M/s Jaiparkash Industries Limited v. State of H.P. & Ors.

The Hon’ble Mr. R.B. Misra, Judge. The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 Yes. For the Petitioners : Mr. A.K. Chitlay, Senior Advocate, with Mr. Shreedhar, Advocate; Mr. M.M. Khanna, Senior Advocate, with Ms Pushpa Atri, Advocate; Mr. K.D. Sood, Advocate; Mr. N.K. Sood, Advocate, Mr. Surinder Sharma, Advocate. K.D. For the Respondents : Mr. R.K. Bawa, Advocate General, with Mr. P.K. Sharma, Additional Advocate General, and Mr. R.M. Bisht, Deputy Advocate General. Per Surjit Singh, Judge This bunch of 18 Civil Writ Petitions raises common questions and, therefore, all the writ petitions are being disposed of by a single judgment. Vires of certain provisions of Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended, from time to time, particularly by Amendment and Validation Act No.20 of 1997, have been challenged. Also these writ petitions are in the nature of certiorari, as the assessment orders, passed by Excise and Taxation Authorities, accordance with the provisions of The Himachal Pradesh Passenger and Goods Taxation Act, 1955, as amended from time to time, especially by Amendment and Validation Act No.20 of 1997, have been sought to be quashed. Whether reporters of the local papers may be allowed to see the judgment? …4…

2. Facts relevant for the disposal of these petitions may be noticed. Petitioners, in all the writ petitions, are carrying on different kinds of business. None of them is in the business of carrying passengers or transporting goods by motor vehicles. Some of the petitioners are carrying the business of generating and distributing electricity, while others have their factories, where goods are manufactured. Writ petitioners, in some of the cases, are having buses, by which their employees are carried from their residences to the sites of work and back to their residences and also the children of the employees are carried to schools and back home, by such buses. Petitioners in some of the cases are having private trucks (private service carriers), which are used for carriage of raw-material to the sites of work and finished goods to various places and also for carriage of debris, muck, silt, etc., from the site of generation of electricity. Petitioners have averred that they are not using the buses or the trucks for carriage of passengers or goods nor are they doing the business of carriage of passengers or goods, but they are using their buses and trucks only for the purpose of carrying their employees or the wards of their employees or the raw-material required by them or the finished goods manufactured by them or for carrying debris or silt to keep the work-sites clear. They have pleaded that since they do not carry the passengers and goods by their buses and trucks for hire or reward, they are not liable to pay any tax, under the provisions of The Himachal Pradesh Passengers and Goods …5… Taxation Act, 1955, as amended, from time to time, especially by Act No.20 of 1997.

3. It has been stated by NHPC (petitioner in CWP No.725 of 1998) that earlier the respondents had charged tax from the petitioner. Action of the respondents was challenged, by filing a Civil Writ Petition, being CWP No.1733 of 1995. This Court, vide judgment dated 27th March, 1997, reported as National Hydroelectric Power Corpn. versus State of H.P. and others, 1998 (1) Shim.L.C. 119, allowed that writ petition and directed the respondents to refund the tax already collected. While allowing the said writ petition, it was, inter alia, held that the buses of NHPC were neither public service vehicles, within the meaning of Section 2(35) of the Motor Vehicles Act, nor private service vehicles, within the meaning of Section 2(33) of the Motor Vehicles Act, as the persons were not carried for hire or reward and, therefore, the charging provision of The Himachal Pradesh Passengers and Goods Taxation Act, 1955, contained in Section 3(1) was not attracted. Explanation to Section 3(1), which stated that where passengers are carried or goods are transported, by a motor vehicle, without charging fare or freight, tax shall be levied and paid as if such passengers were carried or goods transported, at the normal rate prevalent on the route, was held to cover the carriage of passengers or goods only in private carriers or public service vehicles and not a vehicle owned by an employer for carrying his employees to the work site and back or the children of the employees to school and back, without charging any fare. Also, …6… it was held that for charging tax, by invoking the explanation to Section 3(1), routes were required to be prescribed, but since no routes had been prescribed the explanation could not come to the rescue of the Taxation Authorities. It has been alleged by the NHPC that Amendment and Validation Act No.20 of 1997 has been passed with a view to neutralizing the judgment passed by this Court in the earlier writ petition for the refund of the tax already charged.

4. Petitioners have also challenged the validity of the Principal Act, as amended by Act No.20 of 1997, which, according to them, seeks to impose tax on motor vehicles, alleging that the State Legislature is not competent to impose such a tax. It is stated that State Legislature’s competence is limited to the imposition of tax on goods and passengers, vide Entry No.56 of List-II of Seventh Schedule of the Constitution of India.

5. After the amendment of the Principal Act, carried out by Act No.20 of 1997, Authorities constituted, under the Act, have issued notices for recovery of tax and have also passed assessment orders against some of the petitioners. Those orders have been challenged, on the ground that the same are illegal, being based on ultra vires provisions of Himachal Pradesh Passengers and Goods Taxation Act, as amended, from time to time, particularly by Act No.20 of 1997.

6. Respondents defend the vires of the Principal Act as also the Amending Act. They also defend the notices for recovery of tax as also the assessment orders passed by the …7… Officers appointed and the Authorities constituted, under the Act. They have stated that the Act has been passed by the State Legislature, in accordance with Entry 56, List-II of Seventh Schedule of the Constitution of India, and it taxes not the motor vehicles but the passengers and the goods carried by motor vehicles. It is pleaded that there is nothing wrong in giving retrospective effect the amended or newly incorporated provisions of the Amending Act No.20 of 1997. It has been stated that there were defects and deficiencies in the Principal Act, which were noticed and pointed out by this Court in the judgment, reported as National Hydroelectric Power Corpn. Ltd. versus State of H.P. and others, 1998(1) Shim.L.C. 119, and that to cure those defects and to remove the deficiencies, Amending Act No.20 of 1997 was passed and the State Legislature had the competence to do so.

