrospectivity was sought to be given, which was five years and four months. Learned counsel for the petitioner submits that in the case on hand, the amendment with retrospectivity had been brought into effect W.P(C) No.18413/14 ## -:13:- beyond the period of seven years. I do not think that the facts of the present case would fit in as far as the case in _**Mega Traders**_ (supra) is concerned. That was a case in which agarbathi was not included under any specific entry in the First Schedule which was brought to the taxation at 10% with retrospective effect. 16. Present is a case where the Division Bench in _**Fathima Shirin**_ (supra) has given an interpretation to the meaning of the word “purchase value” as not including VAT and other components whereas at all point of time, motor vehicle tax was levied including VAT and other components. As already indicated, the Motor Vehicles Department had no doubt about the rate of tax to be collected whereas this Court while interpreting the statutory provision had taken a view which was not consistent with the view taken by the Motor Vehicles Department. 17. The main crux of the argument of the petitioner is with reference to the Constitution Bench judgment in _**Mafatlal Industries Ltd. and Others. v. Union of India**_ [(1997) 5 SCC 536]. That was a case in which the Constitution Bench considered a question regarding refund of excise and customs duty levied on misinterpretation/misapplication/erroneous interpretation of the W.P(C) No.18413/14 ## -:14:- statutory provisions. In the said case, refund was claimed on the ground that Art.265 of the Constitution of India enjoins that no duty shall be levied and collected except in accordance with law. If it is found that a tax payer has been asked to pay more than what is liable under the Central Excise Act, he is immediately entitled to get the wrongly collected duty, which constitutional guarantee cannot be struck down in any manner. The facts of the said case do not disclose a challenge to a retrospective amendment, whereas, the question considered was, whether in a case of wrongful levy, refund can be made or not. There cannot be any doubt to the aforesaid proposition. However, in the case on hand, when there is an amendment to the statute which does not suffer from any infirmity or unreasonableness warranting interference by this Court as unconstitutional or arbitrary, I do not think that the petitioner is entitled for any relief. Writ petition is hence dismissed. Sd/- **A.M. SHAFFIQUE, JUDGE** Rp //True Copy// P.S to Judge