B Sumathi Naik vs. State Of Karnataka

Facts

The petitioner, B Sumathi Naik, purchased a Mercedes-Benz CLA 200D on March 6, 2020, with a manufacturer's invoice value of Rs. 22,00,000/- (including GST and Cess). The respondents demanded Rs. 7,39,061/- as Lifetime Motor Vehicle (MV) tax based on a dealer invoice value of Rs. 36,99,000/-. The petitioner paid this amount under protest on March 25, 2020, to obtain permanent registration. Subsequently, the petitioner requested a refund of the excess tax collected, which was not complied with, leading to the present writ petition. The respondents contended that an amendment to the Karnataka Motor Vehicles Taxation Act, 1957 (KMVT Act) effective April 1, 2020, required tax to be paid on the higher of the manufacturer's or dealer's invoice value.

Held

The Court held that the amendment to Note No. 3(a) to Part A5 of the Schedule to the KMVT Act, which introduced the 'whichever is higher' clause for calculating Lifetime MV tax based on manufacturer's or dealer's invoice value, was prospective and not retrospective. As the petitioner purchased the vehicle on March 6, 2020, prior to the amendment's effective date of April 1, 2020, the amended provision was not applicable. Consequently, the Lifetime MV tax should have been levied based on the manufacturer's invoice value of Rs. 22,00,000/-, which would have resulted in a tax liability of Rs. 3,96,000/-. The Court found that the petitioner had paid Rs. 7,39,061/-, an excess of Rs. 3,43,061/-. The Court directed the respondents to refund the excess amount of Rs. 3,43,061/- to the petitioner within two months. Liberty was reserved for the respondents to take steps for levying penalty, if any, in accordance with law, and the petitioner was granted liberty to contest such proceedings.

Key Issues

1. Whether the amendment to Note No. 3(a) to Part A5 of the Schedule to the Karnataka Motor Vehicles Taxation Act, 1957 (KMVT Act), which mandates the levy of Lifetime MV tax on the higher of the manufacturer's or dealer's invoice value, is applicable to a vehicle purchased prior to April 1, 2020? Petitioner's contention: The petitioner argued that the amendment, being prospective, should not apply to the vehicle purchased on March 6, 2020, before the amendment's effective date. Therefore, the tax should have been calculated on the manufacturer's invoice value of Rs. 22,00,000/-, not the higher dealer invoice value of Rs. 36,99,000/-. The petitioner sought a refund of the excess tax paid. Respondents' contention: The respondents contended that the amendment to Section 3(1) and Part A5 of the Schedule to the KMVT Act, effective April 1, 2020, made the petitioner liable to pay Lifetime MV tax on the higher of the manufacturer's or dealer's invoice value. Since the dealer's invoice value was higher, the demand was justified, and the petition lacked merit.