Patna High Court
Bihar Motor Transport Federation And ... vs State Of Bihar And Ors. on 7 December, 1993
Equivalent citations: I(1995)ACC288, AIR1995PAT188, 1994(42)BLJR711, AIR 1995 PATNA 188, (1994) 1 BLJ 742, (1995) 1 ACC 288, (1994) 1 PAT LJR 343, 1994 BLJR 1 711
Author: S.B. Sinha
Bench: S.B. Sinha
JUDGMENT S.B. Sinha, J.
1. The vires of Rule 3B of the Bihar Motor Vehicles Taxation Rules 1930 is in question in these writ applications.
2. The petitioner No. 1 of CWJC No. 9981 of 1992 is a registered association of transporters looking after their Welfare and the petitioner Nos. 2 and 5 have been carrying on their transport business.
3. The legislature of Bihar enacted Bihar Motor Vehicles Taxation Act, 1930, (here-
inafter called and referred to as 'the said Act'), in terms whereof road tax as envisaged under Section 6 thereof upon the transport operations had been levied.
4. In the year 1993 the State of Bihar by reason of the provisions of Bihar Finance Act, 1983 imposed additional tax upon the Public Service Motor Vehicles by inserting Section 6(1A) therein.
5. The State of Bihar in exercise of its power conferred upon it under Section 14 of the said Act framed rules known as 'Bihar Motor Vehicles Taxation Rules 1930'. In the year 1966 Rule 3B was inserted in the said rules; in terms whereof a provision was made for imposition of penalty to the extent of 50% of the amount of the tax if the same is not paid in time due to any reason subject to a maximum of Rs. 200/-.
6. . By reason of a notification dated 8th January, 1979 published in the Extraordinary Gazette dated 8th January 1979 the words 'subject to a maximum of Rs. 200/-' were directed to be deleted.
7. Mr. B. N. Singh, the learned counsel appearing on behalf of the petitioner in CWJC No. 9981 of 1992 and CWJC No. 10052 of 1992 has raised the following contentions in this application :--
(i) Rule 3B provides for an arbitrary, un-briddled and unguided power in the matter of imposition of penalty without providing for issuance of a show cause notice and an opportunity of hearing and thus the said rule is ultra vires Article 14 of the Constitution of India.
(ii) By reason of the provisions contained in Section 14 of the said Act the State was not authorised to make any rule providing for imposition of a fine and thus Rule 3B is ultra vires the rule making power,
(iii) In any event as additional road tax had been levied by insertion of Section 6(1A) in the said Act in the year 1983, no fine can be imposed for non-payment of Additional Tax.
(iv) As in view of the provisions contained in Section 14(3) of the Act only a fine up to Rs. 50/- can be imposed for violation of the provision of the Act, thus the provisions of Rule 3(b) whereby fine can be imposed up to 50% of the tax not paid or deposited within the prescribed period must be held to be illegal being beyond the rule making power of the State.
Learned counsel in support of his contention relied upon Krishnamurthy v. C. D. A. Transport Co. reported in AIR 1953 Mad 321, Maneka Gandhi v. Union of India reported in AIR 1978 SC 597; Francis Coralie v. Union Territory of Delhi reported in AIR 1981 SC 746 and K. T. Moopil Nair v. State of Kerala reported in AIR 1961 SC 552.
8. The learned Advocate General, on the other hand, submitted that rulcsbcing part of the Act, the legislature is empowered to make a provision for imposition of fine for nonpayment of tax.
It was further submitted that the said Rules are regulatory in nature and Rule 3B was inserted by the State for realisation of Road Tax and additional tax within the prescribed period.
9. It was further submitted that Rule 3B applies both to road tax as also the additional road tax.
10. The said Act was enacted inter alia in order to make provisions for imposition of road tax on the Motor Vehicles. Section 6 applied to all types of motor vehicles plying on the roads whereas Section 6(1A) applies only to the Public Service Motor Vehicles.
