@JUDGMENTTAG-ORDER
Ajit J. Gunjal, J.@mdashAll these three petitions are disposed of by this common order. The facts in W.P. No. 4658/08 and 4166/08 are almost identical, if not similar. The facts in W.P. No. 10489/07 are slightly different. But however, the core question which falls for consideration in these petitions are same.
2. The petitioners in W.P. No. 4166/08 and 4658/08 are Public Sector Undertaking coming under the administration and control of the Ministry of Defence. The controversy would relate to the Motor Vehicles Tax payable in respect of the private service vehicles operated on behalf of the contractors in respect of their companies situate at Bangalore and KGF. The purpose of making use of the transportation facilities is to ferry its employees from their residences to the factory for work and to drop them back after work. It appears, a tender was floated and the petitioners in both these writ petitions entered into an agreement with a contractor for operating buses to ply the petitioners'' employees working in Bangalore. Likewise, it appears, they have entered into another agreement with a contractor in KOF. The agreements were signed and the contractors transferred their vehicles in the names of the petitioners and approached the concerned authorities to register the transfer of vehicles in the petitioners'' names. The petitioners secured the permits for operating the buses as Private Service Vehicle and the motor vehicle tax was paid under item 8 of the Schedule to the Karnataka Motor Vehicles Taxation Act, 1957 (for short, ''Taxation Act''). The tax was paid on the basis of the floor area. It appears, the respondents based on the audit objection objected to payment of vehicle tax as applicable to private service vehicle and took a stand that the tax has to be paid as applicable to contract carriages. Objections were invited and filed and they were out-rightly rejected by the respondents and eventually an order was passed holding that the tax had to be paid as applicable to contract carriages. The differential tax and penalty was determined and was levied. The petitioners in both these writ petitions were called upon to pay the amount so determined which was inclusive of tax and penalty. The petitioners Sled appeals to the Deputy Commissioner for Transport, the appellate authority, against the orders of the respondent the order of the respondent was confirmed by the appellate authority. Suffice it to say, questioning the determination of tax payable as well as the penalty, the petitioners were before this Court in a batch of writ petitions. The learned single Judge dismissed the writ petitions on the ground that the private transport vehicles are to be treated on par with contract carriages and the tax payable would be as applicable to the contract carriages. The said order of the learned single Judge was questioned by the petitioners before a Division Bench in a writ appeal. The Division Bench allowed the writ appeals and set aside the order of the learned single Judge and has quashed the demand made by the respondents. The order of the Division Bench was carried in appeal to the Apex Court by the State. The Apex Court declined to grant Special Leave. Thus, the order of the Division Bench inter se between the petitioners and the respondents has become final. It is to be noticed that during the pendency of the writ appeal, an interim order was sought but this Court declined to grant an interim order but however observed thus:
No ground for grant of interim stay of recovery of tax is made out.
IA-I is dismissed.
However keeping in view the amount of tax involved and the fact that this has to be paid every quarter thereby creating a continuing liability, we order that the appeals be listed in the Hearing List for the week commencing 27/09/99. In case the appellants succeed in the appeal, the respondent shall be liable to refund the amount of tax collected with 12% interest.
The Division Bench, as observed earlier, eventually found and made a distinction between the contract carriage vehicles as well as the private transport vehicles with reference to the definition under the Motor Vehicles Act and also the definition as to who is the owner. The order of the Division Bench is on 25.05.2005. The SLP was dismissed on 18.11.2005. Thereafter an amendment is proposed pursuant to a notification, a copy of which is at Annexure-F, encompassing the private transport vehicles on par with contract carriages and were assessed to tax as if they are contract carriages. The said notification at Annexure-F is questioned in this petition.
3. W.P. No. 10489/07 is almost identical except that it is the owner of the vehicle who has come before this Court, in as much as, he had transferred the vehicles in favour of Tata Infotech Limited and a lease agreement was also drawn inter se between them in the year 1999. But the substratum of the case is that the petitioner was also the appellant in the writ appeals before the Division Bench of this Court.