7. For better appreciation of the issues involved, it is desirable to have a look at the relevant provisions of the Principal Act, before its amendment by the Amendment and Validation Act No.20 of 1997, and how they were interpreted by a Division Bench of this Court in National Hydroelectric Power Corp. Lt. versus State of H.P. and others, 1998(1) Shim,L.C. 119, with regard to the liability of passengers and goods carried by motor vehicles to pay tax, as also the amendments, which have been carried out by the aforesaid Act No.20 of 1997, for making the passengers and goods carried in the private buses and the trucks of the petitioners liable to tax, under the Act. …8…

8. Preamble of the Act indicated that it was meant to charge not all the vehicles, carrying passengers and goods, but only “certain” vehicles. Section 2(c) provided inclusive definition of “fare”, which read that “fare” included sums payable for a seasonal ticket or in respect of the hire of a contract carriage. Section 2(e) defined “Motor Vehicle” as any transport vehicle and included a motor vehicle used for carrying of passengers or goods, or both, for hire or reward, in contravention of the provisions of the Motor Vehicles Act. Section 2(aa) defined “business” to mean business of carrying passengers and goods by motor vehicles. Section 2(g) defined “passenger” to mean any person travelling in a motor vehicle but did not include the driver or the conductor or any employee of the owner of the vehicle travelling in bonafide discharge of his duties, in connection with the vehicle.

9. Section 3(1), which was and still is the charging provision had an explanation to it, which read as under: “When passengers are carried and goods are transported by a motor vehicle, and no fare or freight whether chargeable or not has been charged the tax shall be levied and paid as if such passengers were carried or goods transported at the normal rate prevalent on the route.”

10. Section 3-A, which provided and still provides for levy of surcharge, stated that surcharge, on the tax payable by every passenger carried by a stage/contract carriage, shall be charged.

11. It were mainly the aforesaid provisions of the Principal Act (before their amendment by Act No.20 of 1997), …9… which were the subject of interpretation by a Division Bench of this Court in National Hydroelectric Power Corpn. Ltd. versus State of H.P. and others (supra).

12. On behalf of the State, it was urged that it was by virtue of the Explanation to Section 3(1), i.e. the charging provision of the Act, that the employees or the children of the employees of the petitioners carried in the buses were liable to pay tax. Relevant portion of Section 3(1) of the Act says that there shall be levied, charged and paid to the State Government a tax on all fares and freights, in respect of passengers carried and goods transported by motor vehicles, on such rates, not exceeding 50% of the value of the fare or freight, as the case may be, and as the Government may, by notification, direct. Explanation to this section read that when passengers are carried and goods are transported by a motor vehicle and no fare or freight, whether chargeable or not, has been charged, the tax shall be levied and paid as if passengers were carried or goods transported at normal rates prevalent on the route. The Court rejected the argument holding that Explanation to Section 3(1) was not to be read in isolation, but alongwith the definitions of “motor vehicle” and “passenger”, as appearing in clauses (e) and (g), respectively, of Section 2 of the H.P. Passengers and Goods Taxation Act, 1955, and when so read it meant that it was applicable only in the case of passengers carried in public service vehicles, because the meanings of “motor vehicle” and “passenger” used in the definitions were no different from those given in clauses (e) and …10… (g), respectively, of Section 2 of the Act. The Court observed that petitioners’ vehicles did not fall within the definition of “motor vehicle”, which meant any transport vehicle, because transport vehicle, according to Section 2(47) of the Motor Vehicles Act, 1988, meant a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle. Buses of the petitioners were, admittedly, not public service vehicles, goods carriage or educational institutional buses. They were sought to be covered, on behalf of the State, in the category of private service vehicles. The Court noticed definition of “private service vehicle” appearing in Section 2(33) of the Motor Vehicles Act, 1988, which reads as follows: “2(33) ‘private service vehicle’ means a motor vehicle constructed or adapted to carry more than six persons excluding the driver and ordinarily used by or on behalf of the owner of such vehicle for the purpose of carrying persons for, or in connection with, his trade or business otherwise than for hire or reward but does not include a motor vehicle used for public purposes.” The vehicles of the petitioners were held to be not covered even by this definition, avowedly for the reason that the definition of “business”, as given in H.P. Passengers and Goods Taxation Act, 1955, meant only the business of carrying passengers and goods by motor vehicles and no other business and admittedly the petitioners were not doing business of carrying passengers and transporting goods by motor vehicles. We may notice that the learned Division Bench referred to the definitions of transport vehicle/public service vehicle and some other words and expressions appearing in the Motor Vehicles …11… Act, because Section 2(j) of the Himachal Pradesh Passengers and Goods Taxation Act, 1955, provides that the words and expressions used in this Act, but not defined, shall have the meanings assigned to them in the Motor Vehicles Act, 1988.

13. Another reason why the argument of the State did not find favour with the learned Division Bench was that though the explanation to Section 3(1) provided that the tax was to be levied and paid, in respect of the passengers carried without payment of fare, as if such passengers were carried at the normal rate of fare prevalent on the route, yet the Act did not specify the route nor did it define the term. And the definition of “route” appearing in the Motor Vehicles Act, in Section 2(38), was irrelevant, in the context of this Explanation. It was further held that expression “normal rate”, appearing in the Explanation was unascertainable and for that reason also it was not possible to give effect to the Explanation, even if some route was assumed to exist.

14. Learned Division Bench allowed the writ petition and held that the employees and the children of the employees, carried in the buses of the petitioners, were not liable to be taxed, under Section 3(1) of the Act and consequently the money charged from the petitioners, by way of tax, was ordered to be refunded.