11. Motor Vehicles Act and the Bihar Motor Vehicles Taxation Act have all along been held to be complementary to each other or inter-connected. Tax is liable to be paid by any person operating a Motor Vehicle on a public road.
12. Section 14 of the Bihar and Orissa Motor Vehicles Taxation Act, 1930 provides for the rule-making power which reads as follows:--
"Power to make rules-- (1) The State Government may after previous publication make rules for the purpose of carrying into effect the provisions of this Act.
(2) In particular and without prejudice to the generality of the foregoing power, the State govt. may make rules for all, or any of the following purposes, namely :
(a) to prescribe the form of any declaration, certificate or receipt and the particulars to be stated therein;
(b) to prescribe the form of the tax token and the manner in which it shall be displayed on motor vehicles.
(b) to prescribe what shall be deemed to be quarterly period for the purpose of Section 6.
(c) to prescribe the powers and duties of the taxing Officer.
(d) x x x
(e) to regulate the manner in which refund or deduct ions or exemptions may be claimed.
(f) to regulate the method of assessing and recovering the tax.
(g) to regulate the seizure, detention and release of motor vehicle under Section 11 and
(h) any matter for which under this Act provisions may be made by rules.
(3) Any Rule made under Sub-section (1) or (2) may provide that a contravention-
thereof shall be punishable with fine which may extend to fifty rupees.
(4) Every rule made under this section shall be laid as soon as may be after it is made, before each house of the State Legislature while it is in session for a total period of fourteen days which may be comprised in one sessions or in two successive session and if, before the expiry of the session in which it is so laid or the sessions immediately following both houses agree in making any modification in this rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect as the case may be, so however that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule".
15. Rule 3B which was inserted by notification No. A-2-4014/66 T-7180 dated 19-12-1966 read as follows :--
"3B : Penalty : If a person liable to pay tax under the Act does not pay tax within the time he is required by or under the provisions of the Act or these rules to pay it, he shall be required to pay by way of penalty in addition to the amount of tax, a sum of 50% of the amount of tax calculated up to the month of payment subject to a maximum of Rs. 200/ -."
16. There cannot be any doubt that imposition of penalty for non-payment of tax is essentially a legislative function.
17. A delegated legislation can be challenged inter alia on the ground that it has gone beyond the power conferred by the Act or that it encroaches on the fundamental rights or other constitutional provisions.
It is also well settled that legislature cannot abdicate its essential legislative functions.
18. An abdication of power amounts to effacement thereof which may be complete or partial. A case of complete abdication would be where a legislation may not exercise any control over the delegate; and partial abdication when it exercises loose supervision.
19. In Re. Delhi Laws Act reported in 1951 SC Reporter 747 Chief Justice Kania pointed out that the true test in respect of 'abdication' or 'effacement' appears to be where in conferring power to delegate the legislature in the words used to confer the power has retained its control. Does the decision to delegate derive sanction from the Act of the delegator? Has it got the sanction from what the legislature has indicated and decided?
20. The power to levy penalty is a legislative function. Rule 3(B), however, provides imposition of penalty in case of non-payment of tax, Sub-section (2) of section 14 of the Act does not confer any such power upon the rule making authority to make rules in this regard.
21. The question, therefore, which would fall for consideration is 'does such delegation of power would come within the purview of Sub-section (1) of Section 14?' The answer to this question, in my opinion, must be rendered in negative.
22. In A. N. Parasuraman v. State of Tamil Nadu reported in AIR 1990 SC 40, L. M. Sharma, J. (as his Lordship then was), laid down the law in the following terms (at p. 42):-
"The point dealing with legislative delegation has been considered in numerous cases of this court, and it is not necessary to discuss this aspect at length. It is well established that determination of legislative policy and formulation of rule of conduct are essential legislative functions which cannot be delegated. What is permissible is to leave to the delegated authority the task of implementing the object of the Act after the legislature lays down adequate guidelines for the exercise of power. When examined in this light the impugned provisions miserably fail to come to the required standard."
