The Kerala High Court has clarified that State governments are free to levy taxes on vehicles registered under the Bharat (BH) Series as per their respective laws. The judgment asserts the States’ exclusive right to determine motor vehicle taxes, rejecting the Central government’s attempt to standardize tax rates for BH Series vehicles under Rule 51B(2) of the Central Motor Vehicle Rules, 2021.
Justice Dinesh Kumar Singh, delivering the verdict in Harish Kumar KP v. Union of India & Ors., emphasized that taxation on motor vehicles falls within the legislative competence of States under Article 246 read with Entry 57 of List II of the Seventh Schedule of the Constitution. Consequently, the Court declared Rule 51B(2), which prescribes a uniform tax rate for BH series vehicles, to be unenforceable.
“The States are free to levy tax at the rate prescribed under their respective legislation. Therefore, the States are not bound to implement the rate of tax as prescribed in sub-rule (2) of Rule 51B of the Central Motor Vehicle (Twentieth Amendment) Rules 2021 for vehicles registered under the BH series,” the Court held.
However, the Court upheld the Centre’s authority to lay down the principles for motor vehicle taxation, noting, “Sub-rule (1) and sub-rule (3) only provide the principles for motor vehicle tax. Therefore, sub-rule (3) does not transgress the legislative competence of the Centre in providing the principle for charging the motor vehicle tax on vehicles seeking BH series registration.”
The judgment was passed in response to petitions filed by individuals whose applications for BH series registration were rejected by State transport authorities. The authorities contended that taxation matters are governed by the Kerala Motor Vehicle Taxation Act, 1976, and argued that the Central Motor Vehicle Rules were unconstitutional in encroaching upon the State’s legislative domain.
The petitioners argued that the Motor Vehicles Act, a Central legislation, overrides State laws concerning vehicle registration. The Central government supported this view, asserting that the MV Rules are binding on States. However, the State government maintained that the MV Rules cannot override the Kerala Motor Vehicle Taxation Act.
After examining constitutional provisions on the legislative powers of the Centre and States, the Court concluded that while vehicle owners have the right to obtain BH series registration, the States retain the power to determine tax rates.
Directing State authorities to register the petitioners’ vehicles under the BH series, the Court stated, “The State has the power to decide what rate of tax to levy on vehicles including BH series non-transport vehicles,” and taxes must be collected in accordance with the Kerala Motor Vehicle Taxation Act, 1976.
This ruling underscores the balance of legislative powers between the Centre and States while protecting the rights of BH series vehicle owners.
Case: Harish Kumar KP vs Union of India & Ors. – Available on LAWFYI.IO
