NHPC LTD. [APPELLANT(S)] VS. STATE OF HIMACHAL PRADESH SECRETARY & ORS. [RESPONDENT(S)]

CIVIL APPEAL NO. 3948 OF 2009
(2JB, B.V. NAGARATHNA and UJJAL BHUYAN JJ., delivered by B.V. NAGARATHNA, J.)

Facts: The present appeals have been filed assailing the final Orders of the High Court of Himachal Pradesh dated 11 December, 2008 and 06 May, 2 2009, whereby the vires of the Himachal Pradesh Passengers and Goods Taxation Act, 1955 as amended from time to time, particularly by the Himachal Pradesh Passengers and Goods (Amendment and Validation), Act, 1997 has been upheld and the writ petitions filed by the appellants herein, i.e., Civil Writ Petition Nos. 725 of 1998, 422 of 1998, 401 of 2001, 464-467 of 2001 and 79 of 2007, have been dismissed.

Issue:

• Whether, by enacting the Amendment and Validation Act of 1997, the Himachal Pradesh State Legislature had validly removed the basis of the judgment of the Division Bench of the High Court dated 27 March, 1997, whereby the Act of 1955 had been held not to include within its scope the activity of the appellants of providing gratis transport facilities for their employees and their children?
• Whether the activity of the appellants of providing gratis transport facilities for their employees and their children, would now be a taxable activity under Section 3(1-A) of the Amendment and Validation Act of 1997?

Arguments on behalf of counsel for appellant: Sri S.B. Upadhyay

It is submitted that High Court has proceeded on a misplaced interpretation of the Act of 1955, as amended by the Amendment and Validation Act of 1997 to hold that the latter Act, seeks to impose tax on passengers and not motor vehicles and that the said Act covers non-fare paying passengers as well which it cannot do so. That fundamentally, ‘passenger’ means a person who travels by paying a fare to the owner or operator of the vehicle. Therefore, a non-fare paying employee of the operator, or a school-going child of such employee, is not a passenger within the meaning of the constitutional entry. That if sub-clauses (ii) and (iii) to Section 2 (aa) are interpreted to include even businesses other than the business of carrying passengers, the said sub-clauses would be violative of Article 14 of the Constitution. That the Amendment and Validation Act of 1997 did not remove the basis of the judgment of the Division Bench of the High Court dated 27 March, 1997, by curing the defects and plugging the lacunae in the Act of 1955. Rather, it has been enacted with the oblique motive of destroying the finality, force and effect of the said judgment of the High Court, which has been affirmed by this Court.

Arguments on behalf of counsel for respondent: Sri Anup Kumar Rattan

It is submitted that it is trite that if a law passed by a Legislature is struck down or rendered inoperative by a Court, the competent Legislature can correct the infirmities which formed the basis of the Court’s decision to strike down the law and make such amended law effective retrospectively. That simply for the reason that notices had been issued to the owners or assessment orders had been passed against the owners of the vehicles, it could not be said that the tax was being levied on the motor vehicles. The tax sought to be imposed was on the passengers and goods carried by road and the operators/owners of the motor vehicles were simply required to facilitate payment of tax by collecting the same from the passengers and depositing it with the Respondent Authorities. That the Act of 1955, as amended by the Amendment and Validation Act of 1997, was enacted on the strength of Entry 56 of List II of the Seventh Schedule of the Constitution of India, which pertains to “taxes on goods and passengers carried by road and inland water ways.” Therefore, it was prayed that the present appeals be dismissed as being devoid of merit and the impugned orders of the High Court, be affirmed.

Held: The court dismissed the present appeals, and affirmed the order of the Division Bench of the High Court of Himachal Pradesh, dated 11 December, 2008 and 06 May, 2009 whereby the vires of the Act of 1955 as amended from time to time, particularly by the Amendment and Validation Act of 1997 has been upheld and the writ petitions filed by the appellants herein, i.e., Civil Writ Petition Nos. 725 of 1998, 422 of 1998, 401 of 2001, 464-467 of 2001 and 79 of 2007, have been dismissed.

With respect to the first issue, it is held that, “By enacting the Amendment and Validation Act of 1997, the Himachal Pradesh State Legislature has validly removed the basis of the judgment of the Division Bench of the High Court dated 27 March, 1997.Thus, the  Amendment and Validation Act of 1997 is a valid piece of Legislation.”

With respect to the second issue, it is held that, “The activity of the appellant in providing gratis transportation to its employees, and their children, would be a taxable activity under Section 3(1-A) of the Amendment and Validation Act of 1997.”

The court observed that, “The Constitution of India precludes any interference by the legislature with the administration of justice and judicial determination of the validity of a legislation. The power of abrogation is to be exercised in the light of the said Constitutional mandate. The legislative device of abrogation must be in accordance with the following principles which are not exhaustive:

1. There is no legal impediment to enacting a law to validate a legislation which has been held by a court to be invalid, provided, such a law removes the basis of the judgment of the court, by curing the defects of the legislation as it stood before the amendment.
2. The validating legislation may be retrospective. It must have the effect that the judgment pointing out the defect would not have been passed, if the altered position as sought to be brought in by the validating statute existed before the court at the time of rendering its judgment.
3. Retrospective amendment should be reasonable and not arbitrary and must not be violative of any Constitutional limitations.
4. Setting at naught a decision of a court without removing the defect pointed out in the said decision is opposed to the rule of law and the scheme of separation of powers under the Constitution of India.
5. Abrogation is not a device to circumvent an unfavourable judicial decision. If enacted solely with the intention to defy a judicial pronouncement, an Amendment and Validation Act of 1997 may be declared as ultra-vires.”