Similarly in M/s. Shri Sitaram Sugar Co. Ltd. v. Union of India, reported in AIR 1990 SC 1277 it has been stated as follows (at p. 1296) :--
"Power delegated by statute is limited by its terms and subordinate to its objects. The delegate must act in good faith, reasonably intra vires the power granted, and on relevant consideration of material facts. All his decisions whether characterised as legislative or administrative or quasi judicial must be in harmony with the constitution and other laws of the land. They must be 'reasonably related to the purposes of enabling legislation' See Leila Mourning v. Family Publications Service (1973) 411 US 356, 36 Law Ed. 2d 318. If they are manifestly unjust or oppressive or outrageous or directed to an unauthorised end or do not tend in some degree to the accomplishment of the objects of delegation, Courts might well say," Parliment never intended to give authority to make such rules; they are unreasonable and ultra vires."
Per Lord Russel of Kilowen, C.J. in Kruse v. Johnson, (1898) 20B 91, 99."
in Smt. Maneka Gandhi v. Union of India, reported in AIR 1978 SC 597, it has been held as follows (at p. 624) :
"Now the question immediately arises as to what is the requirement of Article 14 : what is the content and reach of the great equalising principle enunuciated in this article? There can be no doubt that it is founding faith of the Constitution. It is indeed the pillar on which rests securely the foundation of our democratic republic. And therefore it must not be subjected to a narrow, pedantic or lexicographic approach. No attempt should be made to truncate its all embracing scope and meaning for to do so would be to violate its activist mangitude. Equality is a dynamic concept with many aspects and dimensions and it cannot be imprisoned within traditional and doctrinaire limits. We must renerate here what was pointed out by the majority in E. P. Royappa v. State of Tamil Nadu, (1974) 2 SCR 348 : (AIR 1974 SC 555) namely, that 'from a positivitic point of view, equality is antithesis to arbitrariness. In fact equality and arbitrariness are sworn enemies, one belongs to the rule of law in a republic, white the other, to the whim and caprice of an absolute monarch. Where an act is arbitrary, it is implicit in it that it is unequal according to political logic and constitutional law and is therefore violative of Article 14" Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment. The principle of reasonableness which legally as well as philosophically is an assential element of equality or non arbitrariness pervades Article 14 like a brooding omnipresence and the procedure contemplated by Article 21 must answer the test of reasonableness in order to be in conformity with Article 14. It must be 'right andjust and fair' and not arbitrary, fanciful or oppressive, otherwise it would be no procedure at all and the requirement of Article 21 would not be satisfied."
Francis Bennion in his classical book 'Statutory Inerpretation' states the law thus :--
"58. Delegated legislation; doctrine of ultra vires. Any provision of an item of delegated legislation is ineffective if it goes outside the powers which 'expressly or by implication) are conferred on the delegate by the enabling Act. The provision is then said to be ultra vires (beyond the powers). This applies even where the instrument has been sanctioned by a confirming authority. Except here to do so would produce an instrument the effect of which the delegate would or might not have approved, the Court has power to modify the instrument so as to remove its ultra vires quality."
"59. Delegated legislation; rule of primary intention. There are various types of delegated legislation, but all are subject to certain fundamental restraints. Some of these restraints are dealt with individually in Sections 51, 57 and 58 of this Code. Underlying the whole concept of delegated legislation is the basic principle that the Legislature delegates because it cannot directly exert its will in every detail. All it can in practice do is.lay down the outline. This means that the intention of the Legislature, as indicated in the prime guide to the meaning of delegated legislation. In the code this is referred to as the rule of primary intention."
23. In Hukumchand v. Union of India, reported in AIR 1972 SC 2427 : 1972 (2) SCC 6, the Supreme Court held that the power to make subordinate legislation is derived from the enabling Act and it is fundamental that the delegate on whom such a power is conferred has to act within the limits of authority conferred thereby.