4. The petitioners armed with the order of the Division Bench of this Court sought for refund of the tax collected with interest. The petitioners in all these writ petitions issued legal notices and also made innumerable representations but however, neither the legal notice nor the representations were responded. Hence all the petitioners who are the beneficiaries of the order of the Division Bench are before this Court
5. Mr. K.P. Kumar, learned senior Counsel appearing for the petitioners in two of the writ petitions submits that it was not open for the State to come out with a notification at Annexure-F amending the provisions of the Taxation Act, thus nullifying the decision of this Court. He submits that even otherwise, the lacuna which was pointed out by this Court while accepting the appeals of the petitioners has not been rectified. A perusal of the amended provision would clearly disclose that the lacuna still continues to be in place. Another alternate contention of Mr.Kumar is that the decision, which is rendered inter se between the parties i.e., the petitioners and the State, which has attained finality, cannot be set at naught by the amendment. He would rely on the rulings of the Apex Court to buttress his contention that notwithstanding the amendment to the Act, the judgment rendered inter se continues to hold the field. Hence, he submits that the amendment cannot be given effect to so far as the petitioners are concerned, more so, having regard to the ruling of the Division Bench which is binding precedent between the parties.
6. Mr.Puttige Ramesh, learned Counsel appearing for the petitioner in W.P. No. 10489/07 substantially adopts the arguments of Mr.Kumar, learned senior counsel. In furtherance of the contentions urged, he submits that the nomenclature or the definition of what is ''private service vehicle'' fell for consideration before a Division Bench of this Court and it has ruled that a private service vehicle cannot be equated with the contract carriages. He also submits that the decision between the petitioners and the State has also attained finality. He also submits that the decision rendered between the parties cannot be nullified by an amendment of the provisions of the statute.
7. Mr. Ashok Haranahally, learned Addl. Advocate General submits that it is within the powers of the State to bring out any amendment. He submits that the amendments takes away only the basis of the judgment and does not nullify the same. He further submits that the legislature can cure the defect in the statute and amend the law retrospectively. He submits that the tax levied is with retrospective effect, which is removing the defect The State can exercise its powers and cannot be said that it has acted beyond jurisdiction. It is also permissible for a competent legislature to overcome the effect of a decision of a court setting aside the imposition of a tax by passing a suitable legislation amending the relevant provisions of the statute concerned with retrospective effect, thus taking away the basis on which the decision of the court has been rendered and by enacting an appropriate provision validating the levy and collection of tax made before the decision in question.
8. Hence, he submits that the amendment brought to the Motor Vehicle Taxation Act by introducing Item 8A pursuant to Act 6/2000 with effect from 1.4.2000 is valid. Thus he submits that the private service vehicles already under lease agreement with industrial undertakings or companies for the purpose of providing transport conveyance to their employees from residence to factories and vice versa and such industrial undertakings are holders of permit of such vehicles. He submits that the premise on which the Division Bench granted the relief in favour of the petitioner was on the interpretation of the definition of owner under the Motor Vehicles Act and the Division Bench was of the opinion that the contract carriage and private service vehicles cannot be the same. That lacuna having been rectified pursuant to introduction of Item 8A, the effect of the decision is taken away and the petitioners notwithstanding the observation made by this Court while declining to grant an interim order and further directing the respondents to refund the tax collected in the event of the petitioner''s succeeding will not be of any consequence.
9. To appreciate these contentions it is necessary for us to refer to the observations made by the Division Bench in the writ appeal filed by the petitioners.
10. It is to be noticed that the Division Bench after referring to Clause 5(a) and Sub-clauses (b) to (e) of Clause 8 of the Schedule to the Taxation Act was of the view that the contract carriages cannot be equated with private service vehicles. Indeed a definition of the private service vehicle as defined in Clause (ee) of Section 2 of the Motor Vehicles Taxation Act would be that "it is an omnibus constructed or adapted to carry more than nine persons (excluding the driver) and used by or on behalf of the owner or such vehicle for the purpose of carrying persons for or in connection with his trade or business or otherwise than for hire or reward." The Division Bench has also referred to the definition of "owner" as defined in Clause (30) of Section 2 of the Act Hence, the Division Bench was of the view that the vehicle tax which is payable on contract carriage is not applicable to the petitioner which pursuant to an agreement entered into between the owner of the vehicle and the company can either avoid payment of tax or pay tax at a lower rate. The arrangement could be a part of tax planning within the framework of law and it cannot be described as a colourable device to evade payment of tax. Thus, on this premise the Division Bench was of the view that it is not open for the respondents to demand tax treating the vehicle as a contract carriage.