15. To bring the employees and the children of the employees, travelling without payment of fare in the buses of the employers, and also to bring the goods carried in the private carriages and also to validate the collection of the tax …12… already made, respondents brought about various amendments in the preamble and various provisions of the Act, with retrospective effect, viz. the date of the enforcement of the Principal Act of 1955. The changes, which were brought about, and are relevant for the purpose of deciding these writ petitions are as follows: (a) From the preamble of the Act word “certain” has been omitted. trade, commerce, manufacture (b) Definition of “business” has been amended, whereby, any trade, commerce or manufacture or any adventure or concern, in the nature of trade, commerce or manufacture, whether or not adventure or concern, is carried on, with a motive of gain or profit, or whether or not any trade, gain or profit accrues commerce, manufacture, adventure or concern and any transaction in connection with or incidental or ancillary to such trade, commerce, manufacture, adventure or concern have been included in the definition of “business”. from such (c) Definition of “fare” or “freight” has been changed. (d) Definition of “Private Service Vehicle, which reads as follows, has been inserted: “A motor vehicle constructed or adapted to carry more than six persons excluding the driver and ordinarily used by or on behalf of the owner of such vehicle for the purpose of carrying persons for, or in connection with, his trade or business.” (e) Definition of “road”, which reads as follows, has been introduced: “A track for travel or transportation to communication, between two places.” a means serving fro, (f) Definition of “Transport Vehicle”, which reads as follows, has been added: …13… “A public service vehicle, a goods carriage, an educational institution bus or a private service vehicle.” (g) Sub-section (1A) has been added to Section 3 of the Principal Act, in place of Explanation to Section 3(1), which is as follows: “1(A) Notwithstanding anything contained in sub-section (1), when passengers are carried and goods are transported by a motor vehicle and: (i) no fare or freight, whether chargeable or not has been charged, or (ii) fare or freight has been charged at a concessional rate, the tax at the rate as directed by notification by the Government under sub-section (1) shall be levied, charged and paid as if the passengers were carried or goods were transported either on fares competent authority under the Motor Vehicles Act for different classes of roads and motor vehicles in the State or on the fares and freights for different classes of roads and motor vehicles, specified in Schedule-I to this Act, whichever is higher.” freights (h) Amending Act No.20 of 1997, has been given retrospective effect to the Act by the provision of Section 8, which as follows: “8. The amendments to the Principal Act, made by sections 2,3,4,5,6 and 7 of this Act shall and shall always be deemed to have been made retrospectively from the date of the commencement of the Principal Act.” (i) Actions taken or purported to have been taken, under the Principal Act, before the passing of Act No.20 of 1997, have been validated by Section 9(1), which reads as follows: “9(1) anything contained in any judgement, decree, or order of any court or other authority to the Notwithstanding …14… contrary, any assessment, levy charge or payment of any tax on passengers and goods carried by road (hereinafter referred to as the ‘aforesaid tax’), made or purporting to have been made or nay action taken or anything done under the provisions of the Principal Act at any time on or after the commencement of that Act, but before the commencement of the Himachal Pradesh Passengers and Goods Taxation (Amendment and Validation) Act, 1997 (hereinafter referred to as ‘this Act’), shall be deemed to be a valid and effective, as if such assessment, levy, charge, payment or collection or action or thing had been made, taken or done under the provisions of the said Act as amended by this Act and accordingly- (i) the aforesaid tax assessed, levied, charged, paid or collected or purporting to have been assessed, levied, charged, paid or collected under the provisions of the said Act, before the commencement of this Act shall be deemed to be and always be deemed to have been validly levied, charged, paid or assessed, collected in accordance with law; (ii) no suit or other proceedings shall be maintained or continued in any court or before any authority for the refund of, and no enforcement shall be made by any Court or Authority of any decree or order directing the refund of, any such aforesaid tax which has been collected; (iii) recoveries, if any, shall be made in accordance with the provisions of the said Act of all amounts which would have been collected thereunder as such aforesaid tax if this Act had been in force at all material times; and (iv) anything done or any action taken (including any rule or order made, notification issued or direction given or exemption granted or penalty imposed) commencement of this Act shall be deemed always to have been validly done or taken in accordance with this Act.” said Act before …15…

16. Following points were raised on behalf of the petitioners, during the course of hearing of the matters: (i) (ii) (iii) (iv) the Principal Act and Both Amendment and Validation Act No.20 of 1997 are ultra vires of the Constitution of India, inasmuch as tax is levied on the vehicles, which is contrary to Entry 56, List II of Seventh Schedule of the Constitution of India. children Employees employees of the petitioners are not covered “passenger”, as appearing Himachal Pradesh Passengers and Goods Taxation Act, inasmuch as they are carried free of charge. definition 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 and unconstitutional. is not Material carried in the trucks of the petitioners tax, because the same belongs to the petitioners and, hence, there cannot be any question of freight thereon. charging leviable

17. We have given our best thought to the submissions made on behalf of the parties. We do not find any merit in the contention that the Himachal Pradesh Passengers and Goods Taxation Act, as it stood prior to the Amendment and Validation Act No.20 of 1997, or after the passing of the aforesaid Amendment and Validation Act, has the effect of taxing the vehicles, carrying passengers or goods and, hence, the State Legislature does not have the competence to enact it. Not only from a reading of the Preamble of the Act, but also various provisions, it is more than clear that the Act seeks to tax not …16… the motor vehicles but the passengers and the goods carried therein. Preamble of the Act says that it has been enacted to provide for levying a tax on passengers and goods carried by road in motor vehicles. Prior to the amendment, the Preamble read that it was an Act to provide for levying a tax on passengers and goods carried by road in certain motor vehicles. Word “certain” has been omitted by the Amendment and Validation Act No.20 of 1997. The change has been effected to remove the impression that the Act is meant to levy tax only on those passengers and goods, which are carried by public service vehicles or public carriers. This change in no way suggests that now the taxation is of vehicles and not the passengers and goods carried therein.

18. The charging provision of the Act is Section 3(1), which says that tax shall be levied, charged and paid to the State Government, on all fares and freights, in respect of passengers carried and goods transported by motor vehicles, as the Government may, by notification, direct. Prior to the passing of the Amendment and Validation Act No.20 of 1997, there was an Explanation to this charging provision, which said that when passengers are carried and goods transported by a motor vehicle and no fare or freight, whether chargeable or not, has been charged, the tax shall be levied and paid as if such passengers were carried or goods transported, at normal rates prevalent on the route. By the Amendment and Validation Act No.20 of 1997, the explanation has been omitted and a new sub-section, numbered as 3(1-A) added, which says that …17… notwithstanding anything contained in sub-section (1) (of Section 3) when passengers are carried and goods are transported by a motor vehicle and no fare or freight, whether chargeable or not, has been charged or fare or freight has been charged at a concessional rate, the tax at the rates, as directed, by notification, by the Government, under sub-section (1), shall be levied, charged and paid, as if the passengers were carried or goods were transported, either on fares and freights fixed by the competent authority, under the Motor Vehicles Act, for different classes of roads and motor vehicles in the State or on the fares and freights for different classes of roads and motor vehicles, specified in Schedule-I to the Act, whichever is higher.