24. In G. P. Singh's Principles of Statutory Interpreation at page 590, it has been stated "there cannot be any doubt that the power is conferred to make subordinate legislation in general terms and particularisation of topic as construed is merely legislative and does not limit the scope of general power. But even the general power to make rule and regulation for carrying out or giving effect to the Act is strictly ancillary in nature and cannot enable the authority on whom the power is conferred to extend the scope of general operation of the Act."
25. In Utah Construction & Engineering (P) Ltd. v. Pataky, reported in 1965 (3) All ER 650 at page 653, the Privy Council quoted with approval the following dictum laid down in Sahanahan v. Kot, 1957 (96) CLR 245 :
"Such a power will not support attempts to widen the purpose of the Act, to add a new and different meaning for carrying them out, to depart from or from its term."
Reference in this connection may also be made to Venkateswara Rao, G. v. Govt. of A.P., reported in AIR 1966 SC 828, Deputy Commercial Tax Officer v. Sukhraj, reported in AIR 1968 SC 67.
26. In Sant Saran Lal v. Parsuram Sahu, reported in AIR 1966 SC 1852, it has been held as follows (at p. 1855) :--
"We have referred to the fact that the Act does not anywhere provide for the fixing of the upper limit for the loans remaining outstanding at any particular time. The rule-making power of the Government to prescribe inter alia the form of the registration certificate and the particulars to be contained in an application made for the purpose of being registered as a money-lender. It is significant to note that the rule making power given to the State Government is not expressed in the usual form i.e. is not to the effect that the State Government may make rules for the purposes of the Act. The rule-making power is limited to what is stated in Clauses (a) to (c) of Section 27 and these clauses do not empower the State Government to prescribe the limit up to which the loans advanced by a money-lender are to remain outstanding at any particular moment of time."
26A. In 1976 (2) All ELR 937, it has been held by Lord Simon at page 95 that it can rarely, if ever be, right to read into statute words which are not there in order to satisfy the vires of the subordinate legislation which is prima facie ultra vires.'
27. If the generality for the purpose of carrying out of the Act was to include the power to impose penalty, the power to impose penalty should have been expressly stated in the Act itself or must expressly be delegated. Sub-section (3) of Section 14 of the Act shall, although have no application in the facts and circumstances of the case inasmuch as the same provides for imposition of penalty, namely, imposition of penalty by a Criminal Court, the same indicates the intention of the Legislature to delegate such power. The said provision applies only in a case of violation of the rules and not a case involving violation of provision of the said Act.
28. Penalty thus could be imposed by the authorities under the Act itself (sic) (if Ed) it is not paid in time. Imposition of penalty on failure to carry out the statutory obligation being a penal provision, the same has to be specifically conferred by the Statute. It is now well known that in a taxing statute no intendment can be inferred. Thus rule in my opinion applies with more force in a case of imposition of penalty.
29. Learned Advocate General further submitted that Rule 3B had been inserted only for the purpose of ensuring that tax is paid in time. This may be so, but as noticed hereinbefore, such a power has to be expressly conferred upon the rule-making authority by the Legislature itself as have been done in terms of Sub-section (3) of Section 14 of the Act.
30. It is further well known that 'actus reas' is one of the essential ingredients in the matter of imposition of penalty. A person may be unable to pay tax within the prescribed period for varying reasons. A statutory Tribunal empowered to impose such penalty must, therefore, be conferred with sufficient discretionary power to consider as to whether such default was intentional or not.
31. In Hindustan Steel Ltd. v. State of Orissa, reported in AIR 1970 SC 253, the Supreme Court emphasised that in absence of any provision, the existence of mens rea plays an important role in the matter of imposition of quantum of penalty.
32. Rule 3B, however, does not make any such provision. It provides for imposition of penalty in a mechanical manner irrespective of the fact as to whether he may have sufficient or cogent reason for not doing so. In a given case it is possible for the assessee to show that he had no mens rea at all.
33. In fact the penalty is to be imposed for non-payment of tax for any reasons whatsoever. Such a power is wholly arbitrary.
