Karnataka High Court
The Director, Maintenance, Department ... vs State Of Karnataka And Others on 23 March, 1998
Equivalent citations: AIR1998KANT335, ILR1998KAR2229, 1998(4)KARLJ506, AIR 1998 KARNATAKA 335, (1998) ILR (KANT) 2229 (1998) 4 KANT LJ 506, (1998) 4 KANT LJ 506
ORDER
1. The validity of motor vehicles tax under the Karnataka Motor Vehicles Taxation Act, 1957 has been assailed in this writ petition on the ground that the vehicle is the property of Union of India under Article 285 of the Constitution of India. Article 285 of the Constitution are as under.--
"The properties of the Union shall save insofar as the Parliament may by law otherwise prove be except from all taxes imposed by a State or by any authority within a State.
Nothing in clause (1) shall until Parliament by law otherwise provides prevent, any authority within a State from levying any tax on any property of the Union to which such property was immediately before the commencement of this Constitution liable or treated as liable, so long as that tax continues to be levied in that State".
2. It is pointed out by the learned Counsel for the respondents that the exemption was given to the Government vehicles vide order dated 2nd May, 1958, but the same has been withdrawn vide notification dated 4th June, 1985 as published in Gazette on 6th of June, 1985 and the said notification has been given effect from 1-8-1984. The tax is levied for the period from 1-8-1984.
3. I have considered over the matter. The validity of the notification dated 4-6-1985 has not been assailed in this writ petition by the petitioner. The levy of tax on the vehicles of the Union of India whether could be considered as tax on properties of the Union was considered by the Apex Court. In the case of State of Madhya Pradesh v Shyama Charan Shukla, the Apex Court held that at the time of sale, the goods were belonging to railway and in view of the provisions of Article 285, such sales were immune from taxation under the State law. This decision has not considered the earlier view and as such it is not binding.
The correct decision is given in Customs Law. In re Sea Customs Act (1878), Section 20(2), while interpreting the word 'property' it was observed that the word 'property' in clause (1) of Article 289 has a comprehensive connotation and includes all assets movable and immovable. Provisions of Articles 289 and 285 were also taken into consideration and it was observed that:
"(16) Further, it must not be forgotten that Articles 285 and 289 are successors of Sections 154 and 155 of the Government of India Act, though there are differences in details between them, in particular clause (2) of Article 285, which corresponds to the proviso to Section 154, seems in our opinion to make it clear by the change in the language, that clause (1) of Article 285 when it speaks of all taxes in referring to taxes on property of which clause (2) definitely permits continuance provided such property of the Union immediately before the commencement of the Constitution was liable or was treated as liable to such tax. As to Article 289(1), a change has been made in the words, for Section 155(1), which corresponded there to provided, that the Government of a province shall not be liable to Federal taxation in respect of lands or buildings. Article 289 refers not only to lands and buildings, but to all property of a State, whether movable or immovable and exempts it from Union taxation. Even so, we find no warrant for interpreting clause (1) of Article 289 as if it exempts all property of a State from all Union Taxation. We are therefore of opinion regarding Article 289 and its complementary Article 285 together that the intention of the Constitution makers was that Article 285 would exempt all property of the Union from all taxes on property levied by a State or by any authority within the State while Article 289 contemplates that all property of the State would be exempt from all taxes on property which may be leviable by the Union. Both the articles in our opinion are concerned with taxes directly either on income or on property and not with taxes which may indirectly affect income or property. The contention therefore on behalf of the Union that these two articles should be read in the restricted sense of exempting the property or income of a State in one case and the property of the Union in the other from taxes directly either on property or on income as the case may be, is correct".
Further liability of excise duty and sales tax was considered and it was observed that.--
"This will show that the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. We may in this connection contrast sales-tax which is also imposed with reference to goods sold, where the taxable event is the act of sale. Therefore, though both excise duty and sales tax are levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production while in the other it is on the act of sale. In neither case therefore can it be said that the excise duty and sales tax is a tax directly on the goods for in that event they will really become the same tax. It would thus appear that duties of excise partake of the nature of indirect taxes as known to standard works on economics and are to be distinguished from direct taxes like taxes on property and income.
4. It was held that Article 289(1) provide exemption from Union tax on property and Income. The exemption is with regard to direct tax on property. Indirect taxes like duties of customary excise are not taxes on property. In the light of the observation made above, tax under Motor Vehicles Taxation Act is also an indirect tax on use of roads and not tax on the property.
5. In these circumstances, there is no substance that the provisions of Article 285 grants immunity to the petitioner from levy of tax.
6. Petition is accordingly dismissed.