Introduction
Telangana has decided to treat transport vehicles registered
in Andhra as "vehicles from other states" with effect from April 1,
2015. This effectively imposes a liability on these vehicles to pay road tax
for plying in Telangana.
There is a good deal of "protest" from Andhra
individuals and media about this decision. Businessman turned politician Kesineni
Srinivas alias Kesineni Nani, who not so coincidentally happens to own a
thriving transport business, calling in to a live TV "talk show" condemned
the decision. According to him, this order violates sections 72 (1) and 72 (2)
of the 2014 Telangana act. He also objected to the quantum of tax claiming an
amount calculated on the basis of the former 23 districts is too high for the
present ten.
The other Andhra panelists promptly agreed with their
regional colleague. These worthy gentlemen went on to claim the courts would
strike down the order. Chalasani Srinivas, a self proclaimed intellectual,
piously observed on a different TV channel that Telangana would lose in the
bargain.
A few Andhra talk show participants indulged in a breast
beating exercise lamenting the latest decision is another blow to Andhras that
allegedly bears the brunt of "bifurcation" & central neglect
already.
Andhra Internet users reacted similarly. An Andhra gossip
web site called the decision "KCR's vendetta against Andhra". A
popular Andhra blogger lamented the fact Andhras would have to pay a tax to
Telangana to enter "their own capital".
Andhra transport businesses have not surprisingly taken to
action. Many inter-state private buses were been cancelled for a day.
Before we proceed further it may be of interest to note the
road tax has been wrongly called
"entry tax".
Questions
Let us try to seek answers to the following questions:
·
Does the decision violate the relevant
provisions of the 2014 Telangana act?
·
Is the argument on the quantum of tax on a
truncated geography sustainable?
·
What is the impact, if any, of the so called
"common capital"?
The contention that Telangana would end up losing is not worth
serious consideration in my opinion. For starters, why are Andhra politicians
losing sleep when their already budget deficit state would gain? Should they
not be welcoming the move and seriously consider subsidizing their transport
businesses by reimbursing the Telangana road tax in part or even full? If their
claim is indeed true, this gives Andhra a golden opportunity to practice good
politics combined with good economics. This is a diversionary tactic and/or a
mischievous propaganda initiative.
Background
A day before the appointed day, the Governor of the
erstwhile state issued an order to the effect that "the quarterly tax paid
for any quarter up to March 31, 2015, in any of the successor states shall be
deemed to have been paid".
Telangana attempted to quash this through a circular but
this was challenged in the High Court by our familiar friend Kesineni Nani. The
honorable Court in its interim order directed the successor states to
"respect" the Governor's decision. It may be noted here the relevant
order lapsed midnight of March 31, 2015.
Another point that may be noted here is that Telangana has
already exercised its section 101 rights and adopted the Motor Vehicles Taxation Act, 1963. Please see
an earlier
post if you would like to know more about how section 101 works.
Relevant extracts from the 2014 Telangana
Act
The relevant sections of the Act are stated in sections 72
(1) and 72 (2).
Section 72 (1) consists of two paragraphs. The full text of
the first is reproduced below (emphasis mine):
"Notwithstanding anything contained in section 88 of the Motor Vehicles Act,
1988, a permit granted by the State Transport Authority of the existing State
of Andhra Pradesh or any Regional Transport Authority in that State shall, if
such permit was, immediately before the appointed day, valid and effective in
any area in the transferred territory, be deemed to continue to be valid and
effective in that area after that day till its period of validity subject to the provisions of that Act
as for the time being in force in that area; and it shall not be necessary for any such permit to be countersigned by
the State Transport Authority of Telangana or any Regional Transport Authority
therein for the purpose of validating it for use in such area"
The second paragraph is a proviso enabling the center to
amend or modify the permit conditions in consultation with the concerned
states.
Section 72 (2) consists of three paragraphs. The full text
of the first is reproduced below (emphasis mine):
"No tolls,
entrance fees or other charges of a like nature shall be levied after the appointed
day in respect of any transport vehicle for its operations in any of the
successor States under any such permit, if such vehicle was, immediately before
that day, exempt from the payment of any
such toll, entrance fees or other charges for its operations in the
transferred territory"
The second paragraph is a proviso enabling the center to
authorize such levies in consultation with the concerned state.
The third paragraph is an additional proviso exempting
commercial road/bridge tolls constructed/developed by state government bodies from
the prohibition.