19. A bare reading of sub-section (1) and newly added sub-section (1-A) of Section 3 of the Himachal Pradesh Passengers and Goods Taxation Act, shows that tax is levied and charged on the passengers and goods carried by the vehicles and not on the motor vehicles themselves.

20. Another submission, which was made with regard to the contention that the tax was levied on the motor vehicle and charged from its owner, is that notices of recovery were issued or orders of assessment of tax were passed against the owners of the vehicles. 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. Section 4 of the Act, which provides for the method of collection of tax, says …18… that the tax shall be collected by the owner of the motor vehicle and paid to the State Government in the prescribed manner. That means the owner of the vehicle has been made the agent of the taxation authorities, by virtue of Section 4 of the Act to collect the tax from the passengers or the owners of the goods and to deposit the same with the Government.

21. Another argument advanced in support of the aforesaid contention was that the persons carried in the buses of the petitioners were not passengers but the employees or the children of the employees of the petitioners, from whom no fare was charged, and similarly the material/goods carried in the trucks also belonged to the petitioners themselves and not any other persons and, hence, there was no question of collection of tax for any other person and, thus, the tax was impliedly levied on motor vehicles and charged from their owners. This submission is also of little help to the petitioners. Section 3(1-A) of the Act, as added by Amendment and Validation Act No.20 of 1997, read with the amended definition of “business”, leaves no scope for doubt that all kinds of passengers and goods carried in private service vehicles are subject to taxation, under the Act. And if the persons carried happen to be employees of the owners of the buses, such employees should pay the tax. When the employer, the owner of the vehicle, does not collect the tax from such employees, he should himself pay it, because of his failure to discharge the statutory duty of Agent of the State to collect tax. So is the case with respect to the goods. If the owner of the …19… vehicle himself happens to be the owner of the goods also, it is he who is liable to pay tax.

22. Section 3(1-A), as incorporated by Amendment and Validation Act No.20 of 1997, says that notwithstanding anything contained in sub-section (1), when passengers are carried and goods are transported by a motor vehicle and no fare or freight, whether chargeable or not, has been charged or fare or freight had been charged at a concessional rate, the tax at the rates, as directed by notification by the Government, under sub-section (1), shall be levied, charged and paid, as if the passengers were carried or goods were transported, either on fares or freights fixed by the competent authority, under the Motor Vehicles Act, for different classes of roads and motor vehicles in the State or on the fares and freights for different classes of roads and motor vehicles specified in Schedule-I to the Act, whichever is higher. Prior to the incorporation of this provision by Amendment and Validation Act No.20 of 1997, there was Explanation to Section 3(1), which read that when passengers are carried and goods are transported by a motor vehicle and no fare or freight, whether chargeable or not, has been charged, the tax shall be levied and paid, as if such passengers were carried or goods transported, at the normal rate prevalent on the route.

23. In National Hydroelectric Power Corpn. Ltd. Versus State of H.P. and others (supra), when it was argued on behalf of the State that by virtue of this explanation, the employees and the children of the employees of the petitioner carried in its …20… buses were liable to taxation, one of the grounds, on which the contention was rejected, was that neither the term “normal rate prevalent” nor the word “route” had been specified anywhere in the Act and, therefore, explanation could not be given effect to. Now, this explanation has been deleted and in its place sub- section (1-A) has been added to Section 3 and in Schedule-I, referred to in this sub-section, both the fares and freights, and roads, have been specified and thus, the deficiency/defect, which was noticed in the explanation stands removed.

24. Another reason given by the Division Bench in the aforesaid judgment for holding that employees and the children of the employees of the petitioner were not covered by the explanation (now deleted) was that the term “motor vehicle”, as used in charging provision of Section 3(1), though meant “transport vehicle”, which included even a private service vehicle, by virtue of Section 2(47) of the Motor Vehicles Act, 1988, and the private service vehicle meant any motor vehicle constructed or adapted to carry more than six persons, excluding driver and ordinarily used by or on behalf of the owner of such vehicle for the purpose of carrying persons for or in connection with his trade or business otherwise than for hire or reward, yet the employees and the children of the employees of the petitioners did not fall within the category of passengers, because the term “business” defined for the purposes of H.P. Passengers and Goods Taxation Act, meant the business of carriage of passengers and goods only by motor vehicles, per Section 2(aa) of the Act and since the petitioner …21… was not in the business of carrying passengers and goods but in a different business, his employees were not covered by the charging provision. This loophole has also been plugged by the Amendment and Validation Act No.20 of 1997. Definition of “business” has been enlarged. It now includes, besides the business of carrying passengers and goods by motor vehicles, any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues therefrom and any transaction in connection with or incidental or ancillary to such trade, commerce or manufacture or any adventure or concern. Learned counsel submitted that inclusion of any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce, manufacture or any transaction connected with or incidental or ancillary to such trade, commerce or manufacture or any adventure or concern in the definition of “business” was ultra vires, because when the Act is meant for taxing the passengers and goods carried by motor vehicles, definition of term “business” cannot be extended beyond the business of carrying passengers and goods, as it stood before the passing of Amendment and Validation Act No.20 of 1997. He argued that inclusion of any trade, commerce, manufacture or any adventure or concern, etc., in the definition of “business” was artificial and, hence, ultra vires and liable to be struck down. It was submitted that in the …22… Principal Act, “business” was defined to mean the business of carriage of passengers and goods and this was the natural and realistic meaning of the term, in the context of The Himachal Pradesh Passengers and Goods Taxation Act, 1955. It was submitted that by the Amendment and Validation Act No.20 of 1997, while retaining the original definition, the Legislature brought in the element of unnaturalness and artificiality by making the following addition: “(ii) any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce, or manufacture whether or not commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern; and trade, (ii) transaction incidental or ancillary commerce, manufacture, concern.” in connection with, or trade, to, such adventure It was submitted that the aforesaid addition to the definition of “business” was irrelevant and meaningless, in the context of the very object of the Act and the charging provision of the Act.