34. A person, thus, if given a notice to show cause as to why penalty should not be imposed may be enable to show that he had sufficient cause therefor. Thus, there cannot be any doubt that a penalty cannot be imposed mechanically. Rule 3B of the Rules, however, neither provides for issuance of any notice to show cause or an opportunity of being heard in the matter.
35. It is true that a statute or statutory rules will be presumed to be constitutionally valid and in order to uphold its constitu tionality, if necessary, the statute may also be read down.
36. It is equally well settled that principles of natural justice have to be read in the statute unless the same has expressly or by necessary implication been excluded.
37. The power of statutory authority to levy tax and fix the rates in regard thereto must contain a guidance to the said authority, (see Debi Gopal Kirshna v. State of Punjab, reported in AIR 1967 SC 1985) (sic).
Imposition of fine for non-payment of tax also stands on the same footing.
38. In Harakchand Ratanchand Banthia v. Union of India, reported in AIR 1970 SC 1453, the provisions of Gold Control Act were struck down by the Supreme Court for similar reasons.
39. In this case, however, by reason of Rule 3B of the said Rules, the authorities under the Act have no other option but to impose levy of fine to the extent of 50% of the tax not paid or deposited. He doed not have any discretion in the matter. He has to apply the law too rigorously which may result in furstrating the very object of the Act instead of advancing the same. It may act in terrorem. The authority even does not have any discretion to impose or not to impose the penalty keeping in view the fact and circumstances of each case. The same amount of penalty has to be levied irrespective of the fact as to whether the delay in deposit of the tax is of one day or years.
Thus, by reason of the said rules, unequals have been treated as equals which itself is violative of Article 14 of the Constitution of India.
40. In Delhi Transport Corporation v. D.T.C. Mazdoor Congress, reported in AIR 1991 SC 101, it has been held by Ramaswamy, J. (at pp. 203, 204) :--
"The Courts though have no power to amend the law by process of interpretation, but do have power to amend it so as to be in conformity with the intendment of the Legis-
lature. Doctrine of reading down is one of the principles of interpretation of statute in that process. But when the offending language used by the Legislature is clear, precise and unambiguous violating the relevant provisions in the Constitution, resort cannot be had to the doctrine of reading down to blow life into the void law to save it from unconstitutionally or to confer jurisdiction on the Legislature. Similarly it cannot be taken aid of to emasculate the precise, explicit, clear and unambiguous language to confer arbitrary, unrbiddled and uncanalised power on an employer which is a negation to just, fair and reasonable procedure envisaged under Articles 14 and 21 of the Constitution and to direct the authorities to record reasons.
41. Roy, J., held (at p. 170):--
"In interpreting the provisions of an Act, it is not permissible where the plain language of the provision give a clear and unambiguous meaning that it can be interpreted by reading down and presuming certain expressions in order to save it from constitutional invalidity. Therefore, it cannot be held by reading down the provisions of regulation 9(b) framed under Section 53 of the Delhi Road Transport Act, 1950 read with Delhi Road Transport (Amendment) Act, 1971 that the said provision does not confer arbitrary, unguided, unrestricted and uncanalised power without any guidelines on the authority to terminate the services of an employee without conforming to the principles of natural justice and equality as envisaged in Article 14."
Sawant, J., held (at p. 180) :--
"The doctrine of reading down or of recasting the statute can be applied in limited situations, it is essentially used, firstly for saving a statute from being struck down on account of the unconstitutionality. It is an extension of the principles that when two interpretations are possible one rendering it constitutional and the other making it unconstitutional, the former should be preferred. The unconstitutionality may spring from either the incompetence of Legislature to enact the statute or from its violation of any of the provisions of the Constitution. The second situation which summons its aid is where the provisions of the statute are vague and ambiguous and it is possible to gather the intentions of the Legislature from the object of the statute, the context in which the provisions occurs and the purpose for which it is made. However, when the provision is cast in a definite and unambiguous language and its intention is clear, it is not permissible either to mend or bend it even if such recasting is in accord with good reason and conscience. In such circumstances, it is not possible for the Court to remake the statute. Its only duty is to strike it down and leave it to the Legislature if it so desires to amend it. What is further if the remaking of the statute by the Courts is to lead to its distortion that course is to be scrupulously avoided. One of the situations further where the doctrine can never be called , into play is where the statute requires an extensive additions and deletions. Not only it is no part of the Court's duty to undertake such exercise, but it is beyond its jurisdiction to do so."