11. The question that falls for consideration in the present proceeding is whether a judicial pronouncement on the basis of the rules and the definition of a contract carriage before introduction of item 8A would come to the aid of the petitioner. Indeed in this regard the Apex Court in the case of Ujagar Prints v. Union of India reported in 1989 (74) STC 401, while dealing with identical if not similar situation has observed thus:
A competent legislature can always validate a law which has been declared by courts to be invalid, provided the infirmities and vitiating factors noticed in the declaratory judgment are removed or cured. Such a validating law can also be made retrospective. If in the light of such validating and curative exercise made by the legislature-granting legislative competence - the earlier judgment becomes irrelevant and unenforceable, that cannot be called an impermissible legislative overruling of the judicial decision. All that the legislature does is to usher in a valid law with retrospective effect in the light of which earlier judgment becomes irrelevant.
The Apex Court in the case of Widia (India) Limited and Ors. v. State of Karnataka and Ors. reported in 2003(55) Kar.L.J 162 (SC) has observed thus:
It is true that normally tax would not be levied with retrospective effect but at the same time to validate the tax which was levied, after removing the defects pointed out by the previous decision, the State Government could exercise its powers u/s 3(1) of the Act and it cannot be said that it has acted beyond its jurisdiction....
The defects pointed out in Aviny Polymers Private Limited''s case, supra, are removed and, therefore, it cannot be said that the notification dated 23.9.1998 is in any way illegal. In a situation like present one where notifications levying tax were held to be illegal, for validating such levy, the State government has issued the aforesaid notification.
The Apex Court in the case of
When a Legislature sets out to validate a tax declared by a court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition, of course, is that the Legislature must possess the power to impose the tax, for, if it does not, the action must ever remain ineffective and illegal....
Ordinarily, a court holds a tax to be invalidly imposed because the power to tax is wanting or the statute or the rules or both are invalid or do not sufficiently create the jurisdiction. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in feet removed and the tax thus made legal.
12. The Apex Court in the case of
It would be thus appear that the amending Act was intended to cure an infirmity as revealed by the judgment of the High Court and to validate the past levy and collection of tax in respect of all kinds of non-lubricating mineral oils, including furnace oils, with effect from April, 1964....
The object of such an enactment is to remove and rectify the defect in phraseology or lacuna of other nature and also to validate the proceedings, including realisation of tax, which have taken place in pursuance of the earlier enactment which has been found by the Court to be vitiated by an infirmity. Such an amending and validating Act in the very nature of things has a retrospective operation....
Moreover, the individual who claims that a vested right has arisen from the defect is seeking a windfall since had the legislature''s or administrator''s action had the effect it was intended to and could have had, no such right would have arisen.
13. The Apex Court in the case of
In the first instant case what the legislature has done is to amend the law retrospectively and thereby remove the basis of the decision rendered by the High Court. Such a course cannot be considered as an encroachment on the judicial power.
14. Indeed it is to be noticed that the premise on which the Division Bench of this court granted the relief in favour of the petitioner was with reference to the definition of owner and private service vehicle. Indeed, this court was of the view that the contract carriage does not come under the definition of either owner or private service vehicle which would necessarily mean that the respondents were not competent and it was not within the legislative power to demand tax and collect from the private service vehicles treating it as contract carriages. But however the moot question would be what should be the course open to the petitioner, they having been successful before the Division Bench. It cannot be said that it is not within the power or the competence of the legislature to remove the lacuna which was pointed out by the courts in a judgment. In the case on hand, as observed, in the Schedule Clause 5(a), referred to in Motor Vehicles Act, the contract carriage as defined under the Motor Vehicles Act means a motor vehicle which carries a passenger or passengers for hire or reward and is engaged under a contract. The omnibus and private vehicles as found in Clause 8 would relate to omnibus and private service vehicle. The lacuna which was sought to be pointed out by the Division Bench to the effect that the private service vehicles cannot be equated with contract carriages has been set at naught or remedied by the introduction of Clause 8A wherein it encompasses omnibus and private service vehicles which are held under the lease agreement with an industrial undertaking for carrying their employees from the residents to the factory and vice-versa and such industrial undertaking or company being the holder of permit of such vehicle thereby equating the private service with that of the contract carriages. Indeed, as on today, the petitioners are paying vehicle tax as per Item 8A as introduced by Act 6/2000 with effect from 1.4.2000. Indeed as observed by the Apex Court in the decisions referred to above there is no impediment and it is within the legislative power of the State to validate an enactment with retrospective effect Hence it cannot be said that the introduction of Item 8(a) in any way in violation of Article 19 of the Constitution. The Apex Court in Ujagar Prints v. Union of India has indeed observed that "A competent legislature can always validate the law which has been declared by the courts to be invalid, provided the infirmities and vitiating factors noticed in the declaratory judgment are removed or cured. Another question which would arise for consideration would be whether the lacuna which was pointed out by the Division Bench has been removed. It is no doubt true that the learned senior Counsel appearing for the petitioner would vehemently contend that the lacuna which was pointed out by the Division Bench has not been removed. This contention cannot be accepted, in asmuch as, the omnibus and private service vehicles with reference to the lease agreement with industrial undertaking or company for the purpose of providing transport has been introduced pursuant to insertion of Item 8 in the Schedule. Once it is held that it is within the power and the legislature is competent to make an enactment, the same cannot be said to be ultra views.