25. The submission does not fit in the context of the Preamble and other provisions, especially the charging provision of the Act, contained in Section 3. Legislature had been making amendments in the Act from the very beginning to charge the passengers carried in the buses of their employers and the goods transported by the owners of such goods in their own vehicles, but the exercise was never complete, on account of omission to amend all the relevant …23… provisions. For example, when the definition of “motor vehicle” was changed to cover all transport vehicles, which included private service vehicles also, definition of “business” remained unchanged and because of that passengers or goods carried by the petitioners in their vehicles were held to be not taxable by the Division Bench of this Court in National Hydroelectric Power Corpn. Ltd. versus State of H.P. and others (supra).

26. It was submitted that to fall within the meaning of “business”, for the purposes of the Act, the trade, commerce, manufacture or the transactions connected therewith or incidental or ancillary thereto, have to have some connection with the business of carrying passengers and goods by road. Reliance was placed by the learned counsel on two judgments of the Supreme Court, in support of the argument. The same are State of T.N. and another versus Board of Trustees of the Port of Madras, (1999) 4 SCC 630, and Commissioner of Sales Tax versus Sai Publication Fund, ( 2002) 4 SCC

27. In State of T.N. and another versus Board of Trustees of the Port of Madras (supra), the question involved was whether the sale of uncleared or abandoned goods by the Port Trust, which was rendering the services of landing, shipping or trans-shipping, receiving, shifting, transporting, storing or delivery of goods brought into the premises of the Port Trust, was exigible to sales tax, under the Tamil Nadu General Sales Tax Act, 1959. By reference to definition of words “dealer” and “business” (later mentioned was in pari …24… materia with clauses (ii) and (iii) added to the definition of “business” in Section 2(aa) by the Amendment and Validating Act No.20 of 1997 to Himachal Pradesh Passengers and Goods Taxation Act, 1955), it was held that the Trust was not involved in any activity of carrying on business and because of that transaction of sale of abandoned or undelivered goods could not be said to be in connection with or incidental or ancillary to the business and, hence, exigible to sales tax.

28. In Commissioner of Sales Tax versus Sai Publication Fund (supra), issue involved was whether sale of books, booklets, pamphlets, photos, stickers and other publication material containing the message of Saibaba was exigible to sales tax, under Bombay Sales Tax Act. It was noticed that Sai Publication Fund, which was a Trust, had been set up by the devotees of Saibaba, Shirdi, for spreading Saibaba’s message and that the sale of books, booklets, etc. was connected with the said object of the Trust. It was held that since the object of the Trust was spreading the message of Saibaba, it did not amount to any business and, hence, the sale of books, booklets, etc., in connection with the spread of the message also did not fall within the definition of business. We may notice that the definition of “business” appearing in Section 2(5-A) of the Bombay Sales Tax Act, 1959, is similar to clauses (ii) and (iii) added to the definition of “business” appearing in Himachal Pradesh Passengers and Goods Taxation Act, 1955, by Amendment and Validation Act No.20 of 1997. …25…

29. In the present case, all the petitioners are carrying on the business of generating and distributing electricity or are running factories for manufacture of goods of different kinds. Therefore, all of them fall within clause (ii) of Section 2(aa) of the Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended by Amendment and Validation Act No.20 of

1997. The petitioners have their buses for carriage of their employees to the work sites and back to their residence and also their children to the school and back home and also have trucks for transportation of raw-material to their factories and to carry finished goods to markets and also to carry the debris, silt, etc., from their work-sites to dumping places. Even though, the petitioners are not charging any fare from their employees or the children of the employees, their activities of carriage of their employees and the children of the employees and the transportation of raw-material, finished goods and debris and silt, etc., are connected with their main business of generating electricity and its distribution and production of goods in their factories. Therefore, the carriage of employees and their children in their buses and the transportation of goods and raw-material in their trucks are covered by the definition of “business”, under clause (iii), read with clause (ii), of Section 2(aa) of the Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended by Act No.20 of 1997.

30. Argument that clauses (ii) and (iii) are to be read alongwith clause (i) and that when so read they would mean that the trade, commerce or manufacture, etc., referred to …26… therein have to have some connection with the business of carrying passengers and goods, merits outright rejection, because from a bare reading of the provision, it is clear that clause (i) is independent of clauses (ii) and (iii) and also because there is nothing in the Act indicating that employees of the persons engaged in businesses other than in the business of carriage of passengers or goods, when carried in employers’ vehicles are intended not to be covered by the Act.

31. It is well settled that laws enacted to tax passengers and goods by road, by reference to Entry No.56 of List II of the Seventh Schedule of the Constitution of India, are compensatory and regulatory in nature. Reference in this behalf may be made to M/s R.S. Sarkaria and O. Chinnappa Reddy, AIR 1981 SC 774. Tax is levied on passengers goods for generating funds for maintenance of roads and providing regulatory services, like traffic control, etc., and, therefore, it is immaterial whether the passengers and goods are carried in the motor vehicles of those, who are in the business of carrying passengers and goods, or by the buses and the trucks of those doing any other business in the nature of trade, manufacture in connection with such business or a transaction connected with, ancillary or incidental to such trade, commerce or manufacture.

32. In the present case, the petitioners carry their own employees and the children of such employees in their buses, presumably with a view to increasing the efficiency of their employees and, thus, augmenting their business and so the activity is covered by clause (iii), read with clause (ii) of Section …27… 2(aa) of the Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended by Act No.20 of 1997, which defines “business”. So is the case with regard to the carriage of raw- material, finished goods and the carriage of debris and silt, etc. from work-site in the trucks of the petitioners.

33. No doubt, initially, the definition of “business” meant only the business of carrying passengers and goods by motor vehicles, but the change had to be effected by adding the aforesaid two clauses, when a Division Bench of this Court held in National Hydroelectric Power Corpn.’s case (supra) that even though the buses of the petitioners fell within the category of private service vehicles, yet the definition of “business” appearing in Section 2(aa) of Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended by the Amendment and Validation Act No.20 of 1997, being limited only to the carrying of passengers and goods, persons travelling therein were not liable to be taxed. Now, by including any trade, commerce, manufacture, etc., and the transactions connected therewith or incidental or ancillary thereto in the definition of “business”, the Legislature has brought the private service vehicles, i.e. the buses and trucks of the businessmen carrying their employees and goods, within the meaning of motor vehicle, the term used in the charging provision.