Impact of the 2014 Telangana Act
One may be surprised (or, on second thoughts, not really) to
note none of the critics appear to have examined how the situation was handled
in the past. After all, we are not re-inventing the wheel here!
The equivalent sections in the 2000 Chhattisgarh act are
numbered at 63 (1) & 63 (2). Sections 67 (1) & 67 (2) Jharkhand serve
the same purpose. These sections tally mutatis mutandis with the ones cited
above. The only addition in the 2014 Telangana act is the second proviso in 72
(2) relating to commercial tolls did not occur in the earlier acts. While this
is presumably because such tolls were non-existent earlier, it is not relevant
to our discussions as no one is challenging this aspect.
Having established the fact the impugned sections are
nothing new, one should start looking at previous case law. Before doing so
however let us examine the text of the sections to understand the meaning. As
the provisos are of no concern, I will restrict myself to the first paragraph
in both cases.
A plain reading of section 72 (1) establishes the following:
·
A permit issued/renewed by the erstwhile before
the appointed day continues to be valid throughout the entire original
territorial jurisdiction till its validity ends
·
There is no necessity for these permits to be
counter signed by the appropriate Telangana authorities not withstanding section
88 of the 1988 Motor Vehicles Act
·
This is however not a carte blanche as the
permit needs to satisfy all other legal requirements in force
What does section 88 of the 1988 act require? Permits issued
by a regional authority are not valid beyond the jurisdiction of the authority.
Section 88 (1) enables territorial extension of the permit subject to counter
signature of the appropriate authority. This requirement is waived in certain
cases e.g. for brief forays of less than 16 km in the "other state".
What then is the impact of this section? As per section 81
(1) of the 1988 act, the duration of a permit is 5 years. 2019 not being a leap
year, a permit issued/renewed by the erstwhile state is valid without counter
signature for period ranging from 1 day through 4 years 363 days from Telangana
formation day depending on the original validity.
It may be noted section 72 (1) does not extend to renewals
i.e. neither successor state can unilaterally extend a permit expiring on or
after June 2, 2014, for a further five years in the original jurisdiction. This
does not augur well for the "common capital" votaries J
A permit is an authorization to ply on a public road while
road tax relates to the cost of doing so. A transport operator typically has to
apply for a road permit in a prescribed form together with other documents
including proof of road tax payment for the current quarter. A permit fee needs
to be paid over and above the road tax. A vehicle can ply on a public road only
during a quarter for which road tax has been paid even if the permit runs for
the next few years.
The above clearly establishes that the terms permit &
road tax are not equivalent by any stretch of imagination. Section 72 (1) relates
only to permits and does not extend
to road tax.
In fact this is the essence of the phrase "subject to
the provisions". A permit can be enforced only if the vehicle meets other legal provisions including the
payment of applicable road tax. Telangana is only restricted from insisting
on counter signing the permit and/or charging additional permit fees.
Turning now to section 72 (2) we find:
·
Neither successor state can levy a toll/entry
tax on vehicles with a valid permit
·
This prohibition applies only if the impugned vehicle was exempted from such toll/entry tax
before the appointed day
A road tax is a charge for using public roads maintained at
the cost of the exchequer. As anyone can see, this is neither a toll nor an
entry tax.
In any case, the road tax paid in the erstwhile state is by
no means a blanket & permanent exemption from all tolls/entry taxes. For
example, the erstwhile state would have been fully within its rights to impose
an entry tax in any particular area. No transport vehicle could have claimed
exemption from such an entry tax before the appointed day. A right that did not
accrue in the erstwhile state may not be enforced post Telangana formation.
Let us now go through available case law. Twenty transport
operators filed writ petitions under grounds identical to the ones cited by
Kesineni Nani and his "fellow travelers". The case (Manoj Sahay &
Etc v. Bihar & Ors, 2002) was decided by a Patna High Court division bench
consisting of Justice Nagendra Rai & Justice PN Yadav.
The honorable Court rejected the petitioners' contention the
road tax they paid in Jharkhand is valid in Bihar as well vide section 67 (1) decreeing:
"Thus, the petitioners cannot claim that once the tax
has been paid in the successor State of Jharkhand after the appointed day, the
same will be treated to be the payment of tax in the State of Bihar under the
Act. The tax under the Act is payable by owner for using or kept for using the
roads in the State of Bihar and once the erstwhile State has been bifurcated,
the transport vehicles of other States are used or kept for use on the roads of
State of Bihar, the vehicle owner is
liable to pay tax".
The learned judges reiterated "the person, who has been
granted permit by the authority of the State of Bihar is liable to pay tax
under the Act in case of use of the transport vehicle in the roads of State of Bihar".