42. Thus, even if the principles of natural justice are read into the provisions of Rule 3B, the same would not result in any fruitful purpose. The Legislature has not even provided that imposition of penalty to the extent of 50% of the tax not paid or deposited would be maixmum amount. Had such maximum amount been fixed, it could have been said that some guidelines have been provided. Such is not also the position here.
Rule 3B as it stood prior to amendment carried out in the year 1979 provided for exercising of discretion in the matter of imposition of penalty. Such discretionary jurisdiction of the authorities, by reason of the amending notification has been taken away.
43. For the reasons aforementioned, Rule 3B of the Rules evidently, does not contain any guideline and confers an un-briddled and uncanalised power and, therefore, the same is violative of Articles 14 and 246 of the Constitution of India.
44. However, the submission of Mr. Singh to the effect that Rule 3B will have no application in the case of additional tax cannot be accepted inasmuch as tax has been defined in Rule 2 (d) to mean a tax imposed in the Act. An additional tax imposed in terms of Section 6A of the Act is also a tax imposed under the Act.
45. However, in view of my findings aforementioned, this writ application has to be allowed and it is to be declared that Rule 3B of the Rules is beyond the rule-making power and in any event unconstitutional.
46. These writ applications are, therefore, allowed land the orders of penalty imposed upon the petitioners, if any, are quashed.
47. In the facts and circumstances of this case, however, there will be no order as to costs.
G.C. Bharuka, J.
48. I am in agreement with brother S. B. Sinha, J. that Rule 3B of the Bihar Motor Vehicle Taxation Rules, 1930 (hereinafter in short 'the Rules') is ultra vires the powers of the State Government envisages under Section 14 of the Bihar and Orissa Motor Vehicle Taxation Act, 1930 (hereinafter 'the Act' only). But I would like to assign some additional reasons for the same. Rule 3B of the Rules as it stands for the present, is in the following terms :--
"3B. Penalty. -- If a person liable to pay tax under the Act does not pay tax within the time he is required by or under the provisions of the Act or these rules to pay it, he shall be required to pay by way of penalty in addition to the amount of tax, a sum of 50 per cent, of the amount of tax calculated up to the month of payment."
Section 6 of the Act provides for levy of tax at the rates specified in the Second and Third Schedule thereof and also prescribed the time frame within which such tax has to be paid. Rule 3A of the Rules contemplates of providing a grace period of 15 days for the payment of tax due under Section 6.
49. No provision has been made under the Act either for levy of penalty or authorising the State Government or any other delegated authority to make provision for imposing penalties in case of any specified contravention of the provision of the Act except under Sub-section (3) of Section 14 which provides that "any rule made under Sub-section (1) or (2) may provide that a contravention thereof shall be punishable with fine which may extend to fifty rupees." Admittedly no provision has been made under the Rules in terms of the above subsection providing a levy of fine to a maximum of fifty rupees for contravention of any of the provisions of the Rules. The impugned rule speaks of levy of 50 percent, of the amount of tax calculated in the prescribed manner as an additional liability towards the tax to be called penalty, in case any person liable to pay tax under the Act does not pay the same within the time prescribed either under the Act or the Rules. Obviously making of this provision cannot be justified as valid under Section !4(3) of the Act.
50. Now for examining the competence of the State Government to make a rule like 3B providing for levy of penalty in a subordinate . legislation, it is first essential to understand the concept of penalty under fiscal statutes and the Constitutional law.