34. Legislature has also brought about changes in the definition of “fare” appearing in Section 2(c). Now, Section 2(c) defines both “fare” and “freight” and it includes the sums fixed by competent Authority, under the Motor Vehicles Act, for the …28… hire of motor vehicle for carriage of passengers and transportation of goods and where no such fare or freight has been fixed, such sum, as is specified in Schedule-I. This Schedule is also a new incorporation.

35. Validity of the Amendment and Validation Act No.20 of 1997, has been challenged, on the ground that it neutralizes the judgment rendered by a Division Bench of this Court in National Hydroelectric Power Corpn.’s case (supra) and also give effects to the amended provisions, with retrospective effect. It was submitted that the actions taken, under the unamended Act have been validated to avoid refund of tax ordered by the Division Bench of this Court in the aforesaid case and this was not permissible under the law. Reliance was placed on judgments of the Hon’ble Supreme Court in, D. Cawasji and Co., Mysore, 1984 (Supp) SCC 490; and S.R. Bhagwat and others versus State of Mysore, (1995) 6 SCC 16.

36. In D. Cawasji and Co., Mysore’s case (supra), collection of sales tax, on the amount representing excise duty, health cess and educational cess on the arrack or special liquor had been held to be illegal and the State Government was not only restrained from collecting sales tax on the amount representing the aforesaid duty and cesses but also directed it to refund the tax already recovered. The Government made amendment in the Mysore Sales Tax Act, by way of incorporation of a new provision, which stated notwithstanding anything contained in any judgment or decree …29… of any Court or other authority, sales tax already collected shall be deemed to be and to have always been validly levied or collected, in accordance with law. From the reading of the judgment, it appears that amendments in the relevant provisions were not made to validate the collection of tax but only a provision was made that tax, already collected, shall be deemed to have been validly and lawfully levied and collected, notwithstanding anything contained in any judgment, decree or order of any Court or any other authority. It was because of this reason that it was held that the Legislature did not have the competence to nullify the judgment.

37. In S.R. Bhagwat’s case (supra), writ petition filed by some Government Officers about fixation of their seniority and equation of their posts had been allowed. Seniority was fixed, in terms of the orders of the Court. However, benefit of promotions was not given. Another writ petition was filed and the Court directed that the Officers be given promotions, in accordance with their seniority, with all consequential benefits. With a view to depriving the Officers of financial benefits, the Government resorted to legislative powers. Initially, an ordinance was issued and then an Act was passed by which financial benefits available to the Officers, in accordance with the orders of the High Court, were taken away. It was in this background that it was held that judgment, which has attained finality and is binding against the State, cannot be over-ruled by legislative measures. …30…

38. In the present case, what has been done is that deficiencies and loopholes in various provisions of the H.P. Passengers and Goods Taxation Act, 1955, have been cured by amending the provisions of the Act and the amended provisions have been given retrospective effect. This action permissible, as held by a Constitution Bench in Lohia Machines Ltd. and another versus Union of India and others, (1985) 2 SCC 197, wherein it was held that if some provisions of Taxation Act are struck down, as unconstitutional and the Government may be called upon to refund taxes collected, under struck down provisions, the State may, with a view to avoiding imbalance of economy and difficulties arising therefrom, pass a Validating Act with retrospective operation.

39. There is another judgment and that too of a Constitution Bench, which says that the legislative power, conferred upon the Legislature, includes the subsidiary or auxiliary power to validate laws, which have been found being not valid. The citation is, Rai Ramkrishna and others etc. versus State of Bihar, AIR 1963 SC 1667. It has been held if a law passed by the Legislature is struck down by the Court, as being invalid for one infirmity or another, it would be competent to the appropriate Legislature to correct the said infirmity and pass the regulating law, so as to making a provision of the said earlier law effective from the date when it was passed. It was also held that the Legislature has the power to make the operation of material provisions of law effective retrospectively. …31…

40. In M/s West Ramnad Electric Distribution Co. Ltd. Versus The State of Madras and another, AIR 1962 SCC 1753, it was held again by a Constitution Bench that the Legislature has the competence to give retrospective effect to an amended provision of law, with a view to validate past actions.

41. In State of H.P. and others versus Yash Pal Garg (Dead) by LRs. And others, (2003) 9 SCC 92, it has been held that the Legislature, under the Constitution, has, within the prescribed limits, powers to make laws, retrospectively and by exercise of such power, it can remove the basis of a decision rendered by the competent Court, thereby rendering the decision ineffective.

42. In M/s Tirath Ram Rajindera Nath, Lucknow versus State of H.P. and another, AIR 1973 SC 405, Legislature made amendment in a law, retrospectively, and thereby removed the basis of the decision rendered by the High Court. It was held that the amendment did not constitute encroachment on the functions of the judiciary.

43. In view of the aforesaid judgments of the Hon’ble Supreme Court, petitioners’ contention that the Amendment and Validation Act No.20 of 1997, suffers from the vice of nullifying the earlier judgment of a Division Bench of this Court in National Hydroelectric Power Corpn. Ltd. (supra), is rejected.

44. Another ground, on which the validity and the Constitutionality of the Amendment and Validation Act No.20 of 1997 has been challenged, is that the substituted definitions of …32… terms “passenger”, “business”, “fare or freight” and newly inserted definition of “road” are artificial. It was submitted that from the reading of para-11 (reproduced below) of judgment of the Hon’ble Supreme Court in M/s J.K. Jute Mills Co. Ltd. Versus State of Uttar Pradesh and another, AIR 1961 SC 1534, it is clear that definitions of a statute should not be artificial and unnatural: “The point for decision, stating it succinctly, is whether the Validation Act is within the ambit of Entry No.54 in List II of Seventh Schedule to the Constitution. That entry confers on the States authority to enact a law with respect to tax on sales of goods. Now what is the extent of that authority? There must be in fact a sale as recognized by law. It is only then that a tax could be imposed. But if the transaction sought to be taxed is not a sale, a law which seeks to tax it, treating it as a sale, would be ultra vires. Thus in Sales Tax Officer vs. Messers Budh Prakash Jai Prakash, (1955) 1 SCR 243: AIR 1954 SC 459, a tax on agreement to sell was held to be not authorized by the entry, and in State of Madrass vs. Gannon Dunkerley & Co. (Madras) Ltd., 1959 SCR 379: AIR 1958 SC 560, a tax on the supply of materials in a contract for the construction of works simpliciter, on the footing of a sale was held to be outside the entry, and the legislation which imposed such a tax was struck down as ultra vires.”