It may be of some interest to our friends that Jharkhand had
adopted the relevant vehicle tax with retrospective effect. The honorable Court
found no fault with this observing:
"It is well-settled that the State Legislature has plenary power of legislation with regard to
the fields occupied by it and they can legislate prospectively as well as retrospectively subject to certain
constitutional restrictions. The notification of the State Government of
Jharkhand adopting the Act in question clearly provides that it is applicable
from 15-11-2000, meaning thereby that any tax paid by the owner of the vehicle
even under the provisions of the Act will be treated to have been paid under the new Act. Nothing has been pointed out to show that there is any legal bar in
making retrospective operation of the Act".
The learned judges proceeded to dismiss 67 (2) based claims decreeing
"Section 67(2) of the Bihar Reorganization Act has no application at all with regard to the payment of tax under the Act".
The rationale is explained as:
"There is a difference
between the tax and toll. The tax under the Act, as stated above, is a
compensatory tax. The toll means the payment realized for some benefits, such
as for use of the market, bridge, temporary use of land etc. In case of Tolls
the fee is levied according to the benefits taken which is not the case in the
case of compensatory tax where it is
difficult to measure the benefit with reference to collection of tax".
In the light of the above, it is certain Kesineni Nani and
others raising a ruckus will bite the dust at the bench. It is best if they
exercise restraint and refrain from pursuing their misadventure any further.
Geography & the quantum of road tax
Having disposed off the major ground, let us now tackle the
alleged grievance that the amount is too high given the truncated geographic
coverage. Most likely this is just a plan B to haggle over the tax amount once
the main grievance is found baseless. Nevertheless we need to check if this
makes much sense.
It is a matter of common sense that no transport vehicle
would use all the permitted roads merely because the tax paid provides the
"eligibility". It is also clear different vehicles would use
different road distances even though the tax paid is the same. Even when the
erstwhile state existed, no doubt several vehicles plied only in Telangana (or
just parts of Telangana) but paid the full road tax.
It becomes clear the amount of road tax has no relationship
the distance plied. If a transport operator believes the amount is unviable for
his operations, he always has the option of paying a lower amount just for one
trip on the selected route. If even this is beyond his capacity, he can always
choose not to use Telangana public roads.
Unfortunately for Kesineni Nani & ilk, the honorable
Patna High Court dismissed an identical argument raised by Manoj Sahay &
others. The learned judges holding "The tax under the Act is a compensatory tax and it is levied upon
those, who avail themselves of the services
or convenience or advantage of the use of the roads in the State of Bihar".
The honorable Court went on to observe "only on the
ground that the length of the road has been reduced after bifurcation, the petitioners cannot challenge the levy of
tax collected under the Act".
Road tax & "common capital"
What does the so called "common capital" really
mean? As per section 3 of the 2014 Telangana act, every square inch in
Hyderabad and Ranga Reddy districts is an integral
part of Telangana with effect from June 2, 2014. Andhra governing classes
including ministers, legislators and state level bureaucrats are permitted work
& live in Hyderabad for a duration that shall not exceed ten years under any circumstances. In other words,
a temporary arrangement with no
territorial rights whatsoever.
It must be noted no transport vehicle (or, for that matter,
any vehicle) can reach Hyderabad without passing through other Telangana
districts. These roads and indeed the ones in Hyderabad are all maintained by
Telangana. As we saw earlier, the road tax is a compensation towards these
costs. Andhra refusal to pay their fair share is unacceptable as it places the
other people of Telangana & 27 other states (all of whom pay their fair
share) at a disadvantage.
In any case, no one is preventing the Andhra government from
reimbursing the additional costs to those visiting their state's offices
temporarily situated on Telangana territory.
Even ignoring the above for a moment, let us consider the
example of an individual living in Raichur. There is little or no chance for
him to reach Bangalore (his "permanent" capital) just by sticking to
Karnataka roads. Is he not paying tax to other state(s) just to reach his
capital? How is the Andhra "my capital" sentiment superior to his?
Andhra pays no rent on the dozens of Telangana buildings
(including heritage structures) being used by their governing elite. These
premises enjoy free security as well as subsidized electricity & water.
Andhra's contribution to public services (whether roads, law & order,
sanitation etc.) in Hyderabad is zilch. All the expenditure used to support
Andhra's "capital" is paid in full by Telangana exchequer.
The present demand is tantamount to a freeloading
"guest" entertaining his friends at the host's expense.