15. The next question would be what would be the result and repercussion of the amendment vis-a-vis, the judgment rendered by this court holding that the private vehicles cannot be equated with the contract carriages. In this regard the Apex Court in the case of
A mere look at Sub-section (2) of Section 11 shows that the respondent State of Karnataka, which was a party to the decision of the Division Bench of the High Court against it had tried to get out of the binding effect of the decision by resorting to its legislative power. The judgments, decrees and orders of any court or the competent authority which had become final against the State were sought to be done away with by enacting the impugned provisions of Sub-section (2) of Section 11. Such an attempt cannot be said to be a permissible legislative exercise. Section 11(2), therefore, must be held to be an attempt on the part of the State Legislature to legislatively overrule binding decisions of competent courts against the State. It is no doubt true that if any decision was rendered against the State of Karnataka which was pending in appeal and had not become final it could rely upon the relevant provisions of the Act which were given retrospective effect by Sub-section (2) of Section 1 of the Act for whatever such reliance was worth. But when such a decision had become final as in the present when the High Court clearly directed respondent-State to give to the petitioners concerned deemed dates of promotions if they were otherwise found fit and in that eventuality to give all benefits consequential thereon including financial benefits, the State could not invoke its legislative power to displace such a judgment Once this decision had become final and the State of Karnataka had not thought it fit to challenge it before this court presumably because in other identical matters this court had upheld other decisions of the Karnataka High Court taking the same view, it passes one''s comprehension how the legislative power can be pressed in service to undo the binding effects of such mandamus. It is also pertinent to note that not only Sub-section (2) of Section 11 seeks to bypass and override the binding effect of the judgments but also seeks to empower the State to review such judgments and orders and pass fresh orders in accordance with provisions of the impugned Act. The respondent-State in the present case by enacting Sub-section (2) of Section 11 of the impugned Act has clearly sought to nullify or abrogate the binding decision of the High Court and has encroached upon the judicial power entrusted to the various authorities functioning under the relevant statutes and the Constitution. Such an exercise of legislative power cannot be countenanced.
16. What has been done by the statute is to take away the effect and the judgment rendered by this court by introducing Item 8A in the Schedule. But, however, the decision as such inter between the petitioner and the respondent holding that the petitioner is not liable to pay tax as demanded stands and holds the field.
17. The Apex Court in the case of
18. It is now well settled that a binding judicial pronouncement between the parties cannot be made ineffective with the aid of any legislative power by enacting a provision which in substance overrules such judgment and is not in the realm of a legislative enactment which displaces the basis or foundation of the judgment and uniformly applies to a class or persons concerned with the entire subject sought to be covered by such an enactment having retrospective effect Thus, even if it is within the competence of the legislature to remove the lacuna which was pointed out but that by itself will not take away the binding judgment between another parties. That is required to be given effect to. Indeed the Apex Court Las observed by amending law retrospectively and thereby removing the basis of the decision rendered by the High Court cannot certainly be considered a replacement of the judicial power which would necessarily mean that the basis of the decision is taken away but the decision as such between the parties still holds the field.
19. Since the petitioners were the owners of the carriages which had questioned the demand, I am of the view that the benefit is required to be extended only to the present petitioners who were vigilant in making the grievance in approaching the court in time. The benefit of this order is extended only to the petitioners herein and not to the other transporters.
20. Having given my anxious consideration, I am of the view that the petitioners are entitled to succeed in part As has been observed while entertaining the writ appeal this court declined to grant interim stay of recovery of tax, but however was of the view that in the event the petitioners succeed in the writ appeal the respondents shall be liable to refund the amount of tax collected with 12% interest.
21. Hence, the following order is passed:
i) Petitions are allowed in part;
ii) The petitioners are entitled for refund of the amount which was collected prior to introduction of Item 8A pursuant to Act 6/2000;
iii) Challenge to the validity of Item 8A of the Motor Vehicles Taxation Act stands rejected.
Rule is issued and made absolute to the extent indicated above.