45. From the above reproduced Para-11 of judgment of the apex Court in J.K. Jute Mills Co. Ltd. (supra), it is apparent that tax was sought to be levied on a transaction, which was not a sale, on the basis of law enacted, under Entry 54 in List II of Seventh Schedule of the Constitution of India and it was for this reason that the definition of “sale” with respect to the transactions, which, in fact, were not sale recognized by law, was held to be ultra vires. …33…

46. Two other judgments, relied upon in support of the submission are: Sales Tax Officer, Pilibhit versus Messrs Budh Prakash Jai Prakash, AIR 1954 SC 459; and The State of Madras versus M/s Gannon Dunkerley & Co., (Madras) Ltd., AIR 1958 SC 560. Both the cases pertained to the definition of “sale”.

47. In Budh Parkash Jai Parkash case (supra), Sales Tax Act was enacted by the State of Uttar Pradesh and “sale” was defined to include forward contracts. The definition, so far as it included forward contracts, was held to be ultra vires, because what had been authorized by Entry 48 of List II of Seventh Schedule of the Government of India Act, 1935, was tax on sale and not on forwards contracts. In Gannon Dunkerley’s case (supra), definition of words “sale” and “goods”, as appearing in Madras General Sales Tax Act, enacted by virtue of Entry 48 of List II of Seventh Schedule of Government of India Act, 1935, were in question. Material used by a contractor, in execution of building work, was included in the definition of “goods” and tax was levied on such material. It was held that Provincial Legislatures had been authorized by aforesaid Entry 48 to impose tax on sale of goods and that material used for execution of a contract of building, being not a transaction of sale, the Legislature was not competent to bring it within the definition of “goods”.

48. In the light of the law laid down in the aforesaid three judgments, it was argued that the definitions of “passenger”, “business”, “fare or freight” and “road” appearing …34… in Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended by Act No.20 of 1997, are artificial and, hence, ultra vires of Entry 56 of List II of Seventh Schedule of the Constitution of India.

49. Article 265 of the Constitution of India says that no tax shall be levied or collected, except by authority of law. Clause (3) of Article 246 of the Constitution of India says that the Legislatures of States shall have the exclusive power to make laws in their respective States, pertaining to matters enumerated in List II of Seventh Schedule of the Constitution of India. The Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended by Act No.20 of 1997, purports to have been enacted, under Entry No.56 of List II of Seventh Schedule of the Constitution of India. The entry pertains to taxes on goods and passengers carried by road or on any inland or waterways.

50. As already noticed, hereinabove, it is settled position of law that taxation of goods and passengers carried by road, under the law enacted, under Entry 56 of List II of Seventh Schedule of the Constitution of India, are compensatory and regulatory. The States seek to compensate themselves for the maintenance of roads and regulation of traffic, etc. That implies that the goods and passengers are taxed, because of their using the roads maintained by the State. Therefore, the fact whether passengers and goods are carried for hire or reward or they are carried gratis, in our considered view, is irrelevant. …35…

51. The tax is levied on passengers and goods and if the owner of the motor vehicle does not charge any fare from the passengers, as an act of benevolence, as is urged in the present case, he, being charged with the duty of collection of tax, should pay the same from his own pocket. His benevolence for his employees or their family members can be only to the extent of not charging any fare, but not with respect to tax. It is in the light of the aforesaid observation of ours that the submission with regard to the artificiality and unnaturalness of the definition of the aforesaid terms need to be examined.

52. “Passenger”, according to the learned counsel for the petitioners, is a person, who travels by paying fare to the owner or the operator of the motor vehicle and if such a person is a non-fare paying employee, or the school going child of such an employee, of the owner or the operator of the motor vehicle, he is not a passenger. Reliance has been placed in support of the submission on a Supreme Court Judge in M/s Tata Engineering and Locomotive Co. Ltd. Versus The Sales Tax Officer and Regional Transport Officer, Poona and another, AIR 1979 SC 343; and a Full Bench judgment of the Allahabad High Court in Smt. Sundri and others versus Union of India and another, AIR 1984 Allahabad 277.

53. In Telco’s case (supra), referring to the charging provision, contained in Section 3 of the Bombay Motor Vehicles (Taxation of Passengers) Act, it was held that non-fare paying passengers were outside the purview of the Act. Section 3 of …36… the Bombay Motor Vehicles (Taxation of Passengers) Act, is reproduced in para-6 of the judgment, according to which tax can be levied on all passengers carried by road in stage carriages, at such rate to be fixed by the State Government, from time to time. State carriage is also defined in the said Act, vide Section 2(7) and that means a motor vehicle carrying or adapted to carry more than six persons, excluding the driver, which carries passengers for hire or reward. It was by reason of the aforesaid definition of the stage carriage that the Hon’ble Supreme Court held that the charging provision contained in Section 3 was not attracted to the employees of the owner of the motor vehicle, which were carried free of charge.

54. Full Bench judgment of Allahabad High Court in Smt. Sundri’s case (supra) turns on its own facts. There in that case a trespasser in a train died. His dependents claimed compensation. It was in that context that it was held that a trespasser does not occupy the status of a passenger.

