Advaith Motors PVT LTD vs. The State Of Karnataka

Facts

The petitioner, Advait Motors Pvt Ltd, purchased a Mercedes-Benz GLC 220D on March 19, 2020, with a manufacturer's invoice price of Rs. 34,96,553/- (including GST and Cess). The petitioner paid a Lifetime Motor Vehicle (MV) tax of Rs. 6,29,379.54/- based on this price. However, the respondents, represented by the State of Karnataka and its transport authorities, considered the dealer's invoice price of Rs. 57,75,000/- for calculating the Lifetime MV tax. This resulted in a demand for an additional Rs. 3,86,482.50/- in tax, bringing the total demand to Rs. 10,15,862.04/-. The petitioner challenged this demand, seeking registration of the vehicle without paying the additional tax or any penalty for late registration.

Held

The Court held that the amendment to Note 3(a) to Part A5 of the Schedule to the Karnataka Motor Vehicles Taxation Act, 1957, which mandates the levy of Lifetime MV tax on the higher of the manufacturer's or dealer's invoice price, is prospective and not retrospective. Since the petitioner purchased the vehicle on March 19, 2020, prior to the amendment's effective date of April 1, 2020, the amendment was not applicable to their case. Therefore, the Lifetime MV tax was leviable on the value shown in the manufacturer's invoice. The Court found that the petitioner was liable to pay only Rs. 6,29,379.54/- towards Lifetime MV tax and was not liable for any additional tax demanded by the respondents. The Court directed the respondents to grant permanent registration upon receipt of the admitted tax amount. Liberty was reserved for the respondents to take steps for levying any applicable penalty in accordance with law, and the petitioner was granted liberty to contest such proceedings.

Key Issues

1. Whether the Lifetime Motor Vehicle (MV) tax for a vehicle purchased prior to April 1, 2020, is leviable on the manufacturer's invoice price or the dealer's invoice price, whichever is higher, in light of Section 3(1) and Part A5 of the Schedule to the Karnataka Motor Vehicles Taxation Act, 1957 (KMVT Act) and its subsequent amendment effective April 1, 2020? Petitioner's arguments: The petitioner contended that as the vehicle was purchased on March 19, 2020, prior to the amendment of Note 3(a) to Part A5 of the Schedule to the KMVT Act, the Lifetime MV tax should be calculated based on the manufacturer's invoice price. They argued that the amendment, which mandates taxation on the higher of the manufacturer's or dealer's invoice price, is prospective and not applicable to their purchase. Respondents' arguments: The respondents argued that by virtue of Section 3(1) and the amendment to Part A5 of the Schedule to the KMVT Act, effective April 1, 2020, the petitioner was liable to pay Lifetime MV tax on the higher of the manufacturer's or dealer's invoice price. Since the dealer's invoice price of Rs. 57,75,000/- was higher than the manufacturer's invoice price of Rs. 34,96,553/-, the petitioner was liable for the increased tax demand.