51. The Supreme Court in the case of C. A. Abraham v. I.-T. O.,(AIR 1961 SC 609) has held that levy designated as penalty under Section 2B of the Income-tax Act, 1922, is in fact a liability to pay additional tax and is imposed in view of the dishonest contumacious conduct of the assessee. Their Lordships have further held that "It is true that this liability arises only if the I.-T. O. is satisfied about the existence of the conditions which give him jurisdiction and the quantum thereof depends upon the circumstances of the case. The penalty is not uniformed and its imposition depends upon the exercise of discretion by the taxing authorities, but it is imposed as a part of the machinery for assessment of tax liability."
52. While dealing with a further question as to whether the levy of penalty under taxing statutes can be automatic like a tax simplici-ter levied under said statutes, their Lordships of the Supreme Court in the case of Hindustan Steel v. State of Orissa, (1970) 25 STC 211 : (AIR 1970 SC 253) while dealing with Section 9( 1) read with Section 25(1)(a) of the Orissa Sales Tax Act, 1947, have held that "But the liability to pay penalty does not arise merely upon proof of default in registering as a dealer. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard to its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a considertion of all the relevant circumstances."
53. While dealing with a similar question again falling in the context of Section 28 of the old Income-tax Act, the Apex Court in C.I.T. v. Anwar Ali, reported in (1970) 76 ITR 696 : (AIR 1970 SC 1782) though held the penalty provisions to be penal in nature but at same time expressed the view that (at pp. 1784, 1785) -
"It is true that penalty proceedings under Section 28 are included in the expression "assessment" and the true nature of penalty has been held to be additional tax. But one of the principal objects in enacting Section 28 is to provide a deterrent against recurrence of default on the part of the assessee. The section is penal in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the Legislature considers to be against the public interest."
54. In view of the law declared by the Supreme Court as noticed above, it has to be held that the levy of penalties contemplated in fiscal statutes which are authorised to be imposed by the taxing authorities created under the respective Acts, pursuant to quasi-judicial proceeding based on alleged contravention of statutory obligations, are in the nature of additional tax. But a person can be inflicted with the liability of this additional tax only on a finding that the defiance of law has resulted from a deliberate, contumacious or dishonest conduct of the tax payer. Such finding can be based either on facts or fiction created by the Legislature. The other important characteristic of such a provision is that it necessarily implies a discretion in the adjudicating authority to levy penalty within the limits prescribed by the Legislature.
55. Entry 57 of the List II to the 7th Schedule of the Constitution empowers the State Legislature to make laws in relation to "Taxes on vehicles, whether mechanically propelled or not, suitable for, use on roads, including tramcars subject to the provisions of Entry 35 of List III." But it is subject to Article 265 of the Constitution which is in the following terms:--
"265. No. tax shall be levied or collected except by authority of law."
Clause (28) of Article 267 of the Constitution defines "taxation" and "tax" as follows :
"28. "Taxation" includes the imposition of tax or impost, whether general or local or special, and "tax" shall be construed accordingly."
56. Keeping in view the constitutional concept of tax, whether the penalty is treated to be an additional tax or an impost under its statutory provision, necessarily it is a tax for the purpose of Article 265 of the Constitution. As such the same cannot be levied except by the authority of law made either by the Legislature or under its authority. No tax can be levied under executive fiat. In this context I may refer to the case of Bimal Chandra v. State of M.P., reported in AIR 1971 SC 517 (Paragraph 18), wherein it has been held by their Lordships of the Supreme Court that (at p. 520) :--
"No tax can be imposed by any bye-law or rule or regulation unless the statute under which the Subordinate legislation is made specially authorises the imposition even if it is assumed that the power to tax can be delegated to the executive. The basis of the statutory power conferred by the statute cannot be transgressed by the rule-making authority. A rule-making authority has no plenary power. It has to act within the limits ' of the power granted to it."
57. aS discussed by my learned brother S. B. Sinha, J. and is also apparent from a reading of the provisions of the Act, the State Government has not been authorised by the Legislature to provide for payment of additional tax in the nature of penalty under the Rules for non-payment of tax within the time prescribed under Section 6 of the Act and as such the impugned Rule 3B has to be struck down as being unconstitutional.