55. “Passenger” has been defined in Section 2(g) of the Himachal Pradesh Passengers and Goods Taxation Act, 1955, to mean any person travelling in a vehicle. The definition does not say that the person should be travelling on payment of fare. As already noticed, Entry 56 of List II of Seventh Schedule of the Constitution of India authorizes the State Legislature to enact law for taxing passengers and goods carried by road. The entry does not say that law is to be enacted only in respect of passengers and goods carried for …37… hire or reward. Such laws are compensatory and regulatory in nature and, therefore, as observed, hereinabove, immaterial for the purpose of taxation whether the passengers are carried for hire or reward.

56. A “passenger”, according to the New Shorter Oxford English Dictionary (Thumb Edition), means (a) a traveller, (b) a traveller in or on a public or a private conveyance; any occupant of such a conveyance other than the driver, pilot, crew, etc. According to the dictionary meaning, both fare- paying and non-fare paying persons travelling by a conveyance are passengers. Entry 56 of List II of Seventh Schedule of the Constitution of India does not suggest that only those passengers and goods are to be taxed, which are carried for higher or reward. Therefore, the contention that meaning of passenger is unnatural or artificial and, hence, ultra vires, is rejected.

57. Definition of “road” introduced vide Section 2(gc) is also alleged to be artificial. “Road” has been defined to mean a track for travelling or transportation, to and fro, serving as a means of communication between two places. It was not pointed out how this definition is unnatural or artificial. The definition is consistent with the dictionary meaning. “Road”, according to the New Shorter Oxford English Dictionary (Thumb Edition), is a path or way between different places, usually wide enough for vehicles as well as pedestrians, with a specially prepared surface. So, we find nothing wrong with the definition …38… of “road”, inserted vide Amendment and Validation Act No.20 of

58. So far as submission with respect to definition of “business”, is concerned we have already noticed that the State is authorized, vide Entry 56 of List II of Seventh Schedule of the Constitution of India, to tax any passenger or goods carried by road in a motor vehicle. Amendment to the definition of “business” by way of addition of clauses (ii) and (iii) has been carried out to bring the buses of the petitioners, which, even prior to the amendment were covered by the definition of “motor vehicle” being private service vehicles, within the ambit of charging provision.

59. It was argued that the effect of change in the definition of “business” is to treat unequals as equal and thus the amendment infringes the rule of equality before law. We do not find any merit in the submission. In fact, by removing the defects and deficiencies in the Act by Amendment and Validation Act No.20 of 1997 and thereby making certain amendments, including addition of clauses (ii) and (iii) to the definition of “business”, the Legislature has sought to treat all equals in the same manner. Earlier, non-fare paying passengers, escaped liability to pay tax, on account of deficiencies and defects in the Act and now by removing those defects and deficiencies they have been brought on par with fare paying passengers, who, in the context of the present case, can be said to be less privileged, because they have to pay the fare, in addition to the tax. …39…

60. Submission that inclusion of trade, commerce, manufacture or any adventure or concern or any activity connected with such trade, commerce, manufacture or any adventure or concern in the definition of “business” is outside the ambit of Entry 56 of List II of Seventh Schedule of the Constitution of India, is misconceived. The effect of the addition of any trade, commerce, manufacture or any adventure, etc. in the definition of “business” is to subject the passengers travelling, free of charge, by the buses of their employers, to taxation. And, as already noticed every passenger, whether fare paying or non-fare paying, travelling by a motor vehicle can legally and constitutionally be taxed, by virtue of Entry 56 of List II of Seventh Schedule of the Constitution of India.

61. With regard to the definition of “fare”, it was not explained how the same is ultra vires of Entry No.56 of List II of Seventh Schedule of the Constitution of India.

62. Now, what remains to be seen is whether the Himachal Pradesh Passengers and Goods Taxation Act, 1955, as amended by Act No.20 of 1997, covers the non-fare paying passengers and the goods carried, without charge of fare and freight in motor vehicles. According to the Preamble to the Act, purpose of the Act is to levy tax on passengers and goods carried by road in motor vehicles. Definition of “business”, as already noticed, has been expanded and by virtue of this expansion, now not only the persons travelling by the motor vehicles of those doing the business of carrying passengers and …40… goods by motor vehicles, but the employees and the children of the employees, travelling by private service vehicles of their employers, engaged in any trade, commerce, manufacture, etc, or any transaction connected with or incidental or ancillary to such trade, commerce, manufacture, are also covered by the charging provision of the Act. This is especially so when definition of “private service vehicle”, which means a motor vehicle constructed or adapted to carry more than six persons, excluding the driver and ordinarily used by or on behalf of the owner of such vehicle for the purpose of carrying persons for or in connection with his trade or business and the definition of “transport vehicle”, which includes a public service vehicle, a goods carriage, an educational institution bus or a private service vehicle, have been inserted, vide clauses (gb) and (ia), respectively.

63. Defect, which was pointed out in the explanation to Section 3(1), the charging provision (National Hydroelectric Power Corpn. Ltd. versus State of Himachal Pradesh and others, 1998(1) Shim.L.C. 119) has also been removed by omitting the said Explanation and in place thereof incorporating sub-section (1A), which provides that when passengers are carried and goods are transported by a motor vehicle and no fare or freight, whether chargeable or not, has been charged or the fare or freight has been charged at a concessional rate, the tax at the rates, as directed by notification by the Government, under sub-section (1) shall be levied, charged and paid as if the passengers were carried or goods were transported either on …41… fares and freights fixed by the competent Authority, under the Motor Vehicles Act for different classes of roads and motor vehicles in the State or on the fares and freights for different classes of roads and motor vehicles, specified in Schedule-I to this Act, whichever is higher. Definition of “fare” has also been suitably amended and the amended definition defines not only the word “fare” but also the word “freight”. Charging provision, which remains unamended provides for levy of tax on fares and freights, in respect of passengers and goods carried in motor vehicles by road. Thus, the Act, after amendment by Act No.20 of 1997, covers the non-fare paying employees and the children of the employees carried by the employers to and fro to their work-places and schools as also the goods and material belonging to the owners of the motor vehicles, which they carry in their own motor vehicles, by road, definition of which has been inserted in the Act by Section 2(gc) by the Amendment and Validation Act No.20 of 1997.

64. In view of the above discussion, all the writ petitions are dismissed. Writ petitions stand disposed of. ( R.B. Misra ), J. December 11, 2008(sd) ( Surjit Singh ), J.