The government's unending search for new tax resources has now led to a novel way to fill the state coffers. Though we have heard about life membership in clubs, societies and other similar organisations, but, like kings and dictators, governments are known to be associated only with life-imprisonment. They are now looking for lifetime taxpayers. the only difference is that in the case of one-time motor-vehicle tax, the life with which the government is concerned is not that of the taxpayer but of the vehicle. The citizen is unimportant. His belongings can fetch some tax for the government -that alone is important. That is the lesson our governments have learnt from the indirect taxation system. If the levy is valid, the field will enormously expand in the next few years. But is the levy valid? So the question is: Can the government levy tax that is spread over the lifetime of an asset, if not of a citizen? In our Constitution, money matters have been put in a special class. They are to be handled by the directly elected representatives of the people, who constitute Lower Houses of the Legislatures. Money Bills have been defined and a special procedure has been prescribed for them.Article 265 of the Constitution lays down that, " No tax shall be levied or collected except by authority of law." The process of lawmaking regarding revenue and expenditure in the case of state governments starts, as in the case of the Centre, with what is known as the budget. The Constitution describes it as an 'annual financial statement.' The relevant portion of the Constitution reads:

" Procedure in Financial Matters
202. Annual Financial Statement. -(1)The Governor shall in respect of every financial year cause to be laid before the House or Houses of the Legislature of the State a statement of the estimated receipts and expenditure of the State for that year, in this part referred to as the 'annual financial statement'."

A bill pending in the Assembly, or having been passed by it and pending in the Council, lapses on dissolution of the Assembly. But Money Bills, even after having been passed into law through the Budget, lapse at the end of the financial year for which the Budget had been so passed. The mad rush to spend the grants on March 31 every year occurs because of this rule as embodied in Article 202(1) cited above. What applies to grants, also applies to the revenue. The permanent tax laws like the Sales Tax Act derive their authenticity as taxation law from their mention in the annual financial statement better known as the Budget. From the foregoing it follows that governments or legislatures have no power to irrevocably undertake that a commodity or citizen, formerly untaxed and with no tax identity as such, shall not be taxed under future budgets. The authority to tax is restricted to the year of the Budget. If there is limitation on the period of levy of tax, there is no limitation on the quantum of any tax. The Central Government can levy 101 per cent income tax while a state government may levy a tax of, say, Rs.10,000 on a moped costing Rs.4,000. Don't we often here about penalties of Rs.500 to Rs.1,000 on mopeds for infringement of road rules? But this is a matter between citizens and their taxing representatives. The election arena, and the law court, is the proper forum to contest such issues. But the fact is that 86% of our tax revenue comes from indirect taxation. That is because the voter should not be scared away but lured to the bait which is best done by keeping him ignorant about the taxes he pays.

There is yet another aspect of the one-time motor-vehicle tax that proves beyond any doubt that the tax is unconstitutional. In legal par- lance, there is a term, " colourable legislation." A legislation is of this nature when a legislature seeks to achieve on the basis of competency in other matters that for which it is not competent. In reality this one-time motor vehicle tax seeks to amend the Constitution. In effect it amends Article 202(1) by virtually adding a proviso that the Maharashtra Legislative Assembly shall not tax a vehicle on which this one-time tax has already been paid. For all legal and practical purposes, the matter is a subject of constitutional amendment attracting provisions of Article 368. But the Maharashtra Legislature is trying to treat it as an ordinary legislation under the head of " Money Bills. "

The importance of this legislation is indicated by the fact that three petitions have been filed before the Nagpur Bench of the Bombay High Court challenging the legality of the so-called "one-time" tax on private two-wheelers and tri-wheelers. One petition is by Akhil Bharatiya Grahak Panchayat through its law-member Madhukar Badhiye, and its Nagpur based General Secretary Ashok Patrikar. Another is by Two-wheeler Owners Association Through Advocate C.K.Marpakwar. Finally, the third petition is by one Advocate Sadavarte for himself.

The last hearing was held on June 25, in the course of which the authorities were ordered by their Lordships Mohata and Sambre to take no coercive action to collect the one-time tax from the petitioners except for 'the current tax.' All the three petitioners were granted leave to amend their petitions and a simultaneous hearing for all three petitions was fixed for July 2, 1987. Two questions arising out of the above discussion, need clarification.

Tax laws promise exemptions spread over a period of several years to various categories of tax payers, industry being prominent among them. what is their position with respect to the promise of exemption by governments? If the one-time tax is repealed the next year, what will be the fate of those who have paid or not paid tax on their vehicles?

1. The substantial difference between the one-time tax and the promise of exemption spread over a period is that the latter is always subject to revocation. The promise is like a treaty, a gentleman's agreement. It is normally adhered to by successive governments unless there is policy change going back on such promise by the government of the day. Then there is no remedy.

   If a person or commodity is not being taxed today, or are availing a concession today, it cannot be said that they will not be taxed under the next budget or that the concessions will continue. The sovereign, or, to be precise, the semi-sovereign legislature cannot be bound by its own promise. A law validly passed by it, is always subject to amendment or repeal by itself. It is supreme within its own sphere as chalked out in the Constitution.

   It should also be noted that the promise is in favour of the people as against government. What is discontinued, is the favour or benefit accruing to certain sections vis-a-vis other taxpayers. The Maharashtra Government itself modified last year the sales tax exemption granted to new industries several years before.

2. If the one-time tax levied this year is valid and the tax has been accordingly collected, it will not become refundable even if it is repealed next year. A tax becomes refundable only when it has been levied and collected illegally, or is reduced by law during the current budgetary or financial year in which it is payable. Strictly speaking, taxes levied with retrospective effect are, therefore, in the same vein, unconstitutional and illegal. though these taxes may be presumed to be current taxes payable on the past performance of the taxpayer, the question remains whether the legislature has the power to go back in the past, say, to the year 2000 BC, to collect a tax today.

   It is regrettable that the judiciary has taken a lenient view of the matter and has endorsed taxation with retrospective effect as legitimate. Now it is facing a tax for the future. India must be a unique country in the world subjecting its citizens to taxes for the past, the present and the future all simultaneously payable today. As for refunds on repeal, the only remedy for the State is to bestow largess on the taxpayer in the form of a sum equivalent to the amount of tax felt to have been paid in excess of that reasonable (though, not legally) due. It will in no case be a refund. The point is one of academic interest but an important one.

   The point to stress again is that if there is no budget, there is no receipt or expenditure for a government under the Indian Constitution. All money matters must pass through this one single exercise, namely, the passing of the Budget. Then only can they assume legal validity.

